The UK government is to provide innovative start-ups including biotech and tech firms with a support fund worth up to £1.5bn ($1.84bn) to help them survive the economic crisis brought on by the pandemic.
The package announced by Chancellor of the Exchequer Rishi Sunak on 20 April includes a £500m ‘Future Fund’ for high-growth companies impacted by the crisis, made up of funding from government and the private sector.
In addition, small-to-medium enterprises (SMEs) focused on research and development will also benefit from £750m of grants and loans.
The UK government committed to paying at total support package of £330bn in government-backed loans to help keep businesses afloat in March as the global economy reeled from COVID-19 lockdowns.
However that scheme requires companies to be profitable as of December 2019 to qualify for help. That left most UK biotech firms ineligible, and the UK Bioindustry Association (BIA) alongside lobby groups from other sectors, has been pushing hard for extra assistance. (Also see "UK Biotechs Seek Government Help As Economic ‘Heart Attack’ Threatens Sector" - Scrip, 27 Mar, 2020.)
Commenting on the new funding, the BIA chief executive Steve Bates said the new measures would help the sector overcome “the short-term financial turbulence” caused by the COVID-19 disruption.
“This package will enable strong and innovative UK companies to weather the COVID-19 storm,” said Bates.
“Many of our members face significant delays to their R&D projects and fundraising due to COVID-19 hitting their workforce, supply chains and clinical trials in hospitals, along with investor confidence generally, with serious consequences for the development of new treatments for patients and the long-term growth of the UK’s knowledge economy.”
Bates said that the way the funding was delivered would be critical. Companies eligible for help with employee wages have had to wait a month for relief, which has sent many towards the brink, and the BIA fears similar delays could hurt biotechs.
“We now need Innovate UK and the British Business Bank to get this money out the door as quickly as possible and ensure it reaches all the companies that need it,” he added.
Grants and loans and Future Fund
The £750m grants and loans package will be delivered by government agency Innovate UK. The BIA says the scheme was very welcome, but would scrutinise the detail of how these will be awarded.
The BIA commented: “Grants are an efficient and well-understood way for the Government to support R&D within businesses and in this crisis could not only be a lifeline for those facing an uncertain financial situation, but will also ensure UK research and innovation bounces back quickly once the disruption has passed.”
The Future Fund will be launched in May and will be administered by the British Business Bank (BBB). Private investors will at least match the government commitment. The loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid, which means the government and investors would take a stake in those businesses unable to pay the money back.
To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.
The government is committing an initial £250m in funding towards the scheme, with a further £250m potentially added. The fund will initially be open until the end of September, and its scale will be kept under review.
The BIA welcomed the new scheme, saying it would prove very helpful for UK biotech companies seeking further rounds of funding during “an incredibly challenging time.”
Praising the scheme’s simplicity and potential speed, the BIA nevertheless says it needs to clarify some technical points about the loan scheme with the BBB.
“Alongside this, we urgently need the planned £200m life sciences scale-up fund to be expedited, so that companies can start to receive that money from the British Business Bank.”
No movement on R&D tax credit suggestion
Last month, the BIA proposed that money due via the UK’s R&D tax credit scheme later this year could be paid out early to help companies with their cash flow.
This would help life sciences companies of all sizes, but the UK Treasury department has not warmed to the idea. The BIA said the early payment idea would not add any further costs to the UK tax payer, and urged the government to also implement this to help the sector.
Already planned for the UK scheme is the £200m Life Sciences Investment Programme from the BBB. This is expected open later this year, and to raise a further £400m from private investors.
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