Recommendation 18

There are several reasons why the proportion of smaller businesses receiving funding could have fallen including the increase in UKRI’s requirements for coinvestment from participants for wave 3 funding. UKRI increased the co-investment requirement from industry in wave 3, responding to a requirement from the Secretary of State for Business, Energy & Industrial Strategy. The ratio of public investment to private investment increased from 1:0.45 in Wave 1 to 1:1.5 in Wave 3.48 The Department told us that it could not prove that the drop in the proportion of small businesses between waves 2 and 3 was solely due to the increase in coinvestment. But it conceded that it was reasonable to believe that it was a “really big factor” because it was harder for small businesses to meet the coinvestment targets. The Department emphasised that co-investment targets were nonetheless important in generating private investment which helped to boost the overall spend on R&D. It explained that it was working with small businesses to help them address this challenge.49 UKRI suggested a more tailored approach to co-investment for different sized companies might help.50