Finance · 15 January 2016

Innovate UK: A closer look at the government’s reform to grants funding

Daniel Tenner: Grants for ground-breaking innovation should notice little change

In his latest column for Business Advice, co-founder of GrantTree and contributing grants expert, Daniel Tenner, takes a closer look at what the proposed government changes to specific grant funding options in last year’s Autumn Statement may mean in real terms for small business.

Last November’s combined Autumn Statement and Spending Review contained the government’s proposals for on-going financial support for science, technology and innovation that were met with some confusion. While there are still some support mechanisms that are in the concept phase, many of the proposals have been in development for a while.

Taking a look at each of the proposals, we at GrantTree think that it’s clear that businesses seeking financial support or grants for ground-breaking and risky innovation should notice little change for the coming year.

Firstly, it’s worth noting that as far as Innovate UK grant funding is concerned, we’re struggling to agree that there’s going to be cuts. Although there may be changes on the horizon to the way the organisation operates and the types of financing businesses can apply for, the Spending Review was pretty explicit that the Department for Business, Innovation & Skills (BIS) settlement will protect “science resource funding in real terms, and maintaining Innovate UK support for businesses” and that “Innovate UK support is maintained in cash terms”.

Pedants may already be wincing at the “real” and “cash” terms qualifiers, but Innovate UK will still distribute £547m in grants and other support per year to British companies pushing science and technology forward.

That said, there are likely to be some disruptive changes to the way the organisation operates and maybe even its name. The Spending Review indicated the government will “look to integrate Innovate UK into Research UK in order to strengthen collaboration between the research base and the commercialisation of discoveries in the business community”.

In the recent Nurse Review, while being complimentary about the support the organisation offered to innovative businesses, Paul Nurse called for a simplification of its schemes and application processes and a closer relationship (if not complete integration) with the UK’s seven Research Councils. BIS are seemingly being told to carry this recommendation out, but the ring-fencing of Innovate UK’s budget and a government commitment to continue to help fund business-led innovation should make the transition smooth.

Perhaps the most difficult proposal to hack through in the Spending Review concerns the conversion of £165m of Innovate UK grants to “new finance products” by 2019/20. We’re pretty certain that the IC Tomorrow stream will be converting to loans from pure grants in the next year, but having looked at the breakdown of how Innovate UK’s money is distributed it’s hard to say what other streams might be converted or even dropped. Our gut instinct is that there are some changes in the air for the Smart funding stream following a recent tightening of the criteria, but we’d not put any money on if or when it might happen.

So although we don’t know when any changes are going to be implemented, for the foreseeable future grant funding support from Innovate UK for business-led innovation will remain. We do know however that the competition is getting tougher, the quality of applications is getting higher and the technology it supports really does have to be world leading.

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Daniel Tenner is a serial entrepreneur and, most recently, the founder of GrantTree – a business established chiefly to assist others with funding requirements. From both tax schemes like R&D tax credits to UK government schemes such as InnovateUK’s Smart Grants, and EU schemes like Horizon 2020.

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