Last year, the European Union (EU) announced a new scale-up fund to support early-stage, private ventures. The fund is expected to launch next month and will target late-stage deep tech, including AI, quantum, biotech, semiconductors, and more.
The EU has struggled to develop innovative, young firms. While there are many reasons, some of the challenges stem from excessive regulation and member-state fragmentation. This, alongside high taxes, can slow entrepreneurship and the risk-taking necessary to support new firms.
Recently, reports indicated that the UK is in talks with the EU to participate in the EU Fund, even though the UK is no longer part of the EU.
EmpowerRD CEO Hari Sandhu believes UK startups could benefit from participating in the EU fund, but hurdles are obvious. EmpowerRD works with companies to claim R&D tax credits, so participation could benefit them as well.
Sandhu says it is a challenging time to access funding in the UK, so joining the EU fund would be a positive step for the UK’s innovation ecosystem. It would also mean helping UK businesses to expand into European markets or to “widen their total addressable market.”
“Greater alignment with international funding initiatives such as the proposed £3 billion fund can help ambitious businesses access the support they need to grow, attract talent, and bring new technologies to market faster,” says Sandhu. “As we’ve seen with other initiatives designed to enable growth in the past, success will ultimately depend on how accessible it is for early-stage companies in particular to access. Any overly complex application processes and administrative burdens can become a barrier and prevent the results that they are designed to achieve.”
Sandhu sees access to the fund as a boost for UK startups, supporting growth and helping them move from early stage to international competitiveness.
“If investing in the fund is required for UK firms to be able to gain access, it’s something that we would advocate for the UK government to do,” Sandhu declares.
Significant hurdles to participating in the EU fund could mean a treaty change for the UK. This concept is being hotly debated.
Access to capital is always key to growth, and the UK already has impactful government-led programs in place, such as the British Business Bank, other funding vehicles, and domestic tax credits. Additionally, many promising UK firms tap into EU markets with other programs or private capital.
In general, the UK is a stronger venture capital market than the EU and leads in unicorn creation, but Europe is a larger market.
