There’s a wide variety of mechanisms available to help companies stay innovative and boost competitiveness, starting with grants. These tend to be used to support early stage projects where the technical challenges are greater and the risk of failure is highest. Along with European sourced grants, InnovateUK offers a number of initiatives to support British-based companies. These include SMART grants which provide early stage assistance for companies working on disruptive technologies.
Meanwhile the Industrial Strategy Challenge Fund offers support for projects aimed at improving productivity and sustainability in food production, enhancing resource and energy efficiency in foundation industries (these are all streams within the ISCF). There is also a range of grants aimed at encouraging collaborative, cross-border research for UK companies in specific sectors, such as aerospace and rail.
Commercial Funding is another support mechanism for innovation, ideal for many projects at a more advanced stage. While it takes the form of a loan or asset finance, it tends to offer more flexibility than grants with fewer conditions attached. Companies accessing this type of funding must typically provide security against the lending. For early stage growth companies which lack traditional assets, we are seeing an increasing trend where some are securing commercial funding for innovation projects or market development activity against their intellectual property such as internally developed software.
At least one bank in the UK is offering commercial loans to support innovation projects, as is InnovateUK. These projects do need to be ‘near to market,’ as lenders do need to see commercialisation potential to support repayment of the loans.
There are also a few equity investors focused on investing in new technology ventures where there is identifiable intellectual property or very obvious market opportunities.
The UK Government’s R&D tax relief scheme also continues to provide financial benefits to companies investing in innovation to resolve technical uncertainties. While the level of relief will be impacted by use of grants, the benefits of this incentive can often be significant, especially where there has been significant R&D spend.
Companies which have been fortunate enough to develop intellectual property through an innovation project for which they’ve secure a patent against can also benefit from Patent Box relief. This scheme offers reduced corporation tax on all profits directly attributed to the commercialisation of the patent itself.
As we begin this new decade facing an uncertain economic outlook, it is essential that innovation does not fall by the wayside. By accessing the wide range of support available, from the inception to the commercialisation of innovation projects, UK manufacturing can ensure it continues to be competitive in the global market.