After the EU: What's next for business funding?

  1. Francois Badenhorst

    Francois Badenhorst Business Editor, UKBF & AWEB Staff Member

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    A follow up to our guide to government support for small businesses in 2018 - what's available to fill the EU funding gap?

    Brexit sparked a huge debate, both in public and on the forums. But for right now, let’s not dwell too much on what happened: it’s gone and past,  and we’re leaving the EU. So what the hell happens now? No matter what side of the fence you were on, what businesses need is some certainty. Frustratingly, the politicians haven’t done much to dispel the mystery.

    Of particular concern is funding, or more specifically European Investment Fund (EIF) and European Investment Bank (EIB) funding. European funding to British ventures are in a state of limbo after the government triggered Article 50 in March 2017.

    The loss of EIF funding will be tough to take. The fund committed around €2.8 billion to the UK between 2011 and 2015 alone. As the FSB’s Mike Cherry pointed out before the last Budget, “The fund has proven a vital lifeline for firms struggling to access finance, particularly outside of London and the South East where private investors are less active.”

    So what’s next? Well, there’s been promises made. The last Tory election manifesto pledged to funnel the money saved from EU contributions into a “shared prosperity fund”. Its aim would be to break down regional disparities in access to finance, but the details have been scant.

    The Chancellor has publicly promised that the government would “stand ready to replace EIF lending if necessary”. The British Business Bank (BBB) has been identified as the most likely vector for this new funding.

    As the BBB’s new chief told the Sunday Times recently, “It really is important that something replaces [EU funding] and we’re here to help”. It would be a big step up in the bank’s role since it was founded only nearly four years ago. Philip Hammond has said the BBB will be seeded with £2.5bn in public money specifically to help ease the funding shortage.

    Much has been made of R&D funding in recent years, too. The government’s new industrial strategy identified increasing R&D investment to 2.4% of GDP by 2027. That figure is currently sitting at 1.7%, so that’s a 50% increase in a decade.

    To attain this lofty goal, we’re very likely to see the R&D tax credit scheme being emphasised and improved upon. RDEC – the R&D tax credit scheme for big businesses –  has had its rate increased from 11% to 12% – effective from 1 January 2018.

    The RDEC regime isn’t the same as the SME R&D tax credit that is calculated by deducting an additional 130% of qualifying costs from profits chargeable to corporation tax. But although SMEs won’t benefit from the giveaway, R&D relief is an option.

    The Brexit challenge isn’t just plugging the finance hole; for many small business it’s a workforce challenge as well. We’re still awaiting the confirmation of long term residence rights of EEA citizens in the UK, but it’s looking likely. But the flexible labour market supplemented by European workers may disappear in favour of immigration controls.

    Are there any Brexit challenges we’ve overlooked? Have you felt the economic impact?

  2. Clinton

    Clinton UKBF Big Shot Full Member

    3,562 1,178
    I'm more interested in the Brexit opportunities. Any chance of some coverage of that instead? ;)

    I feel like I clicked the wrong link somewhere and ended up on the BBC site!
    Posted: Jan 4, 2018 By: Clinton Member since: Jan 17, 2010
    Kat Haylock likes this.
  3. Sam fox

    Sam fox UKBF Newcomer Free Member

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    I need money to start my company if you can help me I will refund it
    Posted: Jan 5, 2018 By: Sam fox Member since: Jan 4, 2018
  4. Steve0077

    Steve0077 UKBF Newcomer Free Member

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    With the regards to Brexit 'opportunities', I'm sure most people would like to hear exactly what they are from those responsible for sending us down this path. Unfortunately, brexiteers seem to go rather quiet when asked for specifics rather than vague notions.
    Posted: Jan 5, 2018 By: Steve0077 Member since: May 13, 2014
  5. Clinton

    Clinton UKBF Big Shot Full Member

    3,562 1,178
    I didn't vote Leave, so don't look at me.

    But I'm still tired of all the negativity, it's gone past boring. The threats have been covered exhaustively.

    Yet with any major change there are always opportunities. Perhaps Francois can make those opportunities the focus of his next article. ;)
    Posted: Jan 5, 2018 By: Clinton Member since: Jan 17, 2010
  6. Scott Muir

    Scott Muir UKBF Newcomer Free Member

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    totally agree. the coverage focuses on the negative. need to get on with it, there are opportunities for sure
    Posted: Jan 5, 2018 By: Scott Muir Member since: Jan 5, 2018
  7. Highland Spring

    Highland Spring UKBF Regular Full Member

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    Well as we were / are a net contributor there is no such thing as EU money, its just our money we pay then get refunded back, I am afraid for me the EU is a con trick we export little and import a lot and pay for the priviledge and its sold as the EU giving us grants.
    Posted: Jan 27, 2018 By: Highland Spring Member since: Jan 20, 2018