This clause has been a source of consternation for the UK for a while. Back in 2018, Britain’s biotech companies were bearing the brunt. 

At the time, sources suggested the UK’s innovation arm Innovate UK was being forced to toughen its stance on dishing out grants to early stage startups. The entity was being urged to more strictly enforce rules to bar companies whose accumulated losses equal more than half of their share capital from receiving any state funding. 

Innovate UK had had to seek “legal counsel” regarding the clause amid growing EU pressure, sources said. Innovate UK had  said it “funds the best new ideas that create jobs and growth and drive up productivity”.

“Securing Innovate UK funding is a highly competitive process, and just because a company has been funded previously, there is no guarantee that they will be funded subsequently.”

Yet the Covid-19 crisis has changed the situation. In June, the EU decided to temporarily relax its state aid rules to allow struggling companies to access government support schemes. In the UK, this was borne out in the form of the Future Fund, which as of last month, had allocated almost £600m to start-ups. Ultimately, due to the fund, the Government is set to end up with stakes in hundreds of loss-making ventures.

The UK had already seemed to be moving towards this direction. It has for years been allocating taxpayer cash to funds through its British Business Bank arm, to then invest into early-stage businesses. More recently, it has been looking at “co-investing” alongside these funds in the most promising business, and its first direct investment into a start-up expected to come within the next few weeks.

Such moves are perhaps unsurprising. For years, the UK has been looking at how it could provide more capital for its tech firms, amid growing concern over foreign swoops on Britain’s brightest companies before they can become multinational players. 

Dominic Cummings, Boris Johnson’s adviser, has written extensively on the subject in the past, citing the case of DeepMind’s takeover by Google as a company which sold “for trivial money without the powers-that-be in Whitehall understanding its significance”. In this vein, he championed the creation of a new innovation agency, ARPA, which could funnel more cash into moonshot ideas.