Iain Butler, Head of R&D at Buzzacott comments on the key takeaways from the event. 

A gap in 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,” says Butler. “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 notes that there are some great support schemes available for innovative businesses – good examples being EIS and SEIS, which are seen as great incentives. “However,” he warns, “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.”

“The same is true of later stage venture capital investment: There are many investors ready to support SMEs, but they are looking for proof of sales before they will commit 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 adds.

Butler believes that using the limited support available to businesses effectively is key to trying to bridge this innovation funding gap. “We have helped businesses develop their strategies for investment, and plan where and when they can lean on Government support to assist with innovation.”

UK government grants

There are various grants that organisations can apply for to support their funding. However, Butler has noticed that Innovate UK grants can take a lot of time, and with the high level of competition for funding, the route is seen as too uncertain for many businesses.

“The resource needed to complete submissions is 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. 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.”

The event attendees also pointed out the differences between the UK and Europe, where organisations make more use of grants. Butler says, “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. 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.”

Butler maintains that the key to success with grants is planning. “We can help identify the right time to apply, and when to look for support,” he says. “Leaving things too late can scupper a submission and having someone else to assist with the preparation can limit the impact on the business.”

R&D tax credits

It became clear throughout the event that SMEs might not be investing due to the uncertainties in schemes such as R&D tax relief, or because they are finding the current system too complicated. “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,” said Butler. “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 also commented: “It was noted by our attendees that having a grant already in place 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 help to 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.”