EU development funds frozen for at least 600 startups after Brexit vote
Hundreds of London startups could lose out on investment because the government has put the distribution of EU funds on hold in the aftermath of the referendum.
A scheme, named CASTS, designed to provide advice and support for 600 startups in the capital was due to receive £3.7m from the European Regional Development Fund (ERDF) this month, but has had the first payments out on "pause" as the government scrambles to find solutions to the plethora of unsolved post-Brexit questions.
In a letter sent to then-chancellor George Osborne, John Spindler, chief executive of Capital Enterprise, which was running the scheme said: "Until last week we were on track to sign the full funding agreement in mid July.
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"So it was with alarm that we heard … that, because of the referendum result … projects like CASTS, were to be put on 'pause' for an indefinite period."
TechCityUK, the body tasked with representing the interests of London's digital economy said it had written to the Mayor of London and the Department for Culture, Media and Sport to raise the issue and seek clarity.
The project was predicted to help create 600 jobs and could have unlocked at extra £50 million in private sector investment, Spindler told City PM.
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"If we don't have the money we could still live, but we couldn't do the extensive activity we do," he said.
"There's no other public funding that goes into the London tech scene in terms of support. We rely on EU money to do that. If we don't get that the importance of [startup] accelerators will be affected."
Around €3bn (£2.5bn) is available for UK-based projects in total under the EDRF scheme, with funding secured under EU structural funds designed to be topped up with other public and private cash. Capital Enterprise said it has been contacted by a number of funding bodies, including Cambridge, Newcastle and Anglia Ruskin universities, saying they had also had projects put on hold.
The projects in the current round of funding run up until 2020, raising questions about what would happen to payments if the UK leaves the EU before this time. The government has yet to confirm its plans for projects currently receiving cash, saying only that an announcement would be made in the coming days.
The Treasury denied it had "stopped any payments from the ERDF" though did acknowledge "the need to bring any uncertainty to an end as soon as possible."
Gerard Grech, CEO of Tech City UK said: "Should this money be kept on hold for too long for no apparent reason, we run the risk of slowing down the growth of some great fast growth startup cohorts in the tech ecosystem."