Funding for tech companies set to be slashed in wake of Brexit

THE technology industry is warning that new companies will be hit by a multi-million pound funding gap unless the UK remains part of a key international investment scheme after Brexit.

Trade group techUK – which represents 950 tech companies – said it is vital any Brexit deal allows Britain to continue to benefit from the European Investment Fund.

TechUK chief executive Julian David warned that a Government plan to boost investment in new firms, which was unveiled last week, could never replace the funds currently being funnelled through Europe. These amount to an average of £500million each year.

David said: ‘Right now the real priority for Government must be ensuring the UK remains part of the European Investment Fund.

‘The EIF continues to be a key investor into UK tech and any new post-Brexit system must seek to maintain the UK’s link to this Europe-wide fund.’

The EIF is backed by the EU and helps to channel private investment to new companies. It led to at least £2billion being poured into smaller British innovative firms from 2011-2015.

Last week, Chancellor Philip Hammond announced proposals to launch a UK-based investment fund in the event that Britain ceases to benefit from cash injections from the EIF.

The Treasury said this would ‘help ensure that firms still have access to the funding they need should our relationship with the European Investment Fund end when the UK leaves the EU’.

However, David said: ‘A new

national fund would struggle to compete with such an established source of support sitting just across the Channel. We should not be looking to reinvent the wheel.’

The key concern for the sector is the gap between funding for tech firms in the UK and their rivals in the US.

David said: ‘The UK tech industry is the European leader in securing venture capital funding, but we still lag behind the US on the longer term investment that helps businesses scale up.

‘If we want to compete globally then this has to change.’

He added: ‘Determining how the UK can improve its own funding mechanisms to help businesses of the future grow must sit alongside continuing to be part of established European systems post-Brexit.’