- new report launched in London today finds UK meets right conditions to make IP-backed lending to SMEs viable
- the report - produced by the World Intellectual Property Organization (WIPO) - shows IP-backed lending is becoming more available to UK businesses
- UK Government announces a new working group led by the UK Intellectual Property Office (IPO) to drive action on IP-backed finance
- IP intensive industries account for over a quarter of UK output - £300 billion a year. Intangible assets may make-up around 70-80% of a firms' value
A United Nations agency report launched in London today by the UK's Minister for AI and Intellectual Property, Viscount Camrose, and WIPO Director General Daren Tang, finds UK banks are beginning to engage with Intellectual Property (IP) backed lending.
The report notes new IP-backed loan products, such as those recently launched by NatWest and HSBC UK, signal that new IP-backed financing options are emerging in the UK to help businesses scale and grow. This follows earlier research which found that firms with registered IP may make better lending candidates.
In a joint collaboration between WIPO and the IPO, today's launch event marked another step in WIPO's work programme to help improve policy and industry insight into the viability and practices of IP finance globally. The UK report contributes to a growing body of evidence on the opportunities and challenges in moving IP finance into the mainstream.
Overall, IP intensive industries account for more than a quarter of UK output - around £300 billion a year. Intangible assets - often protected by IP - may make-up around 70-80% of a typical firm's value.
The report recognises that the UK meets the "essential preconditions" for IP-backed finance to work at scale: a strong IP regime, a pool of innovative firms, and a vibrant financial sector. While there are positive developments, the report notes there is much further to go to move IP financing from the margins to the mainstream.
The report highlights several challenges to firms using IP to raise growth funding, including low levels of awareness among financiers and industry, a lack of secondary markets for IP assets, confidence in IP valuation, and limited visibility of IP in business reporting.
At today's event, the UK's Minister for AI and IP, Viscount Camrose, also announced that the UK Intellectual Property Office (IPO) will act to raise the profile of IP financing and identify avenues to improve investment into IP-intensive firms by:
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establishing an advisory working group to bring together experts from the financial sector, IP profession, and academia to help shape policy in this globally developing area of business finance.
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bringing together, in an annual report, a set of regular and consistent metrics to improve market insight into using IP to access equity and debt finance.
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looking into avenues to improve the process of recording charges against registered IP before the IPO.
These next steps will support the IPO's ongoing policy work on IP finance. This activity will complement the IPO's wider interventions to help businesses better identify, manage, and protect their IP.
Viscount Camrose, Minister for AI and Intellectual Property said:
This report is further evidence of the UK's commitment to supporting business to grow and scale however we can, tapping into their unrivalled IP innovations to help them scale and grow. Accessing the right finance at the right time is critical for firms looking to expand, and companies can now leverage their individual intellectual properties to help unlock new opportunities and drive growth.
The government's new working group will also help to drive this effort forward, ensuring the UK establishes itself as the main destination for businesses who are looking for new ways to drive growth.
Daren Tang, Director General of WIPO said:
Intellectual property is not just a legal right or a business catalyst, but also a financial asset. IP financing will unlock new paths for enterprises to grow, but still feels unfamiliar to many key stakeholders. It is therefore time for us to move this conversation beyond IP specialists and experts to get those in finance, investment, accountancy and valuation involved in moving this piece forward together. IP offices are no longer just IP registries but important builders of a country's innovation ecosystem and will play a central role as catalysts for IP finance.
This is why I strongly welcome the UK IPO's firm commitment to work with WIPO and key stakeholders within the UK and internationally to transform IP financing from exotic to mainstream.
Neil Bellamy, Head of Tech Media & Telecom, NatWest Group said:
Unlocking value from intellectual property (IP) and intangible assets can be a key enabler for the UK economy. Helping firms to scale, create high value jobs and boost UK productivity. IP lending offers an opportunity to enable innovative firms on their growth journey. I welcome the Government's commitment to improve insight into this emerging funding option and help shift IP lending into the mainstream
Roland Emmans, Head of UK Tech Sector and Growth Lending, HSBC UK said:
HSBC UK works with some of the country's most innovative and disruptive firms and have looked at their Intellectual Property (IP) as a key part of our lending analysis for some years now. We have a long history of creating and developing world leading ideas into valuable IP in the UK, and its importance to the economy has been growing steadily. We're delighted to see the spotlight shone on the IP financing opportunity from the WIPO report as it will deliver further impetus to accelerate this growth.
Matt Dixon, President of the Chartered Institute of Patent Attorneys (CIPA) said:
High growth businesses may often own few tangible assets, but can be rich in IP and intangible assets. These businesses can find it difficult to use their traditional assets as collateral to secure growth funding, leading to a potentially sizeable funding gap for fast-growing, but asset light, businesses. IP backed lending could play an important role in addressing this gap.
It is widely recognised that intellectual property represents a significant part of the value of businesses across all sectors of the economy, and these developments are a great step toward helping unlock the potential of innovative SMEs in key industries. We are delighted to see that UK banks are beginning to engage on IP-backed lending, and welcome the plans announced by the IPO today to help drive action in this emerging area
Notes
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in 2022 WIPO launched an action plan to help better understand and promote IP-backed finance. As part of this work, WIPO has developed a series of country reports on IP-backed finance. The first report, which focused on Singapore, was launched in 2021
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the UK country report complements previous research published by Government, including 2013's Banking on IP? 2017's Hidden Value: A Study of the UK IP Valuation Market, and 2018's Using IP to Access Growth Funding
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2018 research by the IPO and British Business Bank (BBB) identified a positive correlation between firms with registered IP and better loan performance. The report, Using IP to Access Growth Funding, looked at borrowers within the BBB's flagship debt guarantee scheme. Firms with registered IP (patents, designs, and trade marks) were found to have lower levels of default and default-related loss. This held across lenders, industry sector, firm turnover and age
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in the context of IP-backed lending, where IP assets are used as collateral to secure a loan, the bank will take a charge over assets. This allows the bank to take control of the assets if the borrower defaults. Banks can register their security interests in patents, trade marks, or registered designs before the IPO. This process helps provide market transparency. IPO has committed to review this process over the coming year
- a 2022 report by the Intellectual Property Office on the use of IP rights across UK industries found that:
- around 95% of all UK business sectors contained businesses that had at least one IP right
- industries with an above average use in IP rights accounted for 26.9% (£298.5 billion) of UK non-financial value-added output, 15.5% (4.5 million) of total UK employment and 52.1% (£159.7 billion) of goods exported
- 35.4% of UK industries were found to have above average IP usage in any of the four IP rights considered (patents, trade marks, registered designs and copyright), with 14.9% of UK industries (92) having high IP usage
- IPO has existing interventions in place to help SMEs identify, protect, and manage their IP. These include an online platform with tools and guidance, grant schemes which help fund an IP audit, regional and international support advisors, as well as outreach via events and webinars
