UK eyes access to EU start-up equity fund as reset talks advance

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UK eyes EU equity fund

Highlights

UK could join the EU's European Innovation Council equity fund by end-2024, contingent on treaty change and legal-budget agreements, enabling UK start-ups access to new equity finance.
London is in parallel negotiations to access the €5 billion Scaleup Europe Fund, with both sides aiming to align outcomes by the next EU funding cycle beginning in 2027.
UK firms remain excluded from EIC equity instruments despite co-investments totalling €200 million, leaving a significant funding gap for high-growth tech sectors like AI, quantum, and biotech.

Funding talks and entry conditions

As reported by the Financial Times, European commissioner for start-ups, research and innovation Ekaterina Zaharieva says the UK could join the EU's equity investment fund for start-ups by the end of this year if both sides complete the required legal and budget arrangements. She says participation is in the "mutual interest" but would require a treaty change because the UK previously chose to exclude itself from the scheme.

The fund sits within Horizon Europe, the EU's €96 billion research programme, which the UK rejoined as an associate country in 2024. Zaharieva says UK-based start-ups are currently not eligible to receive equity from the European Innovation Council fund, even though some UK investors already co-invest with it, with about €200 million committed so far, but those investors cannot back UK companies through the vehicle.

She adds that London would need to contribute to the fund's budget for participation to be fair to European taxpayers. The current funding cycle runs until 2027, while the next cycle is due to continue until 2034 and is likely to exceed €4 billion, with talks potentially concluding in time for UK entry at the start of 2027.

Wider reset and technology sector impact

Negotiations on the fund are part of a broader UK-EU reset ahead of a summit pencilled in for July. Alongside the start-up equity discussions, London is also holding separate talks on joining the new €5 billion Scaleup Europe Fund, while both sides continue discussions on a youth experience scheme, reducing most agrifood border checks and linking emissions trading systems to avoid carbon border taxes.

The UK only finalised its return to Horizon in September 2023 after earlier political disputes between London and Brussels. In 2024, the country received more than €1.7 billion from the programme, the fifth-highest total among 47 member countries.

Industry groups say the continued exclusion of UK companies from European Innovation Council equity instruments remains a significant gap, especially for frontier technology businesses in AI, quantum, semiconductors and biotech. techUK and UK Private Capital say closer co-operation could help innovative companies scale across the UK and EU, strengthen regional competitiveness and draw more long-term capital into high-growth businesses.

The Department for Science, Innovation and Technology says British involvement in funds such as Scaleup Europe could benefit both the UK and the EU. It adds that no decisions have been taken while options are being assessed for fairness, value for money and their potential to support innovation and economic growth.

In our earlier article on diverging post-crisis bank capital rules, we examined research suggesting that deregulation in the US and UK is allowing major lenders to expand balance sheets, while tighter requirements are constraining large EU and Swiss banks. We noted that this widening transatlantic gap could influence banks’ lending and trading capacity, with knock-on effects for how capital is deployed across markets.

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