New report reveals UK’s potential for intellectual property-backed lending to SMEs

26th Mar 2024

A report launched by the World Intellectual Property Organization (WIPO) unveils the UK's promising landscape for IP-backed lending, shedding light on the emergence of new financing avenues for UK businesses.

UK business Gherkin.jpg
© iStock/xavierarnau

The report, presented in London by the UK’s Minister for AI and Intellectual Property, Viscount Camrose, alongside WIPO Director General Daren Tang, underscores the growing accessibility of IP-backed financing options for SMEs.

Highlighting the significance of intellectual property in the UK's economic fabric, the report reveals that IP-intensive industries contribute over a quarter of the UK's output, amounting to an impressive £300 billion annually. Furthermore, intangible assets, often safeguarded by IP rights, constitute a substantial portion, comprising approximately 70-80% of a firm’s value.

A pivotal finding of the report indicates a positive shift in UK banks' engagement with IP-backed lending, with the emergence of new loan products pioneered by institutions such as NatWest and HSBC UK. These developments signal a transition towards leveraging IP assets as collateral, facilitating business scalability and growth. Previous research indicating that firms with registered IP may present stronger lending prospects further reinforces this trend.

In a collaborative effort between WIPO and the UK Intellectual Property Office (IPO), the launch marks a significant stride in advancing policy and industry understanding of IP finance globally. The UK-specific insights contribute to an expanding knowledge base on the opportunities and obstacles associated with integrating IP finance into mainstream business practices.

While recognising the UK's fulfilment of "essential preconditions" for IP-backed finance, including a robust IP regime, a pool of innovative enterprises, and a vibrant financial sector, the report also acknowledges the existing challenges. These hurdles encompass low awareness levels among financiers and industry stakeholders, a dearth of secondary markets for IP assets, valuation uncertainties, and limited visibility of IP in business reporting.

Addressing these challenges, Minister for Intellectual Property and AI Viscount Camrose announced the establishment of a new working group led by the UK IPO. Comprising experts from the financial sector, IP profession, and academia, this group will spearhead efforts to shape policy and enhance investment into IP-intensive firms.

Additionally, the UK IPO will consolidate market insights through annual reports, streamline the process of recording charges against registered IP, and intensify efforts to promote IP financing.

Click here to download the full report

Viscount Camrose affirmed the UK government's commitment to fostering business growth by harnessing the nation's rich IP innovations. He emphasised the pivotal role of access to appropriate financing in driving expansion and welcomed the working group's role in positioning the UK as a prime destination for businesses seeking growth opportunities.

Echoing these sentiments, Daren Tang, Director General of WIPO, underscored the transformative potential of IP financing in propelling enterprise growth. Tang stressed the imperative of broadening the dialogue on IP finance to engage stakeholders across finance, investment, accountancy, and valuation sectors, underscoring the pivotal role of IP offices in catalysing this evolution.

Industry stakeholders, including Neil Bellamy of NatWest Group and Roland Emmans of HSBC UK, expressed optimism regarding the prospects of IP-backed lending in fuelling economic growth. They welcomed the government's initiatives to enhance insight into this emerging funding avenue and drive its mainstream adoption.

The report launch comes in the wake of concerted efforts by WIPO and the UK IPO to advance understanding and promote IP-backed finance. Building upon previous research and interventions, these collaborative endeavours signify a decisive step towards realising the full potential of intellectual property as a catalyst for economic growth and innovation in the UK.