New bank funding scheme may aid developers

New bank funding scheme may aid developers

By Rob Crossley

April 21st 2009 at 8:16AM

Tigaâ??s Wilson says the govt is â??waking upâ?? as Brown proposes a new bank to finance to risky start-ups in the tech sector

Numerous development studios in the UK may soon be eligible for a proposed bank funding scheme set up for start-up and high-risk businesses.

Gordon Brown claims that the Labour Government is considering setting up a new bank that would “provide the finance for more difficult and more risky start-ups for high-technology businesses of the future".

Speaking to Develop, Tiga CEO Richard Wilson believes that this proposed measure is indicative in a gradual change of perception from within Westminster.

“I think this is a wake-up for the government,” he says. “Clearly the financial sector has completely collapsed. Manufacturing is obviously not going to be a leading component of the economy in the way it was in the past, and so almost by force the government is turning to sectors that can create value and sustain jobs.”

This turn to new ‘digital’ sectors was made apparent on Friday when trade secretary Lord Mandelson made a speech on the importance of the digital media industries in pulling the UK out of recession.

Wilson believes that there’s a strong chance that such a scheme would aid game development.

“I don’t think Government policy will ever single out one particular sector of this digital assembly,” he says, “because they like to generate policies that spread through a number of different businesses, but I would say that game industry investment is potentially risky so there’s a real chance the games industry could be targeted if such a lending scheme was introduced.”
 
Of this apparent new outreach to the creative industries, Wilson believes that the videogames sector is a leading component.

Brown’s announcement of a possible bank funding scheme follows a stark warning from The National Endowment for Science, Technology and the Arts (Nesta), which claims that many young high-tech companies are threatened by a perilous drought in venture capitalism.

Nesta claimed that there was a 70% fall in new venture capital funding last year, adding that the UK could lose its global standing in numerous sectors. The body wants Brown’s cabinet to match investment from the private sector in high-tech businesses.

Employers’ interest group CBI has already called on Westminster to design a partnership between the Bank of England and major banks to jointly assist in funding small-to-medium-sized businesses.

Of this proposed scheme, Wilson was far more enthusiastic.

“There’s a strong case for the Government to set up a venture capital fund, which is jointly backed by both the public and private sectors. If this initiative was making equity investments in small to start-up enterprises then that would be pretty encouraging.”

Wilson added that if the scheme was simply lending loan finance, similar to the way a high street bank does, then it’s uncertain how much of a step forward the measure is.

“What would be far more important is a venture capital fund, privately and publicly financed, and that’s something that Tiga would support.”