The government has proposed a new National Investment Bank to counter the loss of European funding initiatives for small UK businesses, reportedly worth £3.6bn, once Britain leaves the EU.
The announcement signals the government’s recognition that Britain’s relationship with the European Investment Fund would likely end after Brexit.
Currently under consultation, a new national fund would also be fundamental in helping UK startups challenge the dominance of US counterparts, the government said.
Designed to improve access to finance for potential “world-leading unicorns” – innovative firms valued over $1bn – the announcement of a National Investment Bank follows a review that identified a £4bn funding gap between UK startups and those in the US.
Commenting on the proposal, Chancellor Phillip Hammond said providing startup founders with sufficient finance opportunities was a priority for ministers.
“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,” Hammond said in a statement.
“Meeting this challenge will boost our productivity and enable us to create more well paid jobs across the UK.”
Days before the Brexit vote in June 2016, the European Investment Bank (EIB), in partnership with lending marketplace Funding Circle, pledged £100m in funding for small UK firms.
Almost a year later, in May 2017, a Federation of Small Businesses (FSB) report claimed British companies stood to lost EU funding worth £3.6bn once Britain left the EU.
FSB chairman Mike Cherry said small business owners across the UK would be “starting into a business support black hole” by 2021, if government failed to prioritise new enterprise support initiatives.
The consultation was opened as part of the Patient Capital Review announced by prime minister Theresa May in November 2016 to help founders obtain long-term “patient” finance for scaling a company.
Chair of the panel, and governor at the Wellcome Trust, Sir Damon Buffini, said: “Since the prime minister launched this review, our panel of experts have worked hard to get to the core of the challenges and look forward to making recommendations for how we can act now to capitalise on the tremendous pipeline of UK scale ups and maximise the potential of British innovation.”
More government export finance up for grabs to support small business
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