The future of UK grant funding

Date posted: 6th Jan 2022

The Shared Prosperity Fund – the future of UK grant funding?

Many regions of the UK, including the North East and Yorkshire, have historically benefited from good availability of business grant funding. This funding has enabled businesses to secure financial support towards a wide range of projects including investment in plant, machinery and equipment, innovation and R&D and the costs of engaging consultants to support business growth projects.

Historically, these grant schemes have been financed by a mix of central government funds, funding devolved to local enterprise partnerships and combined authorities, and funding from the European Union. Whilst in the EU, the UK benefited from an allocation of c£2bn per annum of EU structural funding, the majority of which was spent on enhancing SME competitiveness (39%), research and innovation (23%) and supporting the shift towards a low carbon economy (19%) *.

Almost a year on from the UK reaching a deal to exit the EU, we still have a number of EU backed grant schemes that are operational across the UK. However, these funds will close over the coming 12 to 24 months and of course, UK organisations are no longer eligible to bid for further funding under EU programmes such as ERDF.

So, what next for UK business grant funding?

The UK government has long talked about the launch of a UK Shared Prosperity Fund as a replacement for EU funding; indeed, it first featured in the 2017 Conservative Party manifesto. Whilst some pilot programmes have taken place during 2021, the value of funding provided by these programmes is significantly lower than the £2bn a year EU level. The full-scale launch of the UK Shared Prosperity Fund is now expected in April 2022. In the 2021 spending review the Chancellor confirmed that the UK Shared Prosperity Fund will, at a minimum, match the size of EU Funds in all nations, each year. However, this will be on a phased increase basis, with funding growing from £0.4bn in 2022/23 to £1.5bn by 2024/25.

The main issue at present, which is causing uncertainty for businesses and grant funding providers, is that there is limited detail as to how the fund will operate, how funding will be allocated, and what the priorities of the scheme will be. How the fund will support the Government’s plans for levelling up the UK economy also remains unclear.

The role of subsidy control regulations

The answers to some of these points will be shaped by the legislative process which is ongoing to replace the EU state aid rules, which historically provided a legal framework for grant awards, with a new UK Subsidy Control regime. The Subsidy Control Bill is passing through the House of Commons at present and is expected to become law in the second half of 2022. The hope is that this legislation will bring greater flexibility than the previous EU regime but also provide the comfort of certainty for grant awarding bodies to be able to confidently award funding to businesses without the need to complex legal compliance processes. Whether this will be achieved remains to be seen.

Other sources of government support

In addition to the UK Shared Prosperity Fund, government continue to invest heavily in R&D support, with grant funding for innovation projects through Innovate UK reaching record levels. The Chancellor has recently announced that total funding for R&D will reach £20bn per annum by 2024, with this comprising of a mix of grants and tax breaks through schemes such as R&D tax credits.

Further support has also been advanced through The Stronger Towns Fund and The Community Renewal Fund. However, these funds have also drawn criticism, particularly due to the competition-based awarding system which sees significant resources invested in producing bids which ultimately are unsuccessful and the fact that regions which have traditionally enjoyed significant EU funding have fared poorly in terms of funding award values.

Conclusion

2021 has been another year of continued uncertainty for businesses, with COVID continuing to have an impact and new rules and regulations arising from Brexit also causing challenges. As business leaders start to develop plans for 2022 and beyond, it is vital that they have clarity on the support that will be made available to help them achieve their plans.

The launch of the UK Shared Prosperity Fund and the passing of the UK Subsidy Control Bill will hopefully bring some much-needed clarity, giving businesses the confidence to press ahead with growth strategies.

In the meantime, there are still active grant schemes across much of the North East and Yorkshire which are able to support business growth plans. These include support for capital expenditure and consultancy-based projects.

If you are thinking about growing your business in 2022, then our grants advisory team would be happy to discuss funding opportunities that may be available to your business. Contact us here.

*(source: House of Commons Library: the UK Shared Prosperity Fund 25 November 2021).


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