Government grants in the UK can be a lifeline for innovative small and medium that need a cash injection. There is more than £118 billion in cash grants available across several UK government grant programs. These funding options can be huge opportunities towards employee cover, research and development or equipment and machinery expenses, for example.
However, these government programs are highly sought-after, and those vying for receiving these free investments through business grants must put in a strong bid. Specialist grant writers are often hired to outsource the proposal, businesses find supplementary funding solutions to help access match-funding structures, and most successful grant applications come with quite a few stipulations.
Introduction to government grant programs
The state of business in the UK is thriving, with over 110k new businesses opened last year in 2020. However, the economic climate is daunting, with more companies valuing caution and a measured approach to future spending. In fact, 74% of SMEs said that reducing costs was one of their biggest priorities moving into 2021.
A small business grant is sometimes required in order to uninhibit this restriction on spending, and keep the economic cogs turning for the wider community. These grants are often focused on research and development, with return on research capital (RORC) proving they are worthwhile.
Popular UK Government Grants
We have gathered a list of some of the most popular grant bodies in the UK to get you started, and a look at who might be eligible to apply for the grants.
Research and Development Tax Credits
For SMEs, the R&D tax credit is a government program that looks to incentivise companies working in innovative fields. In the UK, the government offers 100% of the research and development expenses back as cash credit. So companies that are spend resource on different R&D activities can receive a tax credit refund from the HMRC at the end of their financial year. A company can claim back around a third of what it has spent on R&D.
And for companies that are pre-profit, this comes in the form of a cash tax credit, often an important source of liquidity in companies with high R&D investments that have not launched their products yet or are early in the market.
The main R&D tax credit scheme is available to SMEs. If a company is outside of the parameters of the SME scheme, it can still claim R&D tax credits, just under the more limited and lower return Research and Development Expenditure Credit (RDEC) scheme.
Innovate UK
The Innovate UK program was launched by the government in 2004 for startups who are a little further along with their R&D. Businesses who have reached the finalised prototype stage of innovation projects are eligible to apply, with almost 1,000 projects funded so far.
The Innovate UK grant supports fundamental research and development, feasibility studies, industrial research and experimental development. Alongside the actual business grant, this opportunity offers connections to academia services and further investment resources such as advice from the experts, too. Innovate encourages tech based businesses in the arts, creative, science and engineering sectors to apply.
Innovate UK offers a number of different finance options, with 100% of expenses related to R&D covered. Successful projects will receive a share of £25 million, with a maximum of £500,000 awarded per business.
MOD’s Defence and Security Accelerator (DASA) Programme
The Ministry of Defence’s DASA programme is an open-call funding opportunity with seven main areas of focus:
- reducing cyber attacks
- creating robust cyber defences
- simulating future battle environments
- attract and retain skilled defence workforce
- aid management of contested environments
- command and control technology
- integration and training of different armed forces
SMEs with ideas to develop solutions to these defence problems are offered without a standard limit on the funding. For example, within 3 months of the Manchester attacks in 2017, DASA had pledged £1 million towards 7 different organisations for the Improving Crowd Resilience programme.
Proposals should be relevant to defence and security, with a clear technical demonstration of strategic fit.
The major benefit is that the entirety of intellectual property remains with the original suppliers, also covering expenses relating to salaries, materials, equipment and other indirect costs.
Biotechnology and Biological Sciences Research Council (BBSRC)
BBSRC provides a range of funding opportunities to empower individuals and companies pursue world-class bioscience research. It funds research through a range of different mechanisms, including provision of research grants for specified projects and support to researchers on high-quality research projects.
For instance, recently, a range of companies from SMEs to large businesses were awarded a combined package of £2.8m from the Scotland-based Industrial Biotechnology Innovation Centre (IBioIC) iIBioIC and the BBSRC to fund PhD projects run in collaboration between universities and biotech companies.
Medical Research Council (MRC)
The MRC is responsible for coordinating and funding medical research in the United Kingdom, and has provided the financial support and scientific expertise behind a number of medical breakthroughs. MRC’s research grants are geared towards focused research projects, both short- or long-term. It can also be used to support development of research facilities, involving more than one research group of institutions.
The budget for research grant awards does not exceed £1 million, and the grant is usually awarded for a period of up to 5 years. All work proposed need to be fully justified in the proposal. Projects longer than 3 years specifically has to justify why a longer timeline is needed - for example for a specific research deliverable or prolonged data-collection.
Natural Environment Research Council (NERC)
NERC funds research in environmental sciences, with investments in large research infrastructure, equipment, skills, and more. There are different types of funding under NERC, including National capability funding, Strategic research, Discovery science, and Innovation funding.
The grant proposal typically needs to outline data management plan, justification of resources required, and potential impact. For instance, recently, The UK National Oceanography Centre (NOC) secured £670,000 in funding from the NERC to take a robot submarine around end-of-life oil and gas fields to pick up any potential environmental impacts at these sites.
Net Zero Innovation Portfolio
The Net Zero Innovation Portfolio is a £1 billion fund that was launched in 2021, announced in the Prime Minister’s ten point plan for a green industrial revolution. It provides funding to help accelerate low-carbon technologies and systems in the UK.
The funding is available for projects across Great Britain and Northern Ireland, and applications are made via competitions that have been taking place in 2021. Opportunities to apply are provided through the individual competition pages listed here.
Science and Technology Facilities Council
STFC provides research grant funding to UK higher education institutions and other eligible research organisations for research in the fields of astronomy, particle physics and nuclear physics, and for associated technology development, research infrastructure and knowledge exchange.
The STFC provides research funding through a range of research awards, each with specific eligibility, application, and funding criteria. The awards are:
Consolidated Awards
Grants are awarded for a maximum of four years, and only one application per department per research area is permitted. With a 3-year application cycle for each programme area, departments are locked out from applying in between these times.
Consortium grants
These are intended to support work carried out by more than one university department or institution, with a common research programme.
New Applicant awards
These are for newly appointed academic members who might have joined a department between the grant submissions for the two listed above. They are given the opportunity to apply separately for support so that they can obtain research funding in advance of the next grant submission. If the grant funding is agreed, they are likely to be awarded a separate grant in addition to the department’s existing Consolidated or consortium grant.
Seed Enterprise Investment Scheme (SEIS)
The SEIS is a government support opportunity designed to create jobs within social enterprises, while also benefitting the investors who are involved. The unique scheme has been developed in response to criticism of the EIS, a similar programme that is only open to larger corporations. Therefore, only an SME can qualify for this.
The SEIS benefits small businesses that carry out new trade from any industry (less than three years old) and have not yet IPO’d. Successful projects will receive up to £100,000 and covers 78% of expenses.
Investor benefits include:
- income tax relief
- capital gains exemptions
- loss relief
- capital gains re-investment
Enterprise Investment Scheme (EIS)
The EIS was launched in 1994, with a focus on encouraging private citizens to invest in established businesses. Investors get access to income tax relief of 30% up to £100k, capital gains tax exemption and loss relief in case the shares lose value.
Companies who qualify can receive funding of up to £5 million per year, with a maximum venture capital fund of £12 million over the course of their lifetime. The difference between this scheme and the SEIS is that your company is obliged to have less than 250 employees and no more than £15 million in gross assets from 7+ years of business. Alternatively, the SEIS requests companies that are less than 2 years old, with no more than £200k in gross assets and less than 25 employees.
Qualifying customers must be UK-based and privately owned. The other specification for this application process is for “knowledge intensive” businesses, aka those with the potential for huge growth. Instead of a step by step business plan, applicants must instead detail how the funding would increase their knowledge and ability to solve a problem. This solution would later be sold.
Money raised may be used for research and development and qualifying trades.
There are several other grant programs available for startups and sceleups across the UK. It’s about learning more about them and finding the one that best suits your growth needs.
However, even after early stage companies are able to identify grants well-suited to them, they often face some challenges when leveraging these programs. This includes difficulty in matching contributions, proving alternative funding sources, and funding the delivery of milestones consistently.
If you’re looking to solve these challenges, Fundsquire’s Grant Advance is a simple funding solution that lets you use your future grant payments to fuel your current milestones today. You can learn more here.
Hope this guide has been helpful in providing a rundown of the most popular government grant bodies in the UK. If this information was of value to you, feel free to share it others who might benefit from this.
