Financing digitisation and uptake of Key Enabling Technologies (KETs) in Europe
Digitisation and the uptake of key enabling technologies (KETs) are important for Europe and the modernisation of European industry. In order to launch initiatives, support technological transformation and incentivise industrial modernisation the European Commission is mobilising significant funds as well as promoting the use of different financial instruments, to help SMEs on their transformation journeys.
In the 2016 Digitising European Industry initiative, the European Commission plans to mobilise over 50 billion EUR of public and private investments for digitisation, more specifically:
- 37 billion EUR of investments to boost digital innovation
- 5.5 billion EUR national and regional investments in digital innovation hubs
- 6.3 billion EUR for the first production lines of next-generation electronic components
- 6.7 billion EUR for the European Cloud Initiative
KETs and digital uptake is also being stimulated by improved access to finance, notably through:
- COSME financial instruments
- Horizon 2020 funding instruments
- ESI Funds
- Innovation Public Procurement
- Connecting Europe Facility
More specific information about access to finance for SMEs is available on the DG GROW and on the EU Access to Finance portals, where a wide range of funding possibilities are featured: business loans, microloans, guarantees and venture capital (equity). These different funding instruments support more than 200 000 businesses every year, including start-ups, entrepreneurs and companies of any size and sector.
COSME financial instruments
COSME (Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises, 2014-2020), works to ensure better access to finance for SMEs, access to markets for SMEs, entrepreneurship and more favourable conditions for business creation and growth. Within COSME there are several financial instruments at the disposal of SMEs to aid their growth and advancement.
The COSME Loan Guarantee Facility (LGF) forms part of the Single EU Debt Financial Instrument which supports European enterprises' growth and research and innovation (R&I). Through COSME LGF, the European Investment Fund (EIF) offers guarantees and counter-guarantees, including securitisation of SME debt finance portfolios, to selected financial intermediaries (e.g. guarantee institutions, banks, leasing companies, etc.) to help them to provide more loans and leases to SMEs. By sharing the risk, COSME guarantees allow the financial intermediaries to expand the range of SMEs they can finance, facilitating access to debt finance for many SMEs who may struggle to access the traditional banking system
The Equity Facility for Growth (EFG) is also part of the Single EU Equity Financial Instrument which supports EU enterprises' growth and research and innovation (R&I) from the early stage, including seed, up to expansion and growth stages. Through COSME EFG, EIF invests in selected funds – acting as European Investment Funds financial intermediaries – that provide venture capital and mezzanine finance to expansion and growth stage SMEs, in particular those operating across borders. The fund managers operate on a commercial basis, to ensure that investments are focused on SMEs with the greatest growth potential.
Horizon2020 Grants and Financial Instruments
Horizon 2020 is the biggest EU Research and Innovation programme ever with nearly 80 billion EUR of funding available over 7 years (2014 to 2020) – in addition to the private investment that these funds will attract. It promises more breakthroughs, discoveries and world-firsts by taking great ideas from the lab to the market. Within Horizon2020 there are several grants and financial instruments which SMEs can take advantage of.
The SME Instrument, provides about 3 billion EUR in funding over the period 2014-2020, helps high-potential SMEs to develop ground-breaking innovative ideas for products, services or processes that are ready to face global market competition. During the first two years of implementation (2014-2015), more than 1200 SMEs were selected to receive funding under the SME Instrument, and 513 million EUR were invested in the success of innovative SMEs. The SME Instrument offers SMEs the following:
- Business innovation grants for feasibility assessment purposes (optional phase I): 50,000 EUR (lump sum) per project (70% of total cost of the project);
- Business innovation grants for innovation development & demonstration purposes (possible phase II): an amount in the indicative range of 500,000 EUR and 2,5 million EUR (70% of total cost of the project as a general rule);
- Free-of-charge business coaching (optional) in order to support and enhance the firm’s innovation capacity and help align the project to strategic business needs;
- Access to a wide range of innovation support services and facilitated access to risk finance, to support the commercial exploitation of the innovation.
The Innovation Radar is focused on the identification of high potential innovations and the key innovators behind them in FP7, CIP and Horizon 2020 projects. It supports innovators by suggesting a range of targeted actions to assist them in fulfilling their potential in the market. It involves:
- Assessing the maturity of innovations developed within the FP7, CIP and H2020 projects and identifying high potential innovators and innovations;
- Providing guidance during the project duration in terms of the most appropriate steps to reach the market;
- Supporting innovators through EU (and non-EU) funded entrepreneurship initiatives to cover specific needs concerning networking, access to finance, Intellectual Property Rights, etc.
ICT Innovation Vouchers: The voucher scheme is a useful instrument to include in strategies for innovation and growth implemented at local and regional levels. It enables regional and national authorities to facilitate SMEs' access to digital know-how and technology by giving them the incentive to connect with ICT knowledge and service providers. The aim is to encourage the use of new ICT-based business models. Micro-enterprises and SMEs benefitting from a voucher can exchange it for ICT services from a range of providers (i.e. private companies, universities, research centres).
Horizon Prizes is a new instrument that offers a financial reward for developing solutions for unmet societal or technological challenges. The solution is not governed by rules and contestants (companies, organisations or individual persons) are free to submit any development of a technological solution that meets the criteria of the challenge. The solution should be energy efficient, economically viable and easy to implement and deploy. The feasibility of the approach must be demonstrated through clear experimental results. Awarded prizes include: a 500 000 EUR award for ‘Breaking the optical transmission barriers, a 500 000 EUR award for ‘Collaborative spectrum sharing’, a 1 million EUR award for ‘Better use of antibiotics’ and finally a 1 million EUR award for ‘Food scanner’. Several prizes ranging from 750 000 EUR to 3.5 million EUR are currently open and another two new prizes will soon launch their calls for submission.
EUREKA/EUROSTARS Programme is a European joint programme, co-funded from the national budgets of 34 EUREKA countries and by the EU through Horizon 2020. Eurostars has been carefully developed to answer to the specific needs of the R&D-performing SMEs, and targets the development of new products and services, giving easier access to international markets, thanks to the transnational nature of each project consortium. The EU is providing a maximum of 287 million EUR during2014-2020.
InnovFin – EU finance for innovators, is a joint initiative launched by the European Investment Bank Group (EIB and EIF) in cooperation with the European Commission under Horizon 2020. InnovFin consists of a series of integrated and complementary financing tools and advisory services. By 2020, InnovFin is expected to make over 24 billion EUR of debt and equity financing available to innovative companies to support 48 billion EUR of final R&I investments.
The InnovFin SME Guarantee Facility is being deployed by eligible local banks, leasing companies, guarantee institutions, etc. which are selected after a due diligence process following the launch of a Call for Expression of Interest. The EIF, acting for both EIF and the EU as the implementing body, covers a portion of the losses incurred by the financial intermediaries on loans, leases and guarantees between 25 000 EUR and 7.5 million EUR which they provide under the InnovFin SME Guarantee Facility.
Via InnovFin Equity, EIF provides equity investments and co-investments to or alongside funds focusing on companies in their pre-seed, seed, and start-up phases operating in innovative sectors covered by Horizon 2020, including life sciences, clean energy and high-tech. Under InnovFin Equity, EIF targets investments in around 45 funds, mobilising a total amount of 4-5 billion EUR to be invested in enterprises located or active in the EU and Horizon 2020 Associated Countries
European Structural and Investment Funds (ESI Funds)
ESI Funds provide support to deliver the Union strategy for smart, sustainable and inclusive growth, as well as the Treaty-based objectives, including economic, social and territorial cohesion taking account of the relevant Europe 2020 Integrated Guidelines and the relevant country- specific recommendations. Specifically, the EFSI Equity Instrument that supports SMEs’ expansion and growth projects as well as early stage start-ups through the EIF’s InnovFin Venture Capital programme. The ESI Funds guide provides further details on these mechanisms as well as information on the existing synergies with other funding instruments,
Innovation Public Procurement
Public procurement in the EU accounts for more than 14% of GDP. Although it could create a huge market for innovative products and services, the potential of public procurement remains vastly untapped.
The Innovation Procurement Digital Single Market includes public procurement of innovative solutions. Pre-Commercial Procurement (PCP) can be used when there are no near-to-the-market solutions yet and new R&D is needed. PCP can also be used for training, helpdesks and experience sharing on public procurement and how to access it.
Public procurement of innovative products and services is about innovative goods and services. It differs from pre-commercial procurement which supports R&D activities, i.e. before innovative goods or services are ready to be procured. It has the ability to help foster market uptake of innovations, increase the quality of public services where the public sector is a key purchaser, support business market access (especially for SMEs) and help address major societal challenges.
Connecting Europe Facility
The Connecting Europe Facility (CEF) supports trans-European networks and infrastructures in the sectors of transport, telecommunications and energy. In this context the European Commission has proposed, for the first time, a series of guidelines covering the objectives and priorities for broadband networks and digital service infrastructures in the field of telecommunications. Digital Service Infrastructure is one of the ways to stimulate digital update: projects deploy trans-European digital services based upon mature technical and organisational solutions in areas as diverse as electronic identification, online dispute resolution and interoperable health services.