The UK Ecosystem for Innovative SMEs: Taxation, Investment & Incubation   A Presentation to the EU-Israel Workshop on Star...
Innovation in the UK <ul><li>Challenges </li></ul><ul><li>Low levels of R&D investment </li></ul><ul><ul><li>Innovation un...
Fiscal Policies for R&D <ul><li>Support for R&D </li></ul><ul><li>- R&D Tax Credit SMEs - 200%, rising to 225% in April 20...
Venture Investment Incentives <ul><li>Enterprise Investment Scheme </li></ul><ul><li>- Available to individuals and trusts...
Venture Capital Investment <ul><li>Venture Capital </li></ul><ul><li>- Largest VC market in Europe </li></ul><ul><li>- UK ...
Business Incubation <ul><li>Role of Government </li></ul><ul><li>- No national policy or funding programme for incubation ...
UK SME Innovation Programmes <ul><li>Grant for R&D </li></ul><ul><li>- Proof of Concept/Market and R&D support (50% costs)...
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Harradence

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Harradence

  1. 1. The UK Ecosystem for Innovative SMEs: Taxation, Investment & Incubation A Presentation to the EU-Israel Workshop on Start-Ups and Innovation 30-31 May 2011 Fergus Harradence Deputy Director, Innovation Policy
  2. 2. Innovation in the UK <ul><li>Challenges </li></ul><ul><li>Low levels of R&D investment </li></ul><ul><ul><li>Innovation unevenly spread in UK </li></ul></ul><ul><ul><ul><li>10% companies account for over 40% of investment </li></ul></ul></ul><ul><li>Opportunities </li></ul><ul><li>UK open to tech – 4 th in INSEAD Global Innovation Index </li></ul><ul><ul><li>World leading capabilities in science, technology and research, intangibles investment </li></ul></ul>
  3. 3. Fiscal Policies for R&D <ul><li>Support for R&D </li></ul><ul><li>- R&D Tax Credit SMEs - 200%, rising to 225% in April 2012 </li></ul><ul><li>- Covers a range of activities (capital investment, contracted research) </li></ul><ul><li>- SMEs not in profit may exchange enhanced relief for a cash payment </li></ul><ul><li>- FY08-09 - 6,600 SME claims, worth £270m against R&D expenditure of £1.69bn </li></ul><ul><li>- CBI survey found it had encouraged investment, and savings on R&D costs delivered by the scheme now averaged 10.5% for SMEs, 8.5% for medium-sized companies and 6% for large companies </li></ul>
  4. 4. Venture Investment Incentives <ul><li>Enterprise Investment Scheme </li></ul><ul><li>- Available to individuals and trusts – for investments in unquoted SMEs </li></ul><ul><li>- Income tax relief (30%) for individual investors who purchase ordinary shares in qualifying company – offset against income tax </li></ul><ul><li>- Relief on share purchases up to £500K (e.g. max relief £100K) </li></ul><ul><li>- Shares must be held for 3 years after issue – then free from Capital Gains Tax/can offset losses against income tax in year of disposal </li></ul><ul><li>Venture Capital Trusts </li></ul><ul><li>- Launched 1995 – enables individuals to invest in SMEs via trusts </li></ul><ul><li>- VCTs listed on LSE – investors purchase shares </li></ul><ul><li>- 70% assets of trust must be in qualifying companies (restricted activities) </li></ul><ul><li>- Need to be approved by HM Revenue & Customs to qualify </li></ul><ul><li>- Offers income tax relief (30%) on shares purchased – and on dividends </li></ul><ul><li>- Shares to be held for 5 years </li></ul><ul><li>- Capital Gains Tax Relief in some cases on disposal </li></ul>
  5. 5. Venture Capital Investment <ul><li>Venture Capital </li></ul><ul><li>- Largest VC market in Europe </li></ul><ul><li>- UK Investment declined £359m in 2008 to £313m in 2010 </li></ul><ul><li>Enterprise Capital Funds (ECFs) </li></ul><ul><li>- Target market failure in early stage investment </li></ul><ul><li>- Began in 2006 – 10 funds in operation – invested in 85 businesses </li></ul><ul><li>- HMG investment £182m, £200m committed next 4 years – will leverage additional c£100m from private sector </li></ul><ul><li>- Investment of £250,000-£2m in an individual company </li></ul><ul><li>UK Innovation Investment Fund </li></ul><ul><li>- Launched 2010 - £325m pool of capital </li></ul><ul><li>- 2 funds of funds – general tech and greentech </li></ul><ul><li>- 6 investments made into tech funds so far </li></ul><ul><li>- HMG invests on equal terms private sector </li></ul><ul><li>- No restrictions on investments (size, stage etc) </li></ul>
  6. 6. Business Incubation <ul><li>Role of Government </li></ul><ul><li>- No national policy or funding programme for incubation </li></ul><ul><li>- Reflects structure UK innovation system </li></ul><ul><li>- Public funding supports - indirectly </li></ul><ul><li>Types of Incubators </li></ul><ul><li>- Linked to universities </li></ul><ul><li>- Linked to Public Sector Research Establishments </li></ul><ul><li>- Run by innovation-supporting organisations (Carbon Trust) </li></ul>
  7. 7. UK SME Innovation Programmes <ul><li>Grant for R&D </li></ul><ul><li>- Proof of Concept/Market and R&D support (50% costs) </li></ul><ul><li>- Support for projects conducted within a single business </li></ul><ul><li>- Grants of up to £500K (typically £10s of K) </li></ul><ul><li>Knowledge Transfer Partnerships </li></ul><ul><li>- Support for SMEs to work with knowledge base institutions </li></ul><ul><li>- Place associate within company for 6 months – 3-4 years </li></ul><ul><li>- Work on innovation related project in business </li></ul><ul><li>Small Business Research Initiative </li></ul><ul><li>- Procurement programme, based US SBIR </li></ul><ul><li>- 2 Phase competitions to develop technology-based products </li></ul><ul><li>- Scheme value c£20m pa </li></ul>

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