Funding

A new funding deal encompassing social and economic needs

Our consultation shows significant short-term concerns about funding streams. It also shows businesses' willingness to provide ideas for the long-term. Business and government can work together to avoid gaps in funding for infrastructure, innovation and the rural economy, to meet economic and social needs. Government should be open to the idea that the best way to meet those needs may be continued involvement in some specific EU programmes. Uncertainty around EU funding remains despite welcome government efforts The government has made concerted efforts to offer protections for programmes currently supported by EU funding – but further steps are needed. Business welcomed the government's initial efforts to provide certainty in the area of EU funding. However the Chancellor's Autumn Statement made no mention of a future funding pathway and uncertainty still needs to be resolved. This is important for private partners involved in long-term infrastructure investments, particularly capital intensive ones in energy and utilities. It is also necessary for UK businesses, colleges and universities currently undertaking new applications for EU funding. Many bids for funding are made with partners from other EU countries, and these opportunities for partnering are shrinking.

Full clarification is urgently needed for funds that have not yet been allocated and the future of the UK's involvement in collaborative projects in order to avoid "cliff-edges" in the planning and execution of important projects that support the UK's economy. Without further steps from the government, uncertainty is expected to continue and dampen these investments and opportunities for collaboration.

There are specific EU programmes where the UK's continued involvement should be explored, as they provide benefits beyond funding

There are no comparable international alternatives to the European Investment Bank or the EU's collaborative research programmes – currently Horizon2020 – and as such, continued involvement should be seriously considered.

The European Investment Bank (EIB) provides the most significant amount of funding for UK infrastructure from the EU. It uses its expertise to lend and co-finance infrastructure projects at very competitive rates. Between 2011 and 2015, the Bank invested over €29billion in British infrastructure [1] , with the energy, utilities, construction, transportation and education sectors all benefiting in various ways.

As for funding in the innovation space, there is no other multi-lateral funding programme in the world that can compete with the EU's. The EU's partnerships between education institutes and the private sector are world leading. Being part of them adds prestige and boosts the excellence of the UK's science and research base. Industries as diverse as food and drink, life sciences and the creative industries have highlighted the benefits of collaboration these international partnerships provide as well as the substantial funding. While other intergovernmental research programmes do exist, these are limited in scope and do not have the same reach as the EU's. As it is vital the UK maintains its place as a home for international collaboration and innovation, ways should be explored for the UK to remain heavily involved in these programmes.

The UK government's long-term funding strategies must avoid shortfalls in vital areas

The breadth of areas – both regions and sectors – that receive EU funds creates a challenge for government to prioritise. At present, EU funding streams are targeted at areas of economic and social deprivation and need. There are some regions of the UK which receive particularly high amounts per person – including Wales, Northern Ireland, the Scottish Highlands and islands, Cornwall and the Tees Valley. Similarly, there are some sectors which receive significant amounts, particularly in the fields of innovation, infrastructure and the rural economy. A long-term vision for funding in these areas will require government to take a careful look at how public finances are currently managed – in respect of supporting strategic sectors, in important projects that support growth, and in how funds are allocated across the UK's regions and nations.

The UK government can ensure that leaving the EU does not disrupt efforts to provide infrastructure projects that support the whole economy by making an ambitious commitment to build an infrastructure system fit for the 21st century. From roads and railways that connect the UK, to the homes people live in and the energy supply that powers homes and businesses, infrastructure provides the essential foundations business needs to deliver jobs. Firms from all sectors report that a lack of affordable homes is undermining their ability to recruit and retain staff, and that challenges with broadband, energy and transport infrastructure can frustrate their growth. Each of the sectors involved in delivering infrastructure has emphasised the long-term nature of their investments and the importance of meeting local and strategic needs in future domestic funding streams. A determined effort to meet the long-term infrastructure needs of the economy and avoid dislocation from leaving the EU will lift both the confidence and long-term growth of businesses of every sector.

As the UK leaves the EU, a renewed domestic focus on science and innovation will be even more important in driving economic growth. The UK currently has a great environment for new ideas but invests less in research and development than its international competitors – and must not fall further behind as a result of leaving the EU. Innovation is at the heart of economic and social development in the UK. It drives productivity, anchors international investment, helps to raise living standards and lays the foundations for our future. It benefit individual businesses which innovate or adopt innovations, as well as society more widely. To ensure our ongoing international competitiveness and anchor investment in the UK, innovative businesses needs a funding roadmap for areas currently covered by EU funds and grants. Alongside this, business is calling for government to set a target for joint public and private R&D expenditure to reach 3% by 2025.

The agricultural sector has widely received the vote to leave as an opportunity for a refreshed look at how agriculture and the rural economy is supported, but there is strong debate within the various agricultural sub-sectors about the form that should take. A new approach to this support will have to consider the food and drink industry and retail sector – which support efforts to keep food prices low for consumers – and the leisure and tourism sector, which has strong interests in the preservation of the countryside as an attractive destination.

Recommendations: Funding

The UK government's plan for leaving the EU should include plans for a new funding deal that meets economic and social need:

1. In the short-term, further clarification is urgently needed for funds that have not yet been allocated and the future of the UK's involvement in collaborative projects

2. Government should explore continued participation in EU funding programmes where suitable alternatives are not available

3. In the long-term, work will have to take place at the domestic level to establish priorities for investment in the areas currently covered by EU funding – especially in the areas of infrastructure, innovation, and regional development


References

[1] European Investment Bank, The EIB in the United Kingdom

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