A guide to finding government grants for small businesses in the UK

Although the ability of the UK government to give grants to businesses is limited by the European Union (EU) rules on state aid, grants are available for research and development by small and medium enterprises (SMEs) in various categories.

Technology Strategy Board

The Technology Strategy Board, which aims to stimulate business-led innovation, gives grants for collaborative research and development by industry and research bodies to develop knowledge for new business products. Competitions are held to obtain funding for collaborative research and development projects. More than 600 projects are being supported by combined business and government funds of more than £1 billion. Grants are available to small and medium enterprises (SMEs). A “proof of market” grant may be made to test the commercial potential of an innovative idea, up to a maximum of £20,000. Grants may also be available for micro projects, which are development projects lasting less than twelve months. Grants of up to £100,000 may be available to enterprises with less than 50 employees for research projects lasting between six and eighteen months to investigate the feasibility of new technology. Development projects up to £250,000 are available to companies with less than 250 employees for projects to construct and test prototypes of advanced technology lasting between six and thirty-six months. Grants up to £500,000 are also available for exceptional development projects ranging between six and thirty-six months, involving advanced technology relating to specific industrial sectors.

National Endowment for Science, Technology and the Arts

The National Endowment for Science, Technology and the Arts (NESTA) provides small business funding through its £50 million evergreen fund, bringing expertise and wider contacts. NESTA provides small business financing of £500,000 to £1 million for high-tech companies that are targeting large markets or expected to grow quickly. NESTA aims to build a close relationship with companies over several years.

Other support for business

The UK government provides help in the form of the Business Coaching for Growth service (beginning in late 2011). This aims to provide business development coaching, access to innovation facilities, networking opportunities and access to specialist advice. In addition to this, the UK government is creating 21 Enterprise Zones that will benefit from tax breaks, a discount on local business rates and simplified planning requirements. Help for small businesses is also provided by the research and development tax credit that allows a tax deduction of 200% of research expenditure for SMEs.

European Union support

Funding may also be available from the EU Seventh Framework Programme (FP7) which aims to strengthen scientific and technical structures. This programme supports research activities carried out in transnational collaborative programmes. A UK project desiring involvement from FP7 must involve research and development collaboration between a UK entity and an organisation based in an EU member state.