Importance of Grant Funding to SMEs in the UK: Its Continuance through Brexit

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Grants increase our reach - both financially and technically

We are developing three key technologies here in Ortheia and JRI:

  • Regenerative Therapy for the Hip – Codename: Hummingbird
  • In-Theatre Manufacturing – Codename: CONSTRUCt
  • Bone / Implant Interface – Codename: INTEGRATE

These are enabled through the far-sighted grant programmes to which we have access e.g. through Innovate UK and Horizon 2020.

Grants are enabling through financial de-risking

Downside of Early external investment – dilution

At the early stage we are at with these, we are unlikely to get the necessary funding from external investors – and if we did the pre-money valuation will lead to high dilution of our position, so that route becomes less attractive.

Internal funding too slow

The scale of funding (currently we are running at about £3 million) is within reach, however, the rate at which we can cover these costs would mean that the progress of the development work be erratic and slow – making it likely that any opportunity that we are targeting is likely to have gone before we get there.

Risks too high for Internal funding

More important even than speed, is the inability to afford any failures at this level of funding. As SMEs we rightly focus on incremental developments – these are safe and dependable and highly unikely to go wrong. Whereas the more disruptive technologies carry high enough risks to rule them out

Grants are enabling through technical de-risking

As SMEs, we simply do not have the necessary skills and technology internal to our organisations . JRI, for instance, has a background is in manufacturing our implants from metals, polymers and, more recently, ceramics. Any dreams of developing new regenerative medicine approaches would remain just that, dreams, if it were not for the grant funding that support our consortia, the partners of whom do have the necessary equipment, skills and technologies. What is more, through grant funding, we have the power to build our own consortia and then lead them.

Our collaborators today include the top Universities in the UK and Europe as well as some of the most innovative SMEs in our chosen areas. We work with them to pull in skills and experience that are essential to the rapid progression of the developments we need. These grants, therefore, enable us to be able to lead on the development of the new and disruptive technologies that suit our strategies.

UK and European Grants

We have been highly successful at being awarded grants from UK, mainly Innovate UK but also from Research Councils, and from the European Commission, under Horizon 2020 (and previously under Framework 7). We have found both sets of government funding highly successful, with the European funding offering a scale beyond that of the UK funding.

Importance of European-style funding continuing beyond Brexit

I am heartened to read of the importance that the UK Government has in the continuation of access to the levels of funding either offered through Horizon 2020 or a scheme very similar as highlighted as a key pillar in their green paper on Industry Strategy. This was further emphasised to me personally by Jeremy Hunt, Secretary of State for Health, when I raised it his recent roundtable for SMEs in the Life Sciences Sector. Not only as we go thorugh the Brexit process but, crucially, having something comparable in the future - there are several forms in which such a scheme could work.

UK’s Drive for Continued Attractiveness to Investment in Life Sciences

However enabling grants are, they do have a limited lifespan. As we get closer to market and to launch, so any grant begins to look like direct investment. Any direct investment into a Company is defined as state aid and, quite rightly, any of the grant streams must stop before this – before the so-called “State Aid Barrier”.

Currently the UK with its various investor incentive schemes (e.g. EIS, SEIS and Patent Box) is attractive to investors – and for our grant-funded research to continue to be successful, it is important that handing over to the investment-funded stage remains as open as it is today – this means ensuring UK remains as attractive, if not more attractive, to investment as it is today.

I am very heartened to the emphasis by Theresa May’s government on ensure that, post-Brexit, that this is the case.

Closing Message

The grant funding we currently have access to as an innovation-driven SME gives the much-needed rocket boost at the crucial first stages of innovation. With care and attention, this should continue to be the case as we go through Brexit and into the future.

Prof Edward Draper