In January the government published a green paper on “Building our Industrial Strategy”. This week I got round to reading it and although it is long (132 pages) and far reaching, it does have some proposals relevant to the UK technology ecosystem.
I don’t necessarily agree with all of the report’s conclusions, but below I have summarised the key proposals that start-ups and investors should be aware of.
In my next post I discuss the main reasons behind these measures, some of which I agree with, some of which I don’t.
The government is looking for feedback on the strategy so if you have any, I would urge you to respond to its request for input by 17th April.
Proposed changes — 10 pillars
The strategy outlines 10 ‘pillars’ (copied below) aimed at increasing productivity and driving growth across the UK. The pillars are far reaching but several of them present potential opportunities to boost the UK’s early stage tech sector. Pillars 1 and 4 are particularly relevant.
There are many broad implications for business, but I will highlight the three main implications for early stage tech.
Implication 1: increased access to R&D funding
The first ‘pillar’ of the strategy aims to boost R&D investment and help drive commercialisation of research. There are many approaches discussed with varying levels of rigour, but the key proposals are:
– Increase government investment into UK R&D by 20% — a further £4.7bn of funding by 2020–2021. Start-ups should keep an eye out for how to access this funding.
– This will be coupled with efforts to optimise the funding and tax environment to drive up the ratio of private to public investment. Again, an important area to watch for start-ups and investors alike.
– Creation of UK Research and Innovation (UKRI) which brings together Research Councils with Innovate UK to develop a strategy for how to optimise spending of the additional R&D funding. The government seeks initial views which can be submitted here by 17th April. Start-ups and investors should have their say.
– One project that is already underway is the Industrial Strategy Challenge Fund which creates a new funding stream for UKRI to back technologies where: the potential market is large, the UK has research strength and business capacity to meet the market need, there are significant social and/or economic benefits, and there is evidence that government support can make a difference. Start-ups should consider whether their sector might be applicable for Challenge Fund support.
– Sectors that have been suggested are smart energy (including batteries), robotics and AI (including autonomous vehicles), satellites and space tech, healthcare, manufacturing and materials of the future, biotech, quantum technologies, and ‘transformative digital technologies’. But again, the government seeks suggestions.
Implication 2: increased support for ‘scale-ups’
Pillar Four is focussed on measures to help businesses scale-up, with the following proposals being of particular interest:
– A Patient Capital Review will be launched in Spring 2017. Scale-up companies should follow how this review could help them.
– Increased backing of institutions to catalyse private sector investment including an additional £400m for the British Business Bank. This could be a valuable source of finance for scale-up companies.
– The government will ‘explore’ how its data (such as VAT returns, other HMRC data, or companies house data) can be used to help investors identify potential scale-up targets. Growth investors should input into what data could help spot potential targets and how this could best be accessed.
The government has launched its business scale-up inquiry and is looking for feedback by May 3rd.
I should say that whilst I’m absolutely in favour of increased support for scale-ups, as a scale-up investor myself, I’m not sure that I agree with the conclusion that there is a shortage of scale-up venture capital in the UK. More on this in my next post.
Implication 3: investment in tech infrastructure
There is a whole section focused on improving the UK’s infrastructure given our poor relative ranking vs other developed countries (ranked 24th globally on transport infrastructure quality by the IMF).
A wide range of infrastructure investments are planned, but most importantly to the tech-sector is a new £400m Digital Infrastructure Investment Fund to boost fibre broadband providers and a further £740m “earmarked” for:
– “Full fibre broadband roll-out” for businesses and the public sector.
– A “coordinated programme of integrated 5G and fibre projects to accelerate and de-risk the deployment of future digital technologies.
Conclusion — funding opportunities for R&D commercialisation and scale-ups
The government clearly acknowledges the early stage technology sector as an important part of the solution to the UK’s productivity problems. It proposes increased R&D funding (particularly aimed at later stage commercialisation) and support for ‘scale-up’ businesses as key steps to boost the sector, as well as improvements to the UK’s digital infrastructure.
There are many other implications for business more broadly, but I have chosen to focus on those which specifically effect technology start-ups. One example of a broader proposal is an expansion of export finance and the Department of International Trade (DIT) in an effort to boost exports and make it easier for UK businesses to scale internationally. If you are thinking of international expansion, I would recommend that you find out how the DITcan help.
Start-ups and investors should keep an eye on how these new measures evolve as they could present valuable opportunities for funding and support.
Importantly, the strategy is presented as work in progress and the government welcomes input from industry, you can respond here if you have any feedback.
In my next post I will look at some of the reasons behind the measures discussed in this article.