Third round of the German-British innovation funding program ZIM D-UK opens
This Monday, the German-British innovation funding program ZIM D-UK enters its third round. This is remarkable and a good sign.
Remarkable, firstly, because the general ZIM – Central Innovation Program for SMEs, according to the federal government ‘the largest and most important funding instrument for SME research and development’ – was closed as recently as mid-December 2023. No matter how innovative and forward-looking the research, no matter how vital for the company and/or economically promising: thanks to the budget freeze, the innovation engine was also turned off and applications were suspended. Secondly, it is remarkable because the withdrawal of the United Kingdom has not exactly incentivised European cooperation. ‘Global Britain’ believed itself to be heading towards more distant, more promising shores. In reality, this project turned out to be somewhat more complicated than various Tory politicians (‘have my cake and eat my cake’) had propagated at the time.
So this third call is a good sign, and not only because it confirms and consolidates the success of the first two. Above all, ZIM D-UK sends a signal: both of the political will to promote medium-sized companies’ innovation and of the will to co-operate in international industrial policy. It is good that the focus on both sides of the Channel now appears once again to be on identifying possibilities and opportunities for cooperation. This certainly owes something to the overall geopolitical weather situation. The ‘de- risking’ of supply chains is taking place in the context of China’s blatant blending of industrial and great power politics and Russia’s war of aggression against Ukraine. Both of these underline the need for cooperation between value- and rule-oriented partners and – yes, that too – competitors, across national borders and supposed ‘red lines’.
How these developments are reflected in German-British relations is worth taking a closer look at. Because the most pleasing thing about today’s third call for proposals under ZIM D-UK is that it is not an isolated step, but seems to be emblematic of a broader change of heart in research and industrial policy. Almost in step with the Windsor Framework, the first bilateral ZIM round between Germany and the United Kingdom opened last February. Round two then went hand in hand with the British decision to take part in the EU research funding program Horizon Europe again (September 2023) – a step that EU President von der Leyen was particularly committed to. The question therefore arises as to whether this current third ZIM D-UK round is intended to open funding doors for small and medium-sized companies on a broader front. Such hope (which we comment on and analyze in more detail in the FÖRDERHUB ) is fuelled, for example, by the program’s proximity to the recently signed bilateral UK-DE agreements for energy projects.
When it comes to practical implementation, ZIM D-UK represents both an opportunity and a challenge for SMEs. Germany and the United Kingdom are two of the most innovative countries around. Both are leaders in basic research and applied research and development – not just in Europe but worldwide. For example, the UK is ranked 4th in the WIPO Global Innovation Index 2023, Germany is ranked 8th. When it comes to patent applications, Germany is ranked 5th globally, the UK is ranked 7th, although with a clear gap (17,500 to 5,700). In other words, excellence on both sides, excellence that moreover tends to complement the other side’s well.
However, the innovation support systems that are now to be specifically interlinked are quite different. Innovate UK, the arm of the British executive branch responsible for ZIM D-UK, is emphatically business-oriented and accessible and claims to be building “an outstanding innovation ecosystem that is agile, inclusive and easy to navigate”. However, this cannot disguise the fact that the program volumes that the UK has so far used to promote innovation cannot be compared with those of the regular and statutory German funding programs. Innovate UK is rightly proud of its ability to provide targeted and rapid funding. But an award competition of, for example, 6 million GBP for biotech in the ‘Northern Powerhouse’ (the euphemism for the seemingly perennially neglected north of England) pales in comparison to thousands of ZIM projects across all sectors and regions every year, each funded with up to a quarter of a million euros. In addition, Germany boasts other innovation funding programs. In particular, the research allowance should be mentioned here, which, administered by the tongue-twisting Research Allowance Certification Office (Bescheinigungsstelle Forschungszulage, BSFZ), currently not only offers a 25% tax discount or a cash payment for proven domestic R&D expenses, but also includes a legal claim to it. In contrast to ZIM, BSFZ was open to applications even during the budget freeze.
What British and local funding systems have in common is that in practice the application process is much more complicated than the respective project sponsors are prepared to admit. A lesson in this regard, albeit at a much higher financial and complexity level, is Tesla’s attempt to obtain state subsidies of one billion euros for the Brandenburg Gigafactory, abandoned ultimately not because of doubts over eligibility but because of frustration with the process. Many small and medium-sized companies tend not to be thrilled by the bureaucracy surrounding the application process, and albeit that everyone involved is genuinely trying to simplify things, this also applies to ZIM D-UK. The expected formation of a consortium, for example, is likely to have a deterrent effect on some medium-sized companies, especially since Germany, unlike the UK, does not yet provide any means of facilitating exploratory cooperation (such as reimbursement of travel expenses). How the program is ultimately implemented will, in other words, be interesting to see.
Summary: Particularly for existing bilateral research collaborations, it is worth submitting an application in the third call for applications in the German-British ZIM innovation funding program, which opens again today. But even for companies that have so far only tentatively considered cross-border involvement, it is worth having another look – both at the effort involved in a ZIM application and into alternative or supplementary funding instruments such as the research allowance (BSFZ). Overall, it is pleasing that the signs in German-British innovation and industrial policy seem to be pointing to pragmatic cooperation and a focus on common interests again -onwards and upwards, we hope.
Dr. Henning Grunwald,
Managing Director, GT-HD Growth and Technology Heidelberg GmbH
Managing Director, motionfinity & UK Representative BVMW
Together they curate the FÖRDERHUB group on LinkedIn, which provides an information and discussion platform on topics related to innovation funding and industrial policy.