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UK Startups and Innovation
21SEP

UK grant count falls to 10-year low

2 min read
16:52UTC

Fewer companies are receiving grants even as average grant size rises. The money is concentrating upward, leaving proof-of-concept founders with fewer options.

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Key takeaway

Grant count is at a decade low; proof-of-concept funding is harder to find than at any point since 2016.

Beauhurst's 2026 spinout report shows UK grant awards fell to their lowest count since 2016, even as the average grant size rose 10.96% to £423,000 1. Fewer companies are receiving larger awards. The total grant pool is not collapsing, but its distribution is shifting toward mid-stage companies that can absorb bigger tickets.

For a university team seeking a small grant to test an early hypothesis, the narrowing is material. Proof-of-concept funding sits below the threshold of most state programmes. The new Innovate UK Velocity model favours companies with demonstrated team capability and technical breakthrough; by definition, the earliest-stage ventures cannot yet demonstrate either. The expanded £40m proof-of-concept fund (up from £20m over three years) partially addresses the gap but does not restore the volume of small grants available a decade ago.

All of this is happening while the government deploys growth-stage capital at record scale through the British Business Bank, the Sovereign AI Unit, and sector-specific funds. Almost all of it targets companies that have already survived the earliest stages. The pipeline that feeds those programmes is quietly thinning at its base.

Deep Analysis

In plain English

The UK gave out fewer research and development grants to startups and spinouts in 2025 than at any point since 2016. But each individual grant was larger on average (£423,000). The total money spent on grants may not have fallen much, but fewer companies are receiving any grant at all. This matters most for very early-stage companies that need a small amount of money (£50,000 to £200,000) to test whether their idea works before raising investment. These companies are the least served by larger grants to fewer recipients.

What could happen next?
  • Consequence

    UK university spinouts requiring £50k-£200k proof-of-concept funding face a widening gap as grant counts fall and Innovate UK shifts to portfolio selection of more advanced companies.

Sources:Beauhurst / Penningtons Manches Cooper·Beauhurst / Penningtons Manches Cooper
Mentions:Beauhurst →Sovereign AI Unit →British Business Bank →Prima →Innovate UK →Germany →Cambridge →UKRI →
First Reported In

Update #1 · State capital floods in, seed money drains

Beauhurst / Penningtons Manches Cooper· 13 Apr 2026
Read original →
Causes and effects
This Event
UK grant count falls to 10-year low
Declining grant volume squeezes the earliest stage of the UK startup pipeline at the same moment growth-stage capital is most abundant.
Led to
EMI reform quadruples the scaleup thresholds
EMI reform targets scaleups while grant award counts are already at a 10-year low (ID:2351), highlighting a structural gap between seed and scaleup-tier instruments.
Occurred 6 Apr 2026
Read story →
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