Pathfounders can confirm that after the UK had agreed terms with the EU Commission collaboration over the €5 billion EU Scaleup Fund, France, leading other EU member states, blocked any further progress of the agreement.
The move has thrown a massive spanner into the machinery of the fund, at a late stage in its progress through the EU, and threatens British hopes of joining one of Europe’s most ambitious late-stage tech investment vehicles.
The fund, managed by EQT, is designed to address Europe’s shortage of late-stage growth capital by backing strategic technology in areas such as AI, defence and semiconductors.
According to reports, the UK’s British Business Bank had been in early talks about investing in the fund, and had also had the nod of approval from the current Chancellor, Rachel Reeves (who may soon be replaced under any new government). EQT had previously said on the record that it would welcome UK involvement.
There has been further confirmation today, in a tweet from Dom Hallas of Startup Coalition, that the EU’s Startup Commissioner, Ekaterina Zaharieva, had wanted Britain to join their plan for the Scaleup Europe Fund.
However, the UK’s commitment to contributing to the fund was dependent on British startups being eligible for its funding.
Until recently, both observers and officials in London and Brussels had expected the UK would be joining the fund , with the European Commission broadly supportive. However, some EU member states, led by France, are now pushing for geographic restrictions that could exclude non-EU companies from benefiting from EU-funded capital.
Sifted has broke the news that one UK government official, speaking under conditions of anonymity, said talks had been close to an agreement before French officials sought to introduce new rules “at the last minute”.
The dispute comes as the UK’s relationship with the EU is poised to be tested after Sir Keir Starmer’s resignation, and newly elected MP Andy Burnham is tipped as his most likely successor. A planned EU-UK summit on closer economic ties has been delayed, as a result.
So far, the UK government is declining to comment on negotiations but said Britain remained focused on becoming one of the best places in the world to start and scale a business.
Pathfounders confirmed with sources that the talks remain ongoing and that several parties are “annoyed” that this news has leaked mid-negotiations.
Timeline of events:
Scaleup Europe Fund created
The EU establishes the €5bn Scaleup Europe Fund to tackle Europe’s shortage of late-stage growth capital and support strategic technology companies.
EQT appointed manager
Swedish investment firm EQT is selected to manage the fund.
UK explores participation
The British Business Bank enters early discussions about investing in the fund, on the condition that UK startups would also be eligible to receive investment.
Broad expectation of UK involvement
Officials in London and Brussels expect the UK could eventually join the initiative, with the European Commission broadly supportive.
UK requests formal negotiations
Before Keir Starmer’s resignation, the UK government seeks talks with the EU. Rachel Reeves is understood to have privately backed the proposal.
Talks proceed
EU Commission and UK talks on the fund proceed as expected, with EU member states then given the opportunity to comment.
France pushes back
French officials, leading other member states, move to impose geographic restrictions on where the fund can invest, amid concerns that EU-funded capital should not benefit non-EU companies.
Talks thrown into doubt
UK officials say the negotiations had been close to agreement before France, and other, so far unnamed states, attempted to introduce new rules.
Political uncertainty in London
Starmer’s resignation delays a planned EU-UK summit on closer economic ties. Britain’s EU strategy is expected to be reassessed under his successor.
Outcome unresolved
Any UK participation would still need approval from the European Commission, EU member states and the UK government.
