The chancellor is expanding a £500m fund for UK startups hit by the coronavirus crisis, to ensure firms that shifted their headquarters abroad can still access the scheme.
The Future Fund will now benefit companies that are seen as British in all but name, having moved their parent company to tap US investors or take advantage of so-called accelerator programmes. Accelerators like US-based Y Combinator often ask firms to set up a US entity in order to access financing, mentorships and expert networks overseas.
Future Fund applicants will still have to prove that at least half of their staff are based in the UK and that they make at least 50% of their revenues from UK sales, the Treasury said.
“This change means that those startups who have strived to be the very best, and taken opportunities to grow their business, will be able to benefit from our world-leading Future Fund,” chancellor Rishi Sunak said.
The changes come amid a surge in demand for the scheme, which will see the government take stakes in British startups that struggle to repay loans due to the coronavirus crisis.
The Future Fund offers convertible government loans worth between £125,000 and £5m to companies that have previously raised at least £250,000 of equity investments. Those loans are matched pound-for-pound by private investors, but the government debt will convert to equity if the loans are not repaid.
The fund is meant to help startups, in sectors like tech and life sciences, that may have otherwise struggled to survive, let alone grow, throughout the coronavirus crisis.
The government initially committed £250m in loans as part of a £500m fund that was equally shouldered by private investors. However, the government has now approved £320m worth of future fund loans to more than 320 early-stage firms.
The Treasury has not confirmed whether there is a cap for the expanded fund, which originally launched on 20 May.
Business secretary Alok Sharma said: “As we restart our economy, it is crucial that our innovators and risk-takers get all the support they need to flourish.
“Our decision to relax this rule recognises the importance of many of the UKs most cutting-edge startups as we bounce back from coronavirus.”
Unlike other government programmes, such as the bounce back loan scheme (BBLS) and the coronavirus business interruption loan scheme (CBILS), Future Fund loans are distributed by the state-owned British Business Bank rather than high street lenders.
Figures released on Tuesday showed that the trio of government-backed loan schemes led by commercial banks – covering BBLS, CBILS and the scheme for larger businesses known as CLBILS – hit a milestone, with more than 1m firms granted emergency funding so far.
Government data showed that banks had approved more than 1m loans worth £42.9bn as of 28 June. More than 1.3m businesses have applied.