A £1.25 billion package is being launched to help protect the UK’s innovation sector during the coronavirus emergency.

Chancellor Rishi Sunak said the initiative would include a £500 million investment fund for high-growth companies hit by the crisis.

The funding would come from both the Government and private sector, he said.

Small and medium-sized firms specialising in research and development will be eligible for access to £750 million of grants and loans.

Mr Sunak, said: “Britain is a global leader when it comes to innovation.

“Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis.

“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”

The £500 million Future Fund will be delivered in partnership with the British Business Bank and will be launched in May.

It will provide UK-based companies with between £125,000 and £5 million from the Government, with private investors at least matching the Whitehall commitment.

The loans will convert to equity if not repaid.

To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third-party investors in the last five years.

Ministers are committing an initial £250 million in funding towards the scheme, which will initially be open until the end of September.

Labour’s shadow chancellor Anneliese Dodds said: “We have expressed major concerns about the ability of start-ups and innovate firms to weather the current crisis, not least because many fail to benefit sufficiently from existing programmes to stay afloat.

“While welcome, the devil will be in the detail of how firms can qualify for this funding and how long it will take to arrive.

“Given the very low rate of acceptance of applications for the small business loan programme, and the pressing and current time pressures facing many firms, this funding must be available quickly and with a minimum of paperwork if we are to prevent even more firms going bust.”

Federation of Small Businesses national chairman Mike Cherry said: “Today’s announcement will be a vital cashflow boost for many smaller businesses at the forefront of technological development and innovation.

“This is an investment in transforming our futures, as these SMEs focus on research and development in key areas such as life sciences, artificial intelligence, big data, and clean energy.”