Innovate UK Pauses £25 Million Smart Grants Programme to Revamp SME Support

Innovate UK has temporarily suspended its Smart Grants programme, which allocates £25 million annually, in a bid to overhaul how it supports small and medium-sized enterprises (SMEs). The pause comes in response to issues with oversubscription and low success rates, which have reportedly dropped below 10%, and in some cases, as low as 2%.

The Smart Grants programme previously allowed SMEs to claim up to 70% of costs for commercially viable research projects. While successful recipients for the current round have already been notified, no additional awards will be made until the revamped initiative is launched. The new scheme is expected to be unveiled before summer 2025.

A spokesperson for Innovate UK explained that the review is aimed at addressing the “incredibly low” success rates and ensuring that support reaches businesses with genuine growth potential. “We know the effort and often the cost that goes into these applications,” the spokesperson said. “We want to make it easier for businesses to apply while ensuring our support goes to those with strong potential for scaling and job creation.”

This review aligns with broader government goals to prioritize companies with strong growth prospects. At present, applicants do not need to demonstrate their potential for future growth, a requirement that may change when the new scheme is rolled out. Innovate UK clarified that the pause is not a result of Treasury-led funding cuts.

The high competition for grants has led to an increasing reliance on specialist consultants by businesses, a trend that Innovate UK acknowledges has been draining resources. Some industry figures, including venture capital chair Ewan Kirk, have referred to this as a “tax on innovation.” Innovate UK aims to make the application process more accessible and inclusive to reduce these additional costs.

Innovate UK, which manages a budget of £1.1 billion, supports over 450,000 innovators annually, including more than 10,600 tech businesses through its Business Growth programme. However, recent criticism arose after the agency initially awarded only 25 grants in its £4 million Women in Innovation scheme, later increasing the number to 50.

As part of the review, Innovate UK is gathering feedback from SMEs. Interested businesses can participate in a survey available on the Innovate UK website.