UK Innovation Strategy: leading the future by creating it · first published 21 July 2021
This is the UK government's overarching innovation strategy, published in July 2021 and aimed at making the UK a global hub for innovation by 2035. It is not a procurement rulebook — it is a strategic framework organised under four pillars: unleashing business, people, institutions and places, and missions and technologies. For small businesses, the most important signal is that government has explicitly committed to using public procurement as a tool to create routes to market for innovative suppliers. The strategy also announces several funding programmes — including Innovate UK grants and loans, British Business Bank (BBB) schemes, and a new online finance hub — that SMEs can access now. Scope is UK-wide, though some funding schemes have regional eligibility rules. The strategy sets direction rather than legally binding rules, so specific procurement changes will flow through separate legislation and Procurement Policy Notes (PPNs).
WHO THIS APPLIES TO
THE ENKII VIEW
The strategy's explicit commitment to use government procurement to "pull through innovation from idea to market" is a structural opportunity for SMEs with innovative products or services — it signals that buyers should be open to pre-commercial procurement and innovative solutions, not just lowest-cost incumbents. The announcement of an online finance and innovation hub between Innovate UK and the British Business Bank directly targets the navigation problem that stops many small firms finding the right public funding. However, the strategy is high-level; SMEs must watch for the specific PPNs, spending reviews, and programme launches that convert these commitments into concrete contract opportunities.
1. Monitor Innovate UK's competition finder (gov.uk/innovate-uk) regularly for challenge-led grant competitions and pre-commercial procurement contracts relevant to your sector — the strategy confirms these are the primary route for public support of innovative businesses.
All SMEs with innovative products or services — Innovate UK awarded £986 million in 2020/21 to over 4,500 organisations via 'challenge-led competitive grant-funding programmes, pre-commercial procurement contracts and loans'.
2. Apply for an Innovate UK Innovation Loan (up to £1.6 million) if your project is highly innovative with a clear route to market — this is explicitly designed for late-stage SMEs that need flexible finance rather than equity.
SMEs at late-stage development with a clear commercialisation path — The scheme 'offers loans up to £1.6 million for highly innovative late-stage projects with a clear route to commercialisation and economic impact' and has been extended with a further £20 million in 2021.
3. Look at the British Business Bank's Start Up Loans programme for loans of £500–£25,000 at 6% interest plus free mentoring, as an accessible first step into public innovation finance.
Pre-start and early-stage businesses trading less than two years — The strategy lists this programme as offering 'loans (from £500 to £25,000, at 6% interest) alongside free mentoring and support to individuals who are starting a new business or who have been trading for less than two years'.
4. Engage with the British Business Bank's Life Sciences Investment Programme to explore whether your growth-stage funding gap can be addressed through the £200 million programme.
Life science SMEs at growth stage — The programme specifically targets 'the growth-stage funding gap faced by UK life science companies' and aims to mobilise significant third-party capital alongside BBB investment.
5. Check eligibility for British Business Bank Regional Funds (Northern Powerhouse Investment Fund and equivalents) for debt and equity co-investment — these are explicitly designed to reduce the London-bias in innovation finance.
SMEs in the North of England, Midlands, and Cornwall & Isles of Scilly — Regional funds 'provide debt and equity finance, in the form of co-investment by the public and private sectors' and the Northern Powerhouse Fund 'directly invested £256m in over 840 ambitious SMEs'.
6. Watch for the launch of the new online finance and innovation hub being developed jointly by Innovate UK and the British Business Bank — once live, use it as your first port of call to map which funding stream fits your stage and sector.
All SMEs seeking to understand public innovation funding — The strategy commits to 'reduce complexity for innovative companies by developing an online finance and innovation hub between Innovate UK and the British Business Bank'.
7. When preparing bids, explicitly frame your offering around the innovation outcomes the buyer is trying to achieve — the strategy signals that procurement should be 'proactive and long-term' and provide 'a route to market for innovative new products and services', so buyers should be receptive to innovation-led proposals.
SMEs bidding for public contracts with innovative solutions — Government has committed that 'government procurement is proactive and long-term, signalling to industry our direction of travel and providing a route to market for innovative new products and services'.
8. Apply for the Help to Grow: Management programme to access subsidised leadership and management training — it is targeted at exactly this audience and can strengthen the business capabilities needed to pursue innovation and public contracts.
Senior managers of SMEs — The strategy commits to supporting 'through Help to Grow: Management, 30,000 senior managers of small and medium-sized firms to boost their business' performance, resilience, and growth'.
9. Align your R&D and product roadmap language with the government's seven identified technology families and the Innovation Missions programme — future Innovate UK competitions and pre-commercial procurement will be shaped around these priorities.
SMEs in AI, quantum, engineering biology, clean energy, and other priority technology families — The strategy commits to identifying 'the key seven technology families that will transform our economy in the future' and establishing 'a new Innovation Missions programme to tackle some of the most significant issues confronting the UK and the world'.
Every rule below quotes the official document verbatim.
The government commits to increasing direct public expenditure on R&D to £22 billion per year. (UK-wide, all sectors, no specific contract value stated)
“We are committed to increasing direct public expenditure on R&D to £22 billion per year.”
Government procurement is to be used as a lever to pull through innovation from idea to market, with procurement being proactive and long-term to signal direction of travel and provide a route to market for innovative products and services. (UK-wide, all public sector buyers, all contract values)
“We will use government procurement as a lever to pull through innovation from idea to market... We will ensure that government procurement is proactive and long-term, signalling to industry our direction of travel and providing a route to market for innovative new products and services.”
Ongoing government procurement reform post-EU Exit aims to simplify the process, increase flexibility, and enable public bodies to procure more innovative solutions from industry. (UK-wide, all public sector buyers)
“This will be aided by ongoing government procurement reform post-EU Exit that aims to simplify the process, increase flexibility and enable public bodies to procure more innovative solutions from industry.”
Innovate UK awarded £986 million in 2020/21, supporting over 4,500 organisations, through challenge-led competitive grant funding, pre-commercial procurement contracts and loans. (UK-wide, businesses of all sizes, all sectors)
“In 2020/21 Innovate UK awarded £986 million, supporting over 4,500 organisations.”
Innovate UK Innovation Loans offer up to £1.6 million for highly innovative late-stage projects with a clear route to commercialisation; total commitments so far are £155.7 million, with a further £20 million extended in 2021. (SMEs, UK-wide, late-stage innovative projects)
“It offers loans up to £1.6 million for highly innovative late-stage projects with a clear route to commercialisation and economic impact. A total of £155.7 million of commitments have been made so far. Innovate UK has extended the Innovation Loans pilot, providing a further £20 million in finance for innovative companies in 2021.”
Government plans to reduce complexity for innovative companies by developing an online finance and innovation hub between Innovate UK and the British Business Bank. (UK-wide, all innovative businesses, all sizes)
“Reduce complexity for innovative companies by developing an online finance and innovation hub between Innovate UK and the British Business Bank.”
British Business Bank Start Up Loans offer between £500 and £25,000 at 6% interest, with free mentoring, for individuals starting a new business or trading for less than two years. (UK-wide, pre-start and early-stage businesses trading less than two years)
“Offers loans (from £500 to £25,000, at 6% interest) alongside free mentoring and support to individuals who are starting a new business or who have been trading for less than two years.”
The British Business Bank's Life Sciences Investment Programme is a £200 million investment targeting the growth-stage funding gap faced by UK life science companies. (UK life science companies at growth stage)
“Invest £200 million through the British Business Bank's Life Sciences Investment Programme to target the growth-stage funding gap faced by UK life science companies.”
Future Fund: Breakthrough is a £375 million UK-wide programme co-investing alongside private investors in later funding rounds at high-growth, R&D intensive innovative firms. (UK-wide, high-growth R&D intensive firms)
“The British Business Bank has also launched Future Fund: Breakthrough, a new £375 million UK-wide programme that will co-invest alongside private investors directly in later funding rounds at high-growth, innovative firms.”
The government committed to support 30,000 senior managers of small and medium-sized firms through Help to Grow: Management to boost performance, resilience, and growth. (SMEs, UK-wide, all sectors)
“Support, through Help to Grow: Management, 30,000 senior managers of small and medium-sized firms to boost their business' performance, resilience, and growth.”
The government identifies seven key technology families that will transform the economy, and plans an Innovation Missions programme to tackle major challenges. (UK-wide, all sectors, relevant to firms in advanced technology areas)
“Identify the key seven technology families that will transform our economy in the future. Establish a new Innovation Missions programme to tackle some of the most significant issues confronting the UK and the world in the coming years.”
Innovate UK's Investor Partnerships programmes have used £25 million of grant funding to leverage £69 million of equity into 108 SMEs, and £288 million of additional follow-on investment. (SMEs, UK-wide)
“£25 million of grant funding has leveraged £69 million of equity into 108 SMEs , and £288 million of additional follow-on investment.”
The Northern Powerhouse Investment Fund provided 16% of all equity investment in its region and by March 2021 had directly invested £256m in over 840 SMEs, attracting an additional £310m from the private sector. (SMEs in the North of England)
“The Northern Powerhouse Investment Fund now provides 16 per cent of all equity investment in the region it covers. By March 2021 the Fund had directly invested £256m in over 840 ambitious SMEs across the investment region. Those deals attracted an additional £310m of investment from the private sector.”
This briefing is enkii's interpretation of the official document — the official text always governs.
Source document © Crown copyright, reused under the Open Government Licence v3.0 via the GOV.UK Content API. enkii tracks every Procurement Policy Note and briefs changes the day they land — see all briefings.