R&D grants for smaller businesses

Research and development (R&D) grants play an important role in funding the development of new products, services, and processes.

Through grants provided by the UK government, regional bodies, local councils, and other organisations, businesses can create innovation crucial to the growth of the economy.

In March 2022, the government announced an R&D budget of £39.8bn for 2022-25, the largest ever allocated.

The allocations are aimed at allowing the government to deliver on the ambitions in its Innovation Strategy and ensure total R&D spending reaches 2.4% of GDP by 2027.

Successfully applying for an R&D grant can provide businesses with many benefits.

In 2017, innovation research by the Department for Business, Energy and Industrial Strategy (BEIS) found that businesses that received financial support were more likely to experience increases in turnover and employment.

What are R&D grants?

R&D grants are used to help businesses with the commercial development of innovative products, services, and processes and collaborate with other organisations and researchers.

Grant amounts range from £25,000 to £10 million.

They are usually allocated for time-limited projects and cover a proportion of the costs rather than the total amount.

The government provides R&D grants through UK Research and Innovation (UKRI) which brings together the seven disciplinary research councils, Research England, and Innovate UK, the agency for business-led innovation.

UKRI runs regular funding competitions including for projects that address societal challenges covered by the four themes in the government’s industrial strategy, Knowledge Transfer Partnerships for businesses working with academic institutions, and open programmes that fund innovative firms in any sector.

Regional grants may also be available.

Businesses should contact the following organisations:

• England: Growth Hubs
• Wales: Business Wales
• Scotland: Scottish Enterprise
• Northern Ireland: Invest NI

Local councils may offer R&D funding. Find your local council website here.

Despite the UK leaving the European Union, some EU grant programmes like Horizon Europe and Eureka Eurostars are open to UK businesses.

Large companies sometimes offer R&D grants to small businesses, and you might also be able to access funding through incubators and accelerators.

What kind of projects qualify for an R&D grant?

R&D grants fund the commercial development of innovative products, services, and processes.

You can also use the funding to get help from experts and access specialist equipment to create product prototypes.

Innovative companies in all industries have the potential to access R&D grants, but businesses in sectors such as technology, information and communication, and scientific research are more likely to access the funding.

UKRI says businesses can apply for funding if they want to do one or more of the following:

• test the feasibility of an idea and make sure it will work
• create a new product, process or service, or improve an existing one through research and development
• work with other businesses or research organisations on collaborative projects.

How to apply for an R&D grant

Applying for an R&D grant can be complicated and time-consuming.

Schemes can also be very competitive.

You may want to get help from a grant application expert.

Once you’ve identified possible grants, carefully check the eligibility criteria to ensure your business qualifies.

Before you start the application, read all guidance provided by the funding body to ensure you provide all the information required.

If you don’t, your application will likely be rejected.

For some UKRI grants, you are required to read two sets of guidance; details specific to the opportunity and general guidance from the council you’re applying to.

Certain grants require you to be approved through an initial screening before completing a more detailed application.

You may have to wait several months to hear whether you’ve successfully secured the grant.

UKRI has a guide to applying for grants, and Innovate UK has information on its website.

Difference between R&D grants and R&D tax relief

As well as R&D grants, businesses can access R&D tax relief.

The main difference is that grants are up-front funding, while tax relief is a retrospective tax refund once you start conducting your R&D.

Small and medium-sized businesses with less than 500 staff and a turnover of under €100 million or a balance sheet total under €86 million can apply for SME R&D tax relief.

It allows you to deduct an extra 130% of qualifying costs from your yearly profit, on top of the normal 100% deduction, to make a total 230% deduction.

If your company is loss-making, you can claim a tax credit worth up to 14.5% of the surrenderable loss.