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UKRI is restructuring £8bn in research funding. Learn what's changing, what stays the same, and how to secure R&D funding for your business.
UK Research and Innovation (UKRI) has announced it's pausing new grant applications and significantly reducing the number of companies it supports. For many innovative businesses, this means looking elsewhere for funding – and fast.
UKRI, which distributes £8bn of taxpayer money annually for research and innovation, is undergoing a major reorganisation. Ian Chapman, UKRI's chief executive, confirmed the government has instructed the organisation to focus resources on fewer projects. This shift will result in reduced support for SMEs seeking early-stage funding.
The changes are already being felt across UKRI's various councils. The Science and Technologies Facilities Council must find £162m in savings, whilst Innovate UK – the primary support body for small and medium-sized businesses – has laid off local business advisers and instructed remaining staff not to take on new clients.
Chapman stated the organisation will now support fewer companies but provide more intensive support to those selected. However, he hasn't explained how these companies will be chosen, leaving many businesses uncertain about their funding prospects.
These changes are expected to be fully implemented by the start of the 2027-28 financial year.
For innovation-driven SMEs, the implications are significant. The Smart Grant programme, which previously supported thousands of start-ups with small funding amounts, is effectively paused. If you were planning to apply for Innovate UK funding, you'll need alternative strategies.
Stephen Tulip, UK manager of the App Association, summed up the concern: "Reducing budgets and staffing for small and medium-sized enterprise support at Innovate UK is the opposite of what our domestic start-up and entrepreneur community needs."
The Smart Grant was open to a SMEs with any kind of project in any sector, so long as they were innovative enough. The loss of this scheme has left a gap for companies looking for innovation funding opportunities outside of the specific challenges advertised.
Whilst the headlines focus on grant pauses and funding cuts, the fuller picture from UKRI's recent announcements reveals a more nuanced situation.
Despite the concerning news about paused programmes, UKRI's overall budget is actually increasing. By the end of the current Spending Review period (2026-2030), funding available to universities, researchers, and innovators will rise to almost £10 billion annually.
UKRI is reorganising its investment approach into three distinct areas:
All three buckets will be underpinned by continued investment in infrastructure, facilities, and skills development.
There’s also an effort towards consolidating funding programmes. UKRI will bring together programmes that previously ran separately across multiple research councils. For example, if several councils were funding AI research independently, there'll now be one unified UKRI-wide programme instead.
However, where multiple councils have a significant interest in a field, like artificial intelligence, we will bring teams together and have one UKRI-wide targeted programme, instead of running multiple programmes from within several councils. This type of change of course was one of the clear aims when UKRI was first proposed.
However, several critical details remain unclear. UKRI hasn't explained how companies will be selected for the reduced number of Innovate UK spots. Will it favour larger, later-stage companies? Specific sectors? Companies with matched private investment?
Individual council budgets beyond STFC haven't been detailed. Whilst Chapman confirmed other councils won't face STFC's level of cuts, the specific impact on programmes like EPSRC or Innovate UK remains unclear.
Whilst Innovate UK support becomes harder to access, other funding opportunities remain available. Here's what you should consider:
R&D tax credits remain one of the most reliable funding mechanisms for innovative UK companies. Unlike grants, tax credits don't require competitive applications or selection processes. If your company is developing new products, processes, or services that involve scientific or technological uncertainty, you're likely eligible.
For SMEs, the Enhanced R&D Intensive Support (ERIS) scheme offers particularly generous benefits. Companies spending at least 30% of their total expenditure on qualifying R&D can claim enhanced rates, receiving significantly more support than the standard scheme provides.
One of our clients recently secured £180,000 in R&D tax credits; the tax relief allowed them to continue their development work despite missing out on an Innovate UK grant.
Horizon Europe, the EU's research and innovation programme, remains open to UK businesses following the country's re-association with the scheme. With a budget of €95.5bn running until 2027, it represents a substantial funding opportunity.
Horizon Europe offers various funding streams, from early-stage research to commercialisation support. Like UKRI, they offer sector-specific and technology-specific challenges, but also open challenges for any kind of innovation (so long as they meet the novelty requirement). The European Innovation Council specifically targets SMEs with high-risk, high-reward innovations. Companies can access grants of up to €2.5m, with potential equity investments up to €15m for scaling.
Whilst Horizon Europe applications are competitive, they're often more oversubscribed than UK-specific schemes and sometimes require multi-stage applications. For businesses developing innovations with European market potential, this route deserves consideration.
With Innovate UK reducing its SME support, now's the time to diversify your funding approach. Rather than relying on a single grant application, consider combining multiple funding sources.
R&D tax credits provide reliable, recurring funding based on your actual R&D spending. Unlike grants, you don't need to predict future costs or compete for limited pots of money. However, private investment and other government supports can also be a boon to companies looking to fund their projects.
If your R&D work generates patentable intellectual property, Patent Box tax relief allows you to pay a reduced 10% corporation tax rate on profits derived from that IP. This can significantly improve your return on R&D investment.
Whilst UKRI faces cuts, some regional funding bodies and sector-specific schemes continue operating. Depending on your location and industry, you may find alternative grant opportunities through:
These UKRI changes represent a challenge for innovative SMEs, but they shouldn't stop your development work. R&D tax credits provide reliable funding that isn't subject to political decisions or budget cuts. For many companies, they'll deliver more consistent support than competitive grants ever did.
If you're concerned about how these changes affect your funding strategy, we can help. Get in touch to discuss your specific situation.
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Please contact us to discuss how working with Myriad can maximise and secure R&D funding opportunities for your business.
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