Wednesday 03 September 2025 5:16 am
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Tuesday 02 September 2025 12:34 pm
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To maintain its economic leadership, the UK must learn from the proactive policies of competitors like France and urgently reform its own R&D and investment schemes to better support innovative start-ups and scale-ups, says Gregor Poynton
As the UK faces up to the economic challenges we confront as a country, we should remain optimistic about the ability of the UK to thrive in an uncertain world.
Given the past decade and a half, it is easy to be pessimistic.
But the UK remains the sixth largest economy in the world. We have four of the top 10 universities in the world, more unicorns than Germany and France combined, and the largest hub for venture capital and start-up investment outside the US, built on our world-class financial and tech sectors.
But even in our areas of greatest strength, the rest of the world is not standing still. A decade ago when the UK was still in the EU the idea that France, Spain, Italy and Germany would each be attracting private capital investors, tech entrepreneurs and financiers at scale from the UK was a distant prospect.
One by one, those countries have clocked the value of what the UK has, and they’re moving fast with pragmatic action to spark innovation, pull in investment, grow scale-ups and take aim at the UK’s dominance in Europe.
Thanks to the strong and improving trading relationship that we in the UK have with the EU, their success can still be our success. But we cannot complacently allow ourselves to fall behind – the lessons of their success should be lessons for us too.
Take France. In recent years France has been catching up with – and has in some cases overtaken – the UK with the introduction of a series of policies and initiatives to help ambitious businesses scale up.
Station F
France is home to the world’s largest ‘start-up campus’ – Station F in Paris, which was established with support from Facebook, Amazon and Microsoft in 2017. Station F has fostered an ecosystem that has raised over €1bn per annum for the past three years, equating to 15 per cent of the annual total raised by start-ups in France.
Expanded Business creator share subscription warrants (BSPCE) enable start-ups established less than 15 years ago to offer employees and certain managers the option to subscribe for shares at a price set in advance. As of January 2020, foreign companies may also offer BSPCE to employees of its French subsidiary.
The introduction of the Tibi scheme to increase engagement and participation of French institutional investors like large insurance companies and private pension schemes has positioned France as a leading technology investment hub.
The scheme sought to stimulate the growth of the French late-stage tech funds and the long-term investment available to private and public French technology companies.
The French tech ecosystem received nearly €30bn of investment over the course of the first phase of the initiative between 2020-2022.
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Given the UK Government focus on increasing UK DC pension scheme investment into UK based companies and infrastructure, alongside this welcome development we must look to match and improve on similar initiatives that could help accelerate investment and foster innovation. Proposals like the BVCA’s ‘Nova’ proposal could be a UK response.
In the UK, R&D tax credits should support the growth of research-intensive companies. However, botched reform under the last government means this does not meet the needs of most companies or investors. Only around 80 companies utilised R&D tax credits in 2023/24 – out of thousands of potential applicants.
In France, young innovative companies (JEI), must employ fewer than 250 people with a turnover of less than €50m, or have a total balance sheet of less than €43m to qualify for R&D tax credits.
France’s R&D tax credits go further offering not just tax breaks but also social exemptions for companies under 11 years old. That might be controversial in a UK context, but in a country with strong social protections it shows a willingness to think holistically – where employees understand both the risks and the rewards of working in a start-up.
How the UK should respond
There are clear steps the UK could take in response.
Recent efforts, for example, to simplify the R&D tax system are welcome, but we could go further and merge the existing schemes into a unified system that offers higher rates for the most R&D-intensive SMEs and provides clearer, faster advance assurance that works better for more companies. Internationally, portfolio companies of Venture Capital firms are often recognised as independent entities, making access to R&D tax credit schemes more straightforward. The UK should learn from this too.
The Enterprise Management Incentive (EMI) which is the UK’s closest equivalent to the French BSPCE scheme, has been extremely effective in allowing SMEs to compete with larger firms by giving their employees a stake in the company. But it hasn’t been reformed in 12 years, and later stage companies could be supported better.
Similarly, the EIS and VCT programmes are critical tools to drive private capital into UK innovation and scale-up – but regional EIS and VCT funds are particularly constrained by restrictions such as the seven-year rule. This often limits access to such schemes as regional funds often take longer to reach the stage when they are able to receive institutional investment from VCs. Scale-up is a problem across the UK economy, and raising this limit would provide more opportunities to scale up and grow across the nations and regions.
Lifting the EIS Knowledge Intensive Company upper limit so R&D intensive IP rich companies in sectors such as biotech and deep tech can continue to raise capital would also help continue the development of innovative companies.
With the right commitment and support for STEM based start-ups and scale-ups, the UK can harness its economic strengths, unlock new opportunities, and not just weather turbulent times but emerge stronger from them.
Gregor Poynton, Scottish Labour MP for the Livingston constituency and Member of the Business and Trade Select Committee
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