But existing government support is not enough. That is why we are calling for the introduction of a further scheme, Citizen Innovation Funds (CIFs), a new investment product that will give the public the chance to be more actively involved in future growth companies.
Innovative companies are nimble but also operate in a global business. If we fail to support our world-leading science base, we risk falling behind. Fortunately, policy solutions are also a global business and we only need to look to France to see a successful policy that has helped support a generation of innovative companies.
The Fonds Commun de Placement dans I’Innovation (FCPI) scheme has been running since 1998. It allows the French public to invest up to €13,000 (£10,490) each year in pooled managed funds, which then invest in promising companies. By law, 60 per cent of the funds must be invested in small innovative firms. From an average investment per person of around €6,000, the scheme has raised over €6bn and supported over 1,000 firms.
Research has shown that companies backed by FCPI funds grow their revenues quicker, file more patents, export more, and hire more staff than their rivals. There have also been real success stories. These include Vistaprint, the online provider of marketing products, Fovea Pharmaceuticals – which is developing a portfolio of ophthalmology products – and Parrot, a manufacturer of wireless devices for mobile phones.
And the results are clear. While the UK hasn’t seen a biotech company listing in quite some time, in France the public markets remain an option. Nanobiotix, which is developing a therapeutic approach to local cancer treatment, was 20 per cent funded by FCPI before its listing on the Euronext.
The government should allow individuals to invest up to £15,000 each year in a CIF, with the incentive of an income tax break. The French experience shows that returns for investors are positive and demand for the product is high when the tax incentive is right.
CIFs would complement existing schemes, like research and development tax credits and government grant funding, and could help leverage significant additional private finance. It would also be the first time that the general public has had the chance to make an informed decision to invest in high-growth and potentially high-reward sectors. At the moment, tax breaks for this kind of investment are limited to high-net worth individuals.
Investing in UK science is vital, especially in times of austerity. CIFs would offer the broader public the opportunity to do exactly that, and to stimulate a sector that has huge potential for Britain’s future economic growth.
Steve Bates is chief executive of the BioIndustry Association.