Treasury plans new fund to support UK start-ups after Brexit
THE UK government has proposed a new national investment fund to replace EU funding to British start-ups after Brexit.
The new fund could be set up as a public-private partnership or be placed fully on the government’s balance sheet, to be sold off once it has established a sufficient track record, the Treasury said on Tuesday.
“Currently, British businesses also rely on funding from the European Investment Fund,” the announcement said. “A new UK based fund would help ensure that firms still have access to the funding they need, should our relationship with the European Investment Fund end when the UK leaves the EU.”
Brexit negotiations commenced in March 2017 with the UK prime minister’s decision to trigger the Article 50 exit clause of the EU treaty. The UK and the EU have until the end of March 2019 to reach an agreement.
In the meantime, UK industries reliant on EU funding have been plunged into uncertainty about their future after Brexit.
“Britain is an innovation powerhouse and it’s vital that we make sure our cutting-edge firms have the funding they need to meet their potential and conquer new markets,” said Chancellor Philip Hammond.
“Meeting this challenge will boost our productivity and enable us to create more well-paid jobs across the UK.”
The proposed new fund is part of a consultation titled ‘financing growth in innovative firms’, which will assess whether start-ups have access to the finance they need. It has identified a £4bn funding gap between American firms and British firms, which the national investment fund will help address.
Fewer than one in 10 firms that receive seed funding in the UK go on to get fourth round investment, compared to nearly a quarter in the US, the Treasury said.
And while the UK leads Europe in the creation of ‘unicorns’ – start-ups valued at more than $1bn – it only accounts for four per cent of these companies globally. The US has nurtured the most unicorns, accounting for 54 per cent, followed by China at 23 per cent.
Top US firms are also younger than UK firms, again suggesting the US is better at growing new businesses into large scale firms, the Treasury said. 10 of the UK’s largest 100 listed firms were created after 1975 compared to 19 in the US but only two in Europe.