Innovate UK pauses Smart Grants: what this means for SMEs

This move is not necessarily a negative change – but it is a significant one. Smart Grants have been a cornerstone of R&D funding in the UK, offering a continuous, open-competition grant scheme for innovative businesses. Now, as Innovate UK redesigns its approach, the impact on SMEs, particularly those in capital-intensive sectors like biotech, needs careful consideration.

The business perspective: uncertainty and strategic gaps

Our funding experts have successfully guided numerous businesses through the Smart Grant process. From experience, we know that many early-stage businesses with strong concepts rely on Smart Grants to develop their ideas, often due to the broader lack of available investment.

The pause in Smart Grants comes at a time when R&D-intensive businesses are already struggling to secure wider investment. The ongoing spending review and overall uncertainty around new Innovate UK grants mean that many businesses could face delays in their R&D timelines – or worse, be forced to halt projects altogether.

Smart Grants: a look at the latest round

Innovate UK spend ~£100 million per year on Smart Grant awards so it is not surprising they are now reviewing the scheme. To understand the impact and rationale of pausing Smart Grants, it’s useful to look at the numbers from the most recent round.The competition saw 2,134 applications submitted, with 1,676 moving forward to assessment. The available funding pot was reduced from £25 million to £15 million, resulting in a historically low 2% success rate. Only 44 projects received funding, with scores ranging from 87.2% to 94.4% required to secure funding.This highlights the increasing competition and diminishing availability of grant funding, making this pause particularly concerning for SMEs reliant on these opportunities.

What should Innovate UK consider in its redesign?

1. A clear funding calendar

One of the biggest challenges businesses face when applying for grants is a lack of visibility on upcoming opportunities. Many applicants turn to Smart Grants simply because they are always open. A clear annual funding roadmap would allow SMEs to plan ahead, identify the best funding options and avoid submitting applications prematurely or consider other more appropriate schemes.

2. Retaining the rolling structure of SmartGrants

Smart Grants were invaluable in providing a rolling opportunity to apply, making it possible for businesses to wait until at a more developed stage before submitting an application. If Smart Grants are permanently replaced, it is crucial that the new system maintains a similar level of accessibility and flexibility.

3. Clearer guidance on eligibility and technology readiness levels (TRLs)

There has long been a misconception that Smart Grants are for any R&D project. More explicit guidance on what qualifies, including TRLs and commercial readiness, would help applicants assess their fit before applying, improving the quality of submissions and reducing wasted effort for both businesses and Innovate UK.

4. More joint grant and investor partnerships

Investor Partnerships, where Innovate UK funding is matched with external investment, have proven to be a highly effective model. Expanding this approach could help businesses not only secure initial R&D funding but also gain investor support to bridge the gap to commercialisation. This joint approach de-risks investing in technologies and companies for both Innovate UK and investors – a win-win.

5. Sector-specific funding with multi-stagesupport

More targeted competitions tailored to industry challenges, such as the recent Farming Innovation Programme, would be highly beneficial. With clearly identified sector-specific challenges, this scheme allowed innovators to apply for different levels of funding based on their R&D maturity, from early-stage feasibility studies to later-stage development for their technology solutions. Crucially, having a rough timeline of competitions for the year ahead would enable SMEs to align their project planning and partnerships accordingly.

6. Reducing the financial reporting burden

One of the major concerns raised by SMEs is the complexity and cost of financial reporting requirements, such as Independent Accountant’s Reports (IARs) and proving match funding capacity. A more streamlined approach could include:

• Innovate UK conducting random audits internally instead of requiring SMEs to source and fund external auditors, ensuring standardisation and reducing administrative burden

• Simplified templates for evidencing match funding
• Consideration of 100% funding for companies of a certain size to remove the match funding requirement
• A financial qualification process before application submission to prevent delays in project start dates post-award
• Automation of financial claim processes to pull data directly from timesheets and invoices into the IFS system

Increased capacity at Innovate UK for reviewing and approving claims faster would also be beneficial. Currently, the time between submitting a claim and receiving funds can take up to a month, which significantly impacts smaller companies with limited cash reserves. In reality, businesses can be waiting up to four months post-expenditure to reclaim costs, so faster disbursement of funds would be a critical improvement.

A call for SME voices: help shape the future of UK innovation funding

Innovate UK is actively seeking feedback from SMEs to help shape its new funding model.This is a crucial opportunity for businesses to have their say on how future grants should be structured.

We encourage all SMEs, particularly those that have benefited from Smart Grants in the past, to participate in the consultation process. Your insights could help ensure that the next generation of Innovate UK funding is even more effective at supporting innovation, scaling and commercial success, and ultimately provide better value for UK taxpayers.

Get involved

To share your views and contribute to the conversation, visit: Innovate UK's consultation page.

While change is always accompanied by uncertainty, this review offers a chance to improve how Innovate UK supports SMEs. By maintaining an open dialogue with businesses, we can help shape a funding landscape that truly enables innovation to thrive.

Need grant support? Speak to our experts

If your business needs support with grants, whether pre-award strategy or post-award compliance, our advisors can help. Book a free consultation with our team today to ensure you’re maximising your funding opportunities.