21.10.21 Market Intel

2020 Spending Review- Funding your business and your innovation

One of the current focuses for the UK Government is trying to respond to the impacts of Covid-19 by widely investing in the UK’s recovery. Supporting jobs and businesses, building back greener and meeting the 2.4% of GDP target by 2027 for R&D spending are just some of the ways they are planning to challenge the economic impacts of the pandemic.

R&D funding- Technologies for the future

“at least £490 million in 2021-22 for Innovate UK core programmes and infrastructure to support ground-breaking technologies and businesses”

Investing in high tech, high risk companies developing new technologies is still a priority for the UK Government. You may be thinking, why invest in companies that are high risk in such a turbulent time for the economy? But these companies also provide high-return. Investing in R&D supports technologies for the future that enable economic growth.

Supporting innovators is vital to ensure that the UK translates its world-class research into technological breakthroughs, enhancing the productivity and competitiveness of UK business, which is why the government is committed to raising economy-wide investment in R&D to 2.4% by 2027.

The areas of funding that appear to be attracting the most R&D investment from the Spending Review 2020 are Defence, 5G, and addressing climate change (further boosted by recent announcements to target an emission reduction target of 68% by 2030). However, this does not limit funding to these sectors as programs such as Innovate UK Smart Grants are open to all sectors.

Capital investment- Supporting job and businesses

Without a doubt the global pandemic has had significant negative impacts on employment with the Office for National Statistics recording an unemployment rate of 4.8% from July to September, meaning that 1.62 million people were unemployed. In an aim to help the economy recover, an additional £3.7 billion is being added to the commitments made in the Plan for Jobs and a further £100 billion of capital investment has been committed.

The £100 billion of capital investment aims to kick start growth and support jobs, this suggests an increase in capital investment funding competitions for businesses. Historically capital/business growth grants typically subsidise the cost of capital items such as buildings, extensions, equipment, machines, and are predicated on job growth. They sometimes also support operational costs such as recruitment and business planning. Typical intervention rates (i.e. the amount of a project cost that is grant-funded) are between 20-40%. These funds are likely to be highly location specific and distributed through LEPs.

Building back greener

“The economic recovery from Covid-19 must build on this, and it must be green.”

In order to ‘build back greener’ the Government has specified the following areas for investment, under the title the Green Industrial Revolution:

  • Greener transport
  • New technologies
  • Warmer homes and buildings
  • Protecting the environment and investing in natural resources

A strong sustainable investment program will not only generate economic benefits through highly skilled green jobs but also reduce the climate change impacts that will form such a central element of the 21st century.

The release of the Energy White Paper should set out the policy necessary to accelerate the roll-out of electric vehicles, increase renewables, and develop a hydrogen economy. All of these areas require cutting-edge technologies to be developed, as well as committed funds at a local level.

Brexit

On the 1st of January 2021, the UK will cut ties with EU trade and travel agreements, potentially without a Brexit deal.

There is still a question around whether the UK will be a part of the €85 billion 2021–27 Horizon Europe research funding program. At present non-EU members can participate meaning the UK is eligible, however, post January the EU offer would see the UK pay in about £15 billion, plus a top-up payment if UK applicants win more than that in research grants.

No matter the detailed outcome of the deal, Brexit is sure to change the flow of research and accessibility of funding. Whether that change is positive or negative is yet to be determined.

How should companies plan their funding strategies for 2021?

As always, a keen understanding of Government policies and intentions helps companies to ensure their approaches are aligned, maximising the potential for support at this most challenging time.

Certainly, organisations operating in key sectors such as low-carbon, that form such a central tenet of the core policy strategy, can be assured of funding to support their innovations.

At the same time, the continued support for R&D nationally, raising investment as a proportion of GDP, and the likely localised capital funding streams indicate the likelihood of significant support for most innovative, job-creating organisations.

Whilst increased funding is a positive, it will no doubt increase competition for available funds. Those organisations that have both strategic market intelligence and effective grant execution are poised to reap the considerable benefits.

Get in touch

If you have any questions regarding funding your business and your innovation after reading this blog, please get in touch with the Granted Consultancy Team for advice.

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