UK’s Top 4 Public Innovation Grants For Startups [2023]

The UK is one of the most attractive country for entrepreneurs and startups. There are indeed plenty of public innovation grants that startups can receive: free money to promote businesses investing in innovation. What are UK’s best innovation grants for startups? Is your startup eligible? How much can you actually get?

In this article we’ll go through the most famous public innovation grants entrepreneurs and startups in the UK can apply to.

What (Exactly) Is A Public Innovation Grant?

Public innovation grants are a form of financing whereby government-backed institutions provide funding to businesses to promote innovation, no strings attached (i.e. no need to repay it). Funding is also sometimes provided along with mentorship, advice, and hands-on support.

First, in order to get a public grant, companies need to apply. Then, they must go through a very thorough selection process.

Often, only a fraction of businesses get a successful application (UK’s flagship SMART grant program only has a 6% success rate for example).

There are 3 very different types of public grants:

• Grants: government-backed institutions invest in businesses with no strings attached. They are essentially “free money” and the most attractive form of financing a business can get
• R&D tax credit: companies can claim a given percentage of their research & development (R&D) expenses as a tax credit. The R&D tax credit is then used to offset corporate tax expenses
• Government-backed loans issued by the government itself, or guaranteed by it. The most famous example of these are SBA loans for US startups

Is it too good to be true?

Unfortunately, not every business can apply to public grants. They are often designed for companies developing game-changing technological products and services.

Also, grants always come with strict conditions when it comes to use of funds. For example, funds may only be used for market research, product development, prototyping, etc. Typically, grants come with reporting requirements and companies may be to subject to audits.

#1: SMART (Innovate UK)

Founded in 2018, Innovate UK is a government body part of the UK Research and Innovation (UKRI) that aims to provide money and support to new businesses and startups as part of multiple innovation grant programs (see more on that below). Their flagship innovation grant is SMART.

As with any innovation grant, SMART is also very competitive: it runs once a year and only 6% of applicants get selected each year.

Is Your Startup Eligible?

All types of industries are eligible. Indeed, applications can come from any tech-enabled company, no matter what sector(s) it applies to.

As long as your business demonstrates it is carrying an innovative project, which is also commercially viable and has a positive impact on the UK economy, you may be able to apply.

First, your business must be either a micro, small or medium-sized enterprise (SME) which is the case for all startups.

Also, the project(s) work need to be carried out in the UK. Same goes for the benefits of the project(s): they need to be commercially exploited “from or in the UK”.

Finally, the project need to meet certain duration and cost criteria:

• Project(s) between 6 to 18 months must have a total cost between £25,000 and £500,000
• Project(s) between 19 to 36 months must have a total cost between £25,000 and £2,000,000

Learn more about whether you can apply for your startup and how much you can get by reading our complete guide on UK Innovate’s SMART grant here.

How Much Can You Actually Get?

Innovate UK’s SMART grant allows successful startups to receive up to £25 million grant funding for “game-changing and commercially viable R&D innovation that can significantly impact the UK economy“

#2: Small Business Research Initiative (SBRI)

Small Business Research Initiative (SBRI) is another of Innovate UK’s innovation grant programs.

The SBRI programme connects innovative businesses and startups with government institutions to tackle some of society’s big challenges.

Also, to support these projects SBRI typically invests up to £100,000 to test an idea, and up to £1 million to develop a prototype.

Moreover, not only do businesses get funding but they also can win big contracts with public institutions. Indeed, over £470 million worth of contracts have been funded through SBRI since the program’s creation in 2001.

What’s more is that the program primarily benefits SMEs over large companies. Indeed, more than 66% of the funding grants have been funded to SMEs to date.

Is Your Startup Eligible?

SBRI runs multiple innovation grants for different industries. Each has its own eligibility criteria which you can check on their website here.

As of date of writing this article (December 2021), there were 7 different grant applications open across aerospace, mobility, manufacturing, digital security and other industries.

How Much Can You Actually Get?

By participating to one of SBRI’s innovation programs, businesses can receive grants of up to £100,000 to test an idea, and up to £1 million to develop a prototype.

#3: UKRI’s Innovation Grants

UK Research and Innovation (UKRI) doesn’t simply offer businesses grant funding programs via SMART (see more on that above). Instead, UKRI also has a number of funds it uses to support projects in a number of areas.

Yet, some of these funds aren’t meant for businesses but only for pure research instead (e.g. the £830 million Strategic Priorities Fund for example).

Luckily, some of UKRI’s funds also welcome businesses and startups, as long as they operate in an industry which is in line with the fund’s mandate.

One of the largest fund is UKRI’s £6.6 billion Industrial Strategy Challenge Fund which is covering the 4 following themes of the UK government’s industrial strategy:

• Clean growth
• Ageing society
• Future of mobility
• Artificial intelligence and data economy

So if your startup is operating in one of these 4 verticals, you might be eligible for a grant. Within the same fund there are multiple types of grants which terms vary.

As such, you should look in their “funding finder” open database to see whether there is a grant open for applications that suits your business.

Is Your Startup Eligible?

There are dozens of innovation grants available at any time that fall into one of the 4 verticals mentioned above.

Each has its own eligibility criteria and funding terms (amount, use of funds, reporting requirements, etc.) so be sure to check on their open database each of the relevant grants that apply to your business before applying.

How Much Can You Actually Get?

As explained earlier, grants funding terms vary. Typically, the grants range anywhere from £20,000 to
£4,000,000 per project.

#4: R&D Tax Credit

The R&D tax credit scheme is a government tax incentive to promote UK businesses investing in innovation. R&D tax credits can either be paid back as cash, or reduce companies’ next tax bill.

In reality there are 2 separate tax credit schemes:

• SME R&D Tax Credit scheme for small and medium-sized businesses (SMEs). Companies must have less than £100M revenue and 500 employees, or less than £86m in assets on their balance sheet to qualify
• RDEC R&D Tax Credit scheme for large businesses

The tax benefits are slightly different for the 2 schemes. Luckily, the most attractive is the SME R&D Tax Credit. More importantly, the SME R&D Tax Credit is all the more attractive for loss-making businesses, which often is the case for early-stage startups.

Is Your Startup Eligible?

As long as your business is falling under the conditions cited above (£100M revenue and 500 employees, or less than £86m in assets), it is eligible. Good news – as virtually all startups are considered as SMEs from the standpoint of these criteria.

Although R&D tax credits can only be claimed against qualifying R&D expenses, there is no limitation on the sector or industry a business is in.

As long as you can justify the R&D expenses are only related to the qualifying research and development work, you can claim expenses such as: salaries, subcontractor expenses, utilities, hardware supplies and materials cost used in research (including capital expenditures) and software hosting and infrastructure costs.

How Much Can You Actually Get?

Startups and SMEs in general can claim up to 33% of their research and development costs in cash. The percentage depends on a number of factors.

Luckily though, most startups can claim the maximum (i.e. 33%) which can significantly reduce their cash burn, and eventually, improve their runway.

For more information on UK’s R&D tax credit, how it works and how much you can actually claim for your startup, read our complete guide here.