Budget 2021 – how will it affect innovation funding?

According to the UK Government, innovative fast-growing companies account for less than 1% of UK companies, however such companies add £1 trillion to the UK economic system and account for the majority of net employment growth and output growth- it’s fascinating to see they are a principal investment focus in The Budget 2021.


Research and innovation are critical to our country’s prosperity, security and wellbeing, particularly in a time when the UK economy is grappling with the affects of Covid 19 and any challenges associated with Brexit (the UK’s departure from the EU). The Government has reiterated its wish to reach its target of 2.4% GDP investment in Research and Development (R&D) by 2027 in its efforts to make the UK the world’s most innovative economy.


Our team of non-dilutive funding specialists have reviewed the important points contained inside the Chancellor’s 2021 budget speech and associated documentation to understand how this could have an impact on the innovation landscape and funding options for world-leading UK companies.


  1. Funding for Innovation- Schemes
  2. Preventing abuse of the R&D Tax Credits Scheme


In order to stop fraud, the government has brought a cap on the amount of the payable R&D tax credits that a qualifying loss-making company can claim.


For accounting periods beginning on or after 1st April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability.


A great deal of genuine SME claims will be affected by the introduction of the new cap. Those that are likely to be impacted include:


  1. Companies that outsource large components of their R&D projects
  2. Companies for whom a large share of the R&D costs occur from consumables (e.g. raw materials)


The government will also carry out a review of R&D tax reliefs, with a consultation posted alongside the Budget, considering all factors of the two R&D tax relief schemes. This is to make certain the scheme continues to facilitate cutting-edge research inside the UK, at the same time as making sure value for money for the taxpayer.


  1. R&D Tax Reliefs: consultation
  2. Build Back Better: our plan for growth


This vision is set to target investment towards advancing infrastructure, skills and innovation to achieve economic recuperation and growth. The Government’s goal is to create “the first-class ecosystem in the world for starting and growing a business.”


Included inside the Build Back Better Plan is an explicit recognition that Innovate UK’s grant programmes and government initiatives will remain a key element of the support available to assist the most innovative, R&D-intensive businesses to develop and scale. It also reiterates the Government’s ambition to invest £800m in the new Advanced Research and Invention Agency (ARIA).


As stated in the 2020 Spending Review, the allocation of £100 billion of capital investment objectives to kickstart growth and aid jobs, which suggests an increase in capital investment funding competitions for businesses.


Further small print of these initiatives are expected over the coming months, particularly in the publication of a new Innovation Strategy, due in Summer 2021.


  1. Build Back Better: our plan for growth
  2. Future Fund: Breakthrough
  3. “The government will commit £375 million to introduce Future Fund: Breakthrough”.


This new fund is a direct co-investment product to assist the scale-up of the most innovative, R&D-intensive businesses. The British Business Bank will take equity in funding rounds of over £20 million led with the aid of non-public investors to ensure these companies can get right of entry to the capital they need to develop and bring prosperity to communities throughout the UK.


UK Infrastructure Bank


The Budget also sets out more detail on the new UK Infrastructure Bank. Launching in Spring 2021 and headquartered in Leeds, the bank will provide economic support to non-public sector and local authority infrastructure projects throughout the UK to help meet government targets on climate change and regional economic growth.


The Bank will:


  1. deploy £12 billion of equity and debt capital and issue up to £10 billion of guarantees
  2. provide a range of financing tools including debt, hybrid products, equity and guarantees to help private infrastructure projects
  3. from the summer, provide loans to local authorities at a rate of gilts + 60 basis points for strategic infrastructure projects
  4. establish an advisory function to assist with the development and delivery of projects.
  5. Further important points can be found in the ‘UK Infrastructure Bank Policy Design’ document.
  6. Sector Specific Funding
  7. Energy Innovation


The government has a strong commitment to attaining Net Zero ambitions by 2050. One of the methods they intend to do this is by closely investing in the research and development of clean technologies.


The investment commitment from the 2021 Budget includes:


  1. the launch of a £20 million programme to help the improvement of floating offshore wind science throughout the UK
  2. the launch of a new £68 million UK-wide competition to implement several first-of-a-kind energy storage prototypes or technology demonstrators
  3. a £4 million UK-wide competition for the first segment of a biomass feedstocks programme, to guide the rural economy in making upgrades to the production of green energy crops and forestry products




With the rollout of COVID 19 vaccinations in full swing, the government has made available more than £6 billion in total to develop and procure COVID-19 vaccines. £128 million of this funding has been dedicated to research and development (R&D) and vaccine manufacturing.


The UK Government’s support for the Health & Life Sciences sector continues to generate a constant flow of innovation funding possibilities for businesses.


In Summary…


The continued support for R&D nationally, rising investment as a percentage of GDP and the possibility of new, localised capital funding streams provide a welcome endorsement for the pivotal role innovative organizations play in driving the UK’s financial growth.


Whilst increased funding is positive, it will no doubt make bigger opposition for available funds. Granted Consultancy has a proven track record of securing funding for ambitious businesses throughout a variety of sectors, particularly for Cleantech, Health and Life Sciences and Digital innovators looking to develop their business rapidly.


Our team knows where to locate appropriate funding, how to access it effectively and how to use it to best effect, giving your business a competitive advantage. Get in contact if you would like to explore innovation funding for your business.


Reach Out


If you have a disruptive enterprising project or innovation, why not contact us? A brief chat with one of our innovation consultants will help you determine whether grant funding could get your project off the ground.


Why use grant funding experts?


Although there are many benefits to seeking grant funding, the thought of applying can be confusing, time-consuming and stressful. Using the creative and technical skills of a professional Innovation grant writing consultancy will strengthen your business in translating technologies and business models into a language and format assessors understand; increasing the chance of success. If you have a disruptive ambitious project or innovation, why not contact Capti Innovation.