UK Edition
EU investment fund closes door on UK tech start-ups
The EU’s investment arm has shut down funding to British start-ups in a move that deprives young technology companies of a key source of financial support.
The European Investment Fund put just €61m (£53m) into UK-focused funds last year, a 91pc drop on 2016.
The freeze comes despite UK taxpayers continuing to fund the EIF, which is majority owned by the European Investment Bank.
The fund has, at times, accounted for up to a third of all the investment in UK-based venture capital funds.
The EIF, a partnership between the EIB and private investors, backs investment funds rather than companies directly. It has never formally suggested that it has cancelled investment in the UK, but technology investors say it effectively turned off the taps when Article 50 was triggered a year ago.
The fund’s annual report, published last week, said it had backed just three UK-focused investors, compared with 20 in 2016. The EIF’s overall level of funding across Europe has remained stable at €9.3bn. But the amount committed to UK-focused investors dropped from €708.8m to €61.1m, less than 1pc of its total investment. The figures do not include pan-European funds, some of which are based in the UK.
It comes despite technology start-ups in Britain attracting more funding than any other European country by a wide margin. Venture capital investors put £3bn into the UK tech scene in 2017, more than four times the next biggest market, Germany, according to figures from London & Partners.
The EIF denied it had formally stopped investment in Britain. “We can confirm that there is no moratorium on investments into funds in the UK,” a spokesman said. “It is the case that due diligence on them now needs to be more thorough, and take into account a wider range of factors.”
However, one tech investor said they had ignored British investors after Article 50 was triggered. “Publicly their line is ‘business as usual’ but they’ve made it very clear in the market that they will not do any new relationships. It’s clearly prejudicial,” the source said.
Philip Hammond, the Chancellor, has said he is prepared to give extra firepower to the British Business Bank in the event that the EIF stops backing UK investors in the long run.
Last November, he said: “I want to reassure you that if we can do a deal that allows the EIB, the EIF, to continue lending into the UK then we will.
“But if we can’t the British Business Bank stands ready, willing and able and the Government stands ready to capitalise it to enable it to step into [their] shoes.”