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Innovate UK urged to shift focus from grants to strategic investments in tech firms

October 2, 2024

The incoming interim executive chair of Innovate UK, Stella Peace, is being encouraged to transform the £1.1 billion-a-year innovation agency into a more investment-focused body, according to Cambridge University’s entrepreneur-in-residence, Ewan Kirk.

Kirk, who also serves on the board of BAE Systems and chairs Deeptech Labs in Cambridge, suggests that Innovate UK should move away from its traditional grant-led model and instead make equity investments in strategically important tech companies. This shift, he argues, would better align the agency with the government’s broader economic goals, working in tandem with the British Business Bank to invest directly in innovative firms that are critical to national growth.

Peace (pictured) took over the role from Indro Muckerjee, who led the agency for three and a half years. Her tenure begins at a time of heightened scrutiny from the Treasury, which is reviewing the efficiency of public spending across all agencies ahead of the upcoming October budget. Innovate UK has come under fire recently for its handling of the Women in Innovation awards, having awarded only half of the promised 50 grants.

Kirk criticised the current grant system as overly bureaucratic, suggesting that the complex process has given rise to a sub-industry of consultants who assist start-ups in securing grants for a fee, which he describes as “dead weight.” He called for a simplification of the process and urged Innovate UK to build on its successes, such as its nine catapult centres, which support R&D across sectors like cell and gene therapy, energy systems, and high-value manufacturing.

Innovate UK has already made strides in this direction, leveraging venture capital alongside its grants. Last year, it matched £40 million of grants with £123 million of equity investments from its partners. However, Kirk believes that a clearer strategy and greater investment in growth sectors are essential to unlocking the full potential of the UK’s innovation ecosystem.

As Peace takes the helm, the agency remains under pressure to demonstrate greater efficiency, having reduced its headcount by 25% in recent years. Innovate UK claims that for every £1 of public funding it distributes, businesses secure £3.61 in direct benefit, further boosting the economy. Still, Kirk insists that the agency’s potential could be maximised by moving toward an investment-led approach.

Lord Patrick Vallance, the science minister, is currently seeking a permanent replacement for Muckerjee and a new chair for UK Research and Innovation. The government’s R&D strategy remains focused on supporting major national initiatives, including accelerating economic growth, advancing clean energy, and building a future-proof NHS.