The recent Labour victory has brought about a significant shift in the political landscape. A key Labour party promise is to increase funding and provide greater devolution to local authorities, which is expected to positively impact the overall grant funding landscape.
However, for innovative businesses, navigating the grant application process remains challenging.
Barriers not only make it difficult for businesses to receive the funding they deserve, but also stifle the UK’s innovation capabilities compared to its European counterparts. By understanding these challenges and comparing the UK with more streamlined systems in other jurisdictions, we can pinpoint the areas for the new government to prioritise.
Taking stock of current barriers
The UK’s grant application process, particularly for requests exceeding £500,000, is complex and often involves a lengthy, rigorous due diligence process. The latter is often protracted and burdensome owing to its heavy reliance on third-party verification. Strict document requirements typically necessitate the involvement of a specialised transaction advisory firm with extensive experience in grants, which can limit available options and increase both business complexity and cost.
Post-offer grant in principle due diligence/verification is critical and can significantly impact the timeline and success of the project. At worst it can cause delays and at best requires applicants to proceed with expenditure at their own risk until the due diligence is complete.
Moreover, the UK’s competitive edge is at risk due to a combination of stringent due diligence requirements and a limited pool of qualified advisors compared to other jurisdictions. Businesses must navigate significant red tape before accessing the necessary funds, slowing down innovation and resulting in many potentially groundbreaking projects failing to get off the ground.
Lessons from Europe
In contrast, countries such as Germany and France have developed far more streamlined grant application processes that foster innovation more effectively.
Germany, for instance, boasts a simplified process with far fewer stages. German applicants receive substantial support from government bodies to navigate the process too, reducing their dependency on private consultants.
This facilitates a more efficient and accessible system, which France has similarly adopted. The French government offers businesses several public advisory services, allowing innovators to focus on developing their projects rather than navigating bureaucratic hurdles. These systems are proof that a more supportive and less burdensome grant application process is achievable. Due to their extensive history of direct grant intervention, these countries have cultivated a robust network of advisors capable of assisting businesses throughout the grant application process.
Overcoming the UK’s challenges
For the UK to remain competitive in this landscape, the new Labour government must start by addressing some critical challenges.
It’s imperative that we catch up with countries like Germany and France, which have longer histories of effective grant funding in key sectors. UK government departments aren’t currently equipped to deliver large-scale grant funding, and it’s important that they provide businesses with these crucial services as well as cultivating a network of independent advisors to support with the post-offer due diligence.
To tackle these challenges head on, the new government should look to implement a sector-led industrial strategy and provide clear statements on which sectors will receive support. This strategy should be developed collaboratively with industry stakeholders to ensure that it meets the needs of businesses.
Additionally, if we want to mitigate the risk of an ‘incubator economy’, it is crucial that funded projects contribute to the UK economy over time. This can only be achieved by implementing policies that encourage long-term investment and growth within the country.
To become a strong contender in the global race for innovation, the UK needs to cast its gaze inward and drive forward bold changes. Labour’s proposed policies, if effectively actioned, have the potential to propel this transformation.
With decisive execution, we can outpace competitors like Germany and France, but the government must be committed to turning the UK into a thriving hub of growth and set us apart on the global innovation stage.
For more guidance on grants, check out our sister site, SmallBusiness.co.uk.
Karim Budabuss is director of grant advisory at ForrestBrown.
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