Government support gaps hinder UK tech innovation growth

An expert panel convened by Buzzacott has examined whether current government funding initiatives adequately support innovation within the UK technology sector.

Representatives from small and medium-sized enterprises (SMEs), venture capital specialists, lawyers, and industry analysts participated in the discussion, focusing on Research and Development (R&D) tax relief schemes, grants, and venture capital availability.

Iain Butler, Head of the R&D team at Buzzacott, highlighted concerns over gaps in governmental support. "Many in the room felt that government support drops off after an organisation has moved out of the initial start-up phase, and that it returns once an organisation is established and can access later-stage venture capital or private equity funding," he explained.

"This is leaving a gap in the middle, exactly at the point where companies are looking to commercialise R&D and build out products. Attendees felt that the UK is potentially leaving smaller companies unable to invest in new innovations."

Butler cited existing schemes like the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) as positive examples. However, he noted that these aids become accessible later in a company's development. "They do kick in later in an organisation's development, and many struggle to survive in the gap before accessing the funding to allow them to grow," Butler stated.

Regarding venture capital, Butler remarked, "The same is true of later-stage venture capital investment: Many investors are ready to support SMEs, but they are looking for proof of sales before committing to the investment. Those in the room articulated that there is a gap to help businesses get to the point of long-term growth plans/sales plans."

Butler also emphasised the importance of effectively using available support: "We have helped businesses develop their investment strategies and plan where and when they can rely on Government support to assist with innovation."

Regarding UK Government grants, Butler noted challenges with the Innovate UK initiative, mainly due to its lengthy application process and intense competition. "The resources needed to complete submissions are high, and SMEs often feel their people's time is best spent in the business itself. Large businesses, in contrast, have large, dedicated teams of grant writers," Butler observed. "Many of our attendees floated the idea of automatic funding: Innovate UK could set the criteria, and if you meet this, you automatically receive funding."

Attendees of the event also discussed the UK's approach compared to that of Europe, particularly in academic collaborations. "This is largely due to the perceived reluctance of UK Universities to collaborate with SMEs, instead, choosing to focus on their relationships with large corporations," Butler said. "It was noted that in Europe, Fraunhofer Institute-style institutions provide the bridge between academic research and commercial exploitation, and the UK lacks this structure."

Concerning grants, Butler reflected on the importance of timing: "We can help identify the right time to apply and when to look for support. Leaving things too late can scupper a submission, and having someone else assist with the preparation can limit the impact on the business."

The discussion also addressed the complexities surrounding R&D Tax Credits, with Butler citing uncertainties as a possible deterrent for investment by SMEs. "There was general agreement that the R&D tax credit scheme is too uncertain and complicated at the current time to be a real driver of investment," Butler explained. "With many changes in play, such as the reduced-benefit new merged scheme and the compliance check campaign, there is much confusion around what can be claimed, and what exactly HMRC want to see in claims."

Butler suggested potential improvements: "Our attendees noted that already having a grant helps with submitting an R&D claim, as the R&D has been pre-checked. Attendees felt that also having pre-approval on R&D claims could improve the scheme; however, it was noted that quite often, R&D crops up on projects, so pre-approval might not work in this case."