With the outlook for its economy flat and capital constrained for innovative startups, the BioIndustry Association, the United Kingdom’s biotech industry trade group, is proposing to invite public investment in advancing homegrown innovation with a proposal to set up Citizens’ Innovation Funds.

The BIA’s just published report, “Citizens’ Innovation Funds: Engaging the public with UK innovation,” details a plan to enable the British public to support the innovative businesses that will drive the nation’s future economic growth. BIA estimates its plan could lead to almost $500 million (£300 million) a year in funding for companies and lead to the creation of more than 1500 new high tech jobs.

In the foreword to the report, BIA CEO Steve Bates says that British commentators often lament “the lack of a ‘British Google,’ a ‘British Apple,’ or a ‘British Amgen.’”

This could be an ideal time to support innovative companies, he says, complementing government initiatives to stimulate the economy, and offering the potential for attractive returns at a time when interest rates on savings is at an all-time low. It is also, he says, a chance to be patriotic.

“Citizens’ Innovation Funds provide a practical way of unlocking the patriotic potential of a large number of Britons to crowdfund the innovative businesses which are essential for our nation’s economic future,” says Bates.

The funds would allow members of the public to put up to $24,000 (£15,000) a year and receive a tax break deduction at 40 percent of the amount invested. A Citizens’ Innovation Fund investment would be made for a minimum of five years and the return would be tax free for the investor.

The proposed Citizens’ Innovation Funds would be managed by professional investment managers, rather than by the government, and would carry tax advantages. The model would be based on a successful program adopted in France in 1997 that has raised more than $7.8 billion (€6 billion) since 1997 and invested in more than 1,150 innovative companies by the end of 2010. Almost four fifths of those companies were less than four years old at the time of investment.

The BIA analysis of the French program found that companies backed by these public funds had a lot of advantages over similar innovative companies not receiving such funding. These advantages included greater revenues and job creation, greater propensity to export, greater likelihood of publishing patents, and an increased likelihood of listing on a stock exchange. Indeed, among European life sciences startups, companies to complete and IPO have invariably been French.

The BIA’s proposal applies the French experience to the UK market, and estimates that its plan could be revenue neutral for the government within three years.

“At a time when new ideas are needed to boost the UK economy Citizens’ Innovation Funds are cost effective, practical and timely,” says Bates.