Government start-up bailout scheme must help winners, not prop up losers

Following today’s news (20th April) that the UK Government has launched a £1.25bn bailout plan for venture capital-backed businesses struggling to survive the COVID-19lockdown;

David Bicknell, Principal Analyst in the Thematic Research Team at GlobalData, a leading data and analytics company, offers his view on the bailout:

“The government’s support for start-ups has been slow-coming, with France and Germany launching similar schemes weeks ago. Yet, what it lacks in timing it makes up for in design. A convertible loan structure that would see the government take stakes in companies at a discount unless the debt is repaid is a pragmatic move.

“Under normal circumstances, most entrepreneurs would be resistant to government intervention, but these are not normal circumstances. The COVID-19 pandemic will have serious repercussions for the UK economy and many start-ups will need government backing to survive.

“Amid the rush to provide support, the government must ensure that the Future Fund does not become a crutch to support failing companies. A necessary bailout to support future winners is one thing, but an ill-judged handout for losers is quite another.”

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