Major new report highlights IP-backed funding as one of key tools to reignite UK economic and business growth

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Taking the Brakes Off UK Growth: Building a More Dynamic Economy for a Faster World, analyses the issues affecting UK economic growth and suggests potential solutions for them. Significantly, the authors highlight IP-backed finance as a main element in modernising the UK’s financial systems, one of the three key areas for change it identifies.

Published by the Tony Blair Institute for Global Change (TBI), the report calls for the UK Government to “take the brakes off” in order to address decades of declining growth and productivity.

In a release accompanying the report’s publication, TBI argues that “Britain’s constraint is not simply weak productivity, but a declining capacity to adjust. Over the past two decades, the reallocation of labour, capital and land has slowed. In an economy being reshaped by AI, that loss of agility has become a competitive liability – and unless dynamism is restored, the UK risks falling further behind in the next phase of global competition.”

The TBI report calls on Government to take action on five key policy areas:

1. Introduce a tiered employment-protection system

Create a two-track framework that maintains strong protections for most workers but allows greater contractual flexibility for higher-paid roles in high-growth sectors, allowing dynamic firms the confidence to hire, experiment and scale.

2. Make minimum-wage policy explicitly conditional on economic conditions

Update the Low Pay Commission’s remit so minimum-wage setting explicitly reflects labour-market conditions and rising employer costs, with clear authority to moderate increases during downturns.

3. Compete aggressively for global talent and capital

Expand the Global Talent Visa to frontier sectors, lower costs, introduce a targeted Growth Investor Visa, and reform the Foreign Income and Gains regime. Recent changes to the immigration system have reduced flexibility; in the age of AI, without a sharper offer, the UK risks losing skills and capital to faster-moving competitors.

4. Modernise the tax and finance system to back an ideas-driven economy

Allow full expensing of investment in R&D, data, software and other intangible assets and catalyse a market in IP-backed lending to unlock finance for high-growth firms. In an economy where value is increasingly driven by ideas, a tax and financial system still geared to physical collateral is out of date, and risks holding back the very industries the UK says it wants to lead.

5. Accelerate planning reform through rules-based zoning and fast-track approval for AI infrastructure

Move decisively towards a rules-based zoning system to provide certainty for development, and legislate for accelerated approval processes for nationally significant AI, energy and digital infrastructure projects. While planning reform has begun, a more radical shift is needed to match the scale and speed of technological disruption.

The report’s authors expand on all of these in the full document, which can be downloaded here. On IP-backed finance and related issues around finance for innovation and entrepreneurialism, it proposes:

• Creating a market for intellectual-property-backed finance to unlock debt funding for high-growth firms. Establish a dedicated IP-backed lending window through the British Business Bank, using an extension of the Growth Guarantee Scheme to de-risk early lending against IP and generate loan-performance data at scale. Use that evidence to establish a Prudential Regulation Authority (PRA) regulatory sandbox and pave the way over time for permanent recognition of IP-backed lending in bank capital rules, enabling banks to treat IP as credible collateral and unlock cheaper, longer-term debt finance for innovative firms.

• Aligning the tax system with a modern, intangible-driven economy. Extend full expensing beyond plant and machinery to cover intangible investments such as software, data and IP, allowing firms to deduct the full cost of these assets immediately from their corporation tax bill. Refocus R&D tax relief by introducing a £30,000 de minimis threshold, stripping out low-value claims, reducing fraud and administrative burden, and directing support towards firms undertaking substantive, growth-enhancing innovation.

• Reducing the personal cost of failure to encourage entrepreneurship, reinvestment and scale-up. Bring lending practices that rely on personal guarantees within the scope of the Financial Conduct Authority (FCA), ensuring clearer consumer protection, consistency and limits on excessive personal exposure. Modernise bankruptcy rules to allow faster re-entry after failure, including shorter restrictions and automatic, rapid credit-file clean-up on discharge. Expand Business Asset Rollover Relief to allow proceeds from successful exits to be reinvested into new ventures without an immediate tax charge, strengthening capital recycling and the pipeline of serial entrepreneurs.

The report’s authors argue the 2008 Global Financial Crisis has directly impacted financing conditions for smaller firms, as banks have become more cautious “at precisely the time smaller, knowledge-rich businesses need more patient finance backed by harder-to-collateralise ideas-based ‘intangible’ assets.”

Lending to small and medium-sized enterprises (SMEs) in the UK puts the country near the bottom of the OECD rankings, partly because UK policy “has failed to adapt to the pivot to a more intangible-reliant economy.” As a result, some SME business owners are asked to take far greater personal and legal risks to secure finance, including putting their homes at risk via Personal Guarantees, “which discourages experimentation, investment and growth.” The report cites statistics that show that less than 15% of SMEs now seek external finance, down from nearly a quarter before the crisis.

The focus must be on “getting capital to the right places – supporting fast-growing, knowledge-rich firms and allowing money to move on quickly from those companies that are no longer productive.”

The authors highlight how “the UK economy is increasingly driven by intangible assets – ideas, data and IP – but the banking system remains rooted in a world of bricks and mortar. Capital rules and lending practices are still geared towards physical collateral, leaving knowledge-rich firms unable to borrow against the assets that actually drive their value.”

That means IP-rich SMEs and growth companies “struggle to access bank finance, not because they lack prospects, but because their assets do not fit a system designed for the last century.”

Unfortunately, “the need for progress is obvious but blocked by a circular problem. Banks are reluctant to lend against IP in large part because regulators do not recognise it as collateral for capital purposes; regulators, in turn, are unwilling to offer capital relief without strong evidence around loan performance. The result is paralysis: risk weights on loans to younger, intangible-rich firms can reach 300 per cent – many times higher than for secured lending to large corporates…. Until this loop is broken, innovative firms will remain locked out of debt finance, forced into more costly equity and held back from scaling at the pace the economy needs.”

Capital relief, under the Basel III banking regulations, means banks can reduce the amount of capital they are required to set aside to cover lending risks. Currently, tangible assets (such as property, machines) taken as lending collateral can often be used to reduce or offset capital requirements under the regulations; IP taken as collateral cannot (in technical terms, it has a 100% risk weighting, so banks must set aside the full amount of an IP-backed loan).

The report concludes that the solution to the problems of financing IP-rich growth companies which have few tangible assets “requires a phased approach: using the [British Business Bank] BBB to kickstart IP-backed lending, allowing banks to build loan-performance data, and enabling the Prudential Regulation Authority (PRA) to test – and ultimately recognise – IP-backed finance through a regulatory sandbox. The ultimate goal should be capital relief, so that IP is treated appropriately in prudential rules and the market can become self-sustaining rather than reliant on public support.”

The full report can be downloaded from the TBI website here.