Government launches new series of loans worth £150 million to support innovative SMEs and level up the UK, supported by an independent interim evaluation of the pilot.
Some of the UK’s most innovative businesses are set to benefit from a new series of loan competitions.
The competitions will offer businesses up to £150 million to support their research and development projects, the government announced today.
The loans will support:
- innovations deemed to have the strongest potential to support future economic growth and tackle social challenges, across fields such as:
- net zero
- health and wellbeing
- next-generation digital technologies
- the ‘seven technology families’ of the innovation strategy:
- advanced materials and manufacturing
- engineering biology
- electronics
- sensors
- photonics and quantum
- robotics
- smart machines.
Funding over three years
The funding, to be delivered through Innovate UK, will be available to small and medium sized-enterprises (SMEs) over the next three years.
It will prioritise projects focused on the most important areas of the future economy as set out in the Innovate UK plan for action.
Businesses can apply for funding through the Innovation Funding Service.
Building on the innovation strategy
The loans are part of the government’s plan to build on the measures outlined last year in its innovation strategy.
The measures enable UK innovators to access the right finance at the right time in order to grow.
It builds on our world-leading research capability and helps to secure the UK’s position as a science superpower.
Supported projects
Projects supported via the successful loan programme have included:
- portable freezers able to safely deliver vaccines to care homes and surgeries
- a platform designed to protect hospitals and healthcare centres from cyber-attacks during the pandemic
- patented hospital screens preventing the transmission of pathogens and viruses.
Businesses with innovative late-stage projects can apply for a loan between £100,000 and £2 million, with flexible repayment terms to help secure their future growth and commercial success.
Monthly competition rounds
The new full-scale programme will start with monthly competition rounds, for which applicants will need to demonstrate evidence of:
- a high-quality proposed innovation project
- suitability to take on a loan
- inability to access finance for their project from commercial finance providers.
This government-backed finance builds on the success of:
- an extended pilot programme that has been delivered by Innovate UK Loans Limited since 2017
- the programme of innovation continuity loans delivered as part of Innovate UK’s coronavirus support package.
Driving productivity and growth
Innovation loans are designed to support suitable SMEs in carrying out late-stage research and development projects, with a clear route to commercial success to drive productivity and growth across the UK.
The decision to transition from pilot to full-scale loans programme was taken following an independent evaluation of the scheme’s success.
The evaluation found that the pilot had been extremely effective. And that the innovation loans programme is viewed as a key finance product within the market, supplying essential funding that would not have been available elsewhere.
£163 million, 200 businesses
The innovation loans programmes to date have committed £163 million to around 200 businesses in all parts of the UK.
It has enabled new product development and commercialisation activities, supporting investment in research jobs and delivering growing levels of sales.
Over a third of businesses in the portfolio have accessed additional private investment, leveraging new capital of over £110 million, with an average raise of £1.8 million.
Independent interim evaluation
An independent interim evaluation supported the decision to move forward from the pilot.
Innovate UK commissioned SQW, working with IFF Research and Middlesex University, to conduct an interim evaluation of the pilot in 2019, with a follow-on report now also published.
This interim evaluation found the pilot to have been highly successful and reported that the innovation loans programme is viewed as a key finance product in the market.
It complements other finance products and provides beneficiaries with access to funding that would not be available elsewhere.
Supporting talented innovators
Science Minister George Freeman said:
As the success of our extraordinary vaccine development roll-out made clear, the UK is home to some of the most brilliant and innovative minds in the world.
Supporting our talented innovators, not only to develop their ideas but to see these ideas through to commercialisation, will be essential to growing an economy built on the technologies of the future, and securing the UK’s status as a true innovation nation.
So, I am thrilled that after an extremely successful pilot programme, Innovate UK are launching this substantial new series of loans to support SMEs working across the country on the most innovative projects for the future economy, entrenching our position as a science superpower.
Helping businesses achieve their ambitions
Indro Mukerjee, CEO of Innovate UK, said:
Innovation loans are an important part of the investment support that Innovate UK offers to help UK businesses achieve their growth ambitions.
We have tested this new form of support rigorously and I am pleased that we can now offer £150 million over the next three years through innovation loans as part of our commitment to support innovative businesses to grow rapidly and achieve scale.
The innovation loans scheme is just one of the services to growing and scaling businesses across the UK.
Our wrap-around support now includes greater access to Innovate UK EDGE, a business advisory service; and Innovate UK KTN, more opportunity for businesses to connect with potential academic and business partners to help scale in the UK and abroad.
Allied with this is our continued work with the British Business Bank and private finance to provide further backing for UK innovators.
Further information
The SQW follow-on interim evaluation of the innovation loans pilot, together with Innovate UK analysis of the innovation continuity loans programme, highlighted important areas of success:
- innovation loans have committed £163 million across almost 200 loans between late 2017 and 2021 in the extended pilot and COVID-19 innovation continuity loans programmes
- demand tripled between 2017 and 2019 in the pilot. Including innovation continuity loans, around 1,000 applications have been received, with a success rate of approximately 20%
- finance through innovation loans is largely additional: few beneficiaries would have been able to access funding elsewhere
- the pilot programme was delivered effectively with clear and well-defined organisational structures and arrangements
- positive outputs and outcomes have been shown in the pilot through the evaluation:
- increased investment in research and development and innovation capacity (88%)
- improved skills (96%)
- progress towards commercialisation (92%)
- launch of new products, services, and processes (60%)
- improved productivity from process innovation:
- cost reduction (84%)
- improved quality (82%)
- reduced time (76%)
- intellectual property protection (72% of beneficiaries applied for or intend to apply for protection)
- emerging impacts are indicated in the pilot evaluation:
- increased sales (£44.7 million cumulative and £16.9 million annual net increase in turnover attributable to loans)
- increased employment (84%, with 346 jobs created in the pilot cohort)
- increased investment and commercial readiness (33% of borrowers in the portfolio raised over £50,000 in new capital, averaging £1.8 million and an aggregate of £110 million)
- the programme is filling a gap in the innovation funding landscape, complementing other finance products and playing an important role in the commercialisation journey.
Case studies
CATAGEN
Net zero technologies company CATAGEN is based in Belfast.
CATAGEN has received two loans totalling £2.6 million in the innovation loans pilot in 2018 and in the innovation continuity loans programme in 2020.
CATAGEN delivers advanced solutions that have a direct impact on our cities and air quality.
Reducing tailpipe emissions remains one of the biggest challenges facing the global mobility industry.
CATAGEN is currently using its specialist emissions expertise to develop new technologies in green hydrogen and e-fuel to impact net zero and climate change targets.
Dr Andrew Woods, Founder and CEO, said:
The loans from Innovate UK have provided vital support to us to develop our technology and reach new markets, enabling us to further our purpose: to clean and decarbonise the air.
Secretary of State for Business, Energy and Industrial Strategy (BEIS), Rt Hon Kwasi Kwarteng opened the CATAGEN Net Zero Technologies Centre in Belfast’s Titanic Quarter in late 2021, saying:
I can think of no other SME that captures what we’re trying to do in BEIS.
Enterprise, net zero and innovation.
CATAGEN, here in Belfast combines all three extremely effectively… the technologies they develop can help to create jobs too, demonstrating that going green and driving growth go hand in hand.
Invatech Health Ltd
Invatech Health Ltd is based in Bristol.
It has used an innovation loan and an innovation continuity loan, together totalling £1.8 million, to develop Titan PMR, its fully NHS accredited Pharmacy PMR system.
This disruptive technology fundamentally changes the way that pharmacies work, creating new efficiencies and delivering a platform that opens up new possibilities for the future of the industry.
In a relatively short space of time Titan has gone from prototype to a fully commercial product that is transforming the pharmacy landscape.
Its unique processes have helped free up 50% of pharmacists’ time and improved dispensing safety by 95%.
The innovations, including the first artificial intelligence system for pharmacy, are changing the way pharmacy is practiced.
Titan’s appeal in the market is also translating into a commercial success story.
The business is generating solid recurring revenues which are increasing month on month as the volumes grow.
The commercial models established during this journey are as innovative for the market as the product itself.
In the words of Tariq Muhammad, CEO:
Our promise was to disrupt the pharmacy market and I believe we have achieved this objective.
Without your support and faith, Titan would still be at an early developmental stage without the necessary funds to gain momentum.
The Electrospinning Company Ltd
Since receiving a £714,000 innovation loan in late 2018, The Electrospinning Company Ltd has been scaling the manufacturing processes for its nanofibrous biomaterials for use in tissue regenerative devices.
The Electrospinning Company was a spin-out from the Science and Technology Facilities Council, part of UK Research and Innovation. It is located in a purpose-built cleanroom facility in the Harwell Campus in Oxfordshire.
The company has also made use of the Innovate UK EDGE programme’s support at this important growth inflection point in their journey towards scale.
Since taking on their innovation loan, the company has raised investment in:
- a £1.5 million series A round led by Downing
- a £4.5 million round led by strategic investor Confluent Medical Technologies Inc.
Experienced CEO Ann Kramer highlighted the importance of the innovation loan:
This loan enabled us to purchase equipment and deliver manufacturing process innovation and validation for our scalable manufacture of implantable biomaterials that work with patient cells to repair or regenerate tissues.
The innovation loan was pivotal in putting our investment round together and helping us to shift from slow-growth angel funding to rapid-growth VC and strategic investor funding.
Top image: Credit: ASKA, E+ via Getty Images