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18 October 2019

How a no-deal Brexit could pull the plug on UK tech start-ups

Millions of pounds in EU funding could dry up if the UK leaves without a deal, leaving promising businesses uncertain if they will survive.

By Chris Stokel-Walker

On 15 October, the British entrepreneur behind UK-based project, CorPower Ocean, which converts wave power into energy, stepped on stage at a nightclub in Budapest where he won €50,000 of European Union funding for start-ups. He could theoretically be the last to benefit from the scheme run by European Union’s start-up and innovation accelerator, the European Institute of Innovation and Technology (EIT).

Just a few hours before Matthew Dickson won the cash, the head of the EIT admitted that EU-funded science and technology projects could lose their funding immediately in the event of a no-deal Brexit.

In exclusive comments made in Budapest at the EIT’s awards gathering, Martin Kern, the body’s director, admitted that British science and technology projects could be put in peril in two weeks’ time.

“In a worst-case scenario – that is the current provision – if there’s no deal, no agreement, nothing, there would be a stop in eligibility at that moment,” he said. “Of course, that would mean either projects have to stop or other national funding would come in.”

More than 100 UK organisations have benefitted from EIT funding since its inception in 2008. EIT is part of the European Union’s Horizon 2020 research and innovation programme.

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Last year, UK-based projects that fell under the umbrella of the EIT’s eight “innovation communities” (support networks-slash-start-up accelerators, tied to different areas such as energy, food and digital) received €20m in grants.

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“We have hundreds of projects and partners involving the UK and each of them has to decide what to do,” said Kern at the EIT awards. “Does someone else take it over? Do we just stop [the project]? Do we get more funding come in [from the UK government]?”

Kern admitted that some UK projects currently under the EIT umbrella could close on 31 October. “Others may decide to continue without the UK, or the UK government may say we’ll finance the UK part and it’ll continue. I don’t think you have a one-size-fits-all approach.”

The EIT director was very open about the risk to UK projects in the group. “At this stage they know the rules, they know the instructions, but it’s difficult to plan because they don’t know what will happen,” he said.

He admitted that the EIT had taken part in “internal discussions” about how to tackle the issue, but there was little they could do.

“While the UK is a member state they are fully eligible and fully participating in our activities,” he said. “If and when Brexit happens the rules may be redefined. It’s not something in our hands. People assess the risk, and I think everyone is very much alert and monitoring it closely but the hard decisions can only be taken after Brexit.”

The news comes less than a week after UK tech industry body techUK released a survey of 5,000 members saying that its members were ill-prepared for and concerned about a no-deal Brexit. Two-thirds of small businesses, and 77 per cent of medium-sized ones, said a no-deal Brexit would have a fairly or very negative impact on their business.

The main concern of businesses was the potential inability to attract talented workers in the aftermath of a no-deal Brexit

Six in 10 small- and medium-sized enterprises (SMEs) surveyed by techUK said they hadn’t taken any steps to prepare for no deal because they were “unable to predict [its] implications”.

“SMEs are integral to the UK economy, providing millions of jobs and supporting the supply chains of larger business. As a result the UK cannot get ready for Brexit, unless its SMEs are adequately prepared,” said Neil Ross, policy manager for the digital economy at techUK.

“techUK’s deep dive into the perspectives of SMEs should therefore be essential reading as the government continues its preparations for no deal.”