The European Union has more than halved its planned investment in the continent’s best entrepreneurs after budget cuts wiped at least €6bn ($6.8bn) off its European Innovation Council (EIC).
Stéphane Ouaki, head of unit for the directorate general of research and innovation at the European Commission, in a panel at the Not Optional – Making Europe the Most Entrepreneurial Continent event on Friday, said the funding for the EIC would come in at €3.5-4bn for the seven-year Horizon Europe budgetary period from 2021 to 2027.
While the three-year pilot that closes this year had €2.7bn allocated, the full EIC was expected to have €10bn for the full Horizon Europe budgetary period.
Hermann Hauser, inaugural chairman of the 15-strong High-Level Group of Innovators advising on the design of an EIC in Horizon Europe, as his two-year mandate was finishing last year said the EIC’s €10bn planned budget would fund the search for “excellence” among EIC applicants.
Professor Mark Ferguson, current chairman of the EIC and director general for Science Foundation Ireland and chief scientific adviser to the Government of Ireland, by email after Ouaki’s speech said: “This year the budget for EIC was about €1.5bn. We have had increasing numbers of applications, funding success rates around 5% and very large numbers of applications awarded the seal of excellence, ie deemed suitable for funding but no budget available.
“So, a budget of [€]10bn over Horizon Europe would be about €1.5bn per year, ie woefully insufficient. Anything less than that will exacerbate the problem even more.
“This is a real problem as the EIC wants to crowd in investment from the private sector to enable European companies to grow and scale – something sorely needed for economic recovery and to address pressing problems like climate change.
“So, we all need to do more to persuade the leaders of European countries to support more investment in innovation.”
The budgetary cuts to the EIC follows consternation among some members of the European Union about the lack of support for entrepreneurs in the €750bn pandemic recovery fund agreed in the summer that borrows money to allow national governments to provide grants to local businesses.
Up until the final negotiations, tens of billions of euros as part of the recovery fund had been expected to go to the European Investment Bank (EIB) and its venture-focused European Investment Fund (EIF) to support the EIC and entrepreneurs. This allocation was withdrawn at the final stages, insiders said.
As a result, the Funding Innovative Growth Enterprises in Europe conference last month organised by Prince Constantijn van Oranje, envoy at Techleap.nl, and William Stevens, founder of Tech Tour, issued a call to action “for the European investment vehicles (EIB, EIF, EIC), in cooperation with the member states, NPBIs [national promotional banks and institutions], institutional investors and private investors to join forces and stimulate sufficient funding for scale-ups in the form of open private equity and venture capital co-investment funds on a European scale”.
In the UK, meanwhile, which has left the European Union, similar concerns have driven Stephen Welton, chairman of the British Growth Fund, to call for a £15bn ($19bn) National Renewal Fund to recapitalise 21,000 growth economy businesses – companies that turnover between £2.5m and £100m.
The fund would be “a mixture of equity investment from the pensions industry, insurance companies, quoted investment trusts, sovereign wealth funds, and the UK government”.
Photo from Ouaki’s speech at the 2019 innovation conference
