A new £14 million UK Germany quantum funding initiative will back joint R&D, photonics and shared standards. For quantum start ups and corporates, this signals fresh bilateral grant opportunities and a need to align R&D tax relief, grant funding and private capital.
What is the new UK Germany quantum funding initiative?
The UK and Germany have announced a £14 million package to deepen collaboration in quantum technologies, unveiled during German President Frank Walter Steinmeier’s State Visit to the UK in December 2025.
The announcement has three pillars:
- £6 million joint quantum R&D funding call to launch in early 2026, co funded by Innovate UK and Germany’s VDI, with £3 million from each side.
- £8 million investment in the Fraunhofer Centre for Applied Photonics in Glasgow, strengthening the UK’s quantum and photonics industrial base and helping businesses bring new quantum products to market.
- A new Memorandum of Understanding between the UK’s National Physical Laboratory (NPL) and Germany’s Physikalisch Technische Bundesanstalt (PTB) that complements the global NMI Q initiative on quantum standards.
Government analysis suggests quantum could contribute around £11 billion to UK GDP and over 100,000 jobs by 2045, reflecting the scale of the opportunity in quantum computing, sensing and navigation systems.
In short, this initiative is not just symbolic diplomacy. It is a targeted intervention to knit together two of Europe’s strongest quantum ecosystems around joint funding, standards and applied industrial research.
How the joint UK Germany quantum funding is expected to work
Detailed call guidance has not yet been published, but the press release confirms that a £6 million bilateral quantum R&D call will open in early 2026, with matched contributions from Innovate UK and VDI Germany.
Based on previous UK bilateral programmes, quantum innovators should expect several common design features:
Bilateral consortia
- At least one eligible organisation from the UK and one from Germany.
- Typical consortia might combine deep tech SMEs, universities and large industrial partners in sectors such as health, aerospace, telecoms or energy.
Aligned but separate funding streams
- UK participants likely funded under an Innovate UK competition within the UK Research and Innovation framework.
- German participants supported under a VDI managed programme.
- Each side is funded under domestic state aid and cost eligibility rules, but projects are assessed as integrated bilateral collaborations.
Focus on applied quantum technologies
- Building on the existing UK National Quantum Technologies Programme and German quantum initiatives, likely themes include:
- Quantum computing and algorithms for industry relevant problems.
- Quantum sensing and navigation, for example for medical imaging or transport infrastructure.
- Quantum communications, networking and enabling photonics.
Match funding and cost shares
- Companies should plan for significant match funding from their own budgets, with research organisations typically more highly subsidised.
- CFOs will need to model cash impacts across both project partners, taking account of differing cost eligibility in each jurisdiction.
Alongside the call, the £8 million for Fraunhofer’s Glasgow centre is designed to accelerate commercialisation by supporting applied photonics research that underpins many quantum systems, as well as providing UK firms with a high quality industrial R&D partner.
The NPL PTB agreement on quantum standards will help ensure that devices and protocols developed under this initiative are aligned with emerging international metrology frameworks, lowering future interoperability risk for manufacturers.
Strategic context: why this matters for the quantum funding landscape
This announcement sits within a wider UK Germany Strategic Science and Technology Partnership, launched in 2024 under the Kensington Treaty to deepen collaboration in areas including quantum, AI and clean tech.
For quantum specifically:
- The UK National Quantum Technologies Programme already combines research council funding and Innovate UK support to translate quantum science into commercial applications.
- Innovate UK has recently committed over £14 million to Contracts for Innovation quantum projects, backing 14 proposals focused on quantum sensing.
- Internationally, new vehicles such as QE’s £100 million Quantum Technologies Fund have been created to address the scale up funding gap facing British deep tech start ups.
On the macro side, FI Group’s recent analysis shows that UK R&D spending has fallen by £2.8 billion in real terms since 2021, raising questions about how the UK will sustain its growth ambitions. HMRC’s latest statistics confirm that the number of R&D tax credit claims dropped by 26 per cent in 2023 to 2024, with SME claims down 31 per cent and total support estimated at £7.6 billion.
In that context, this UK Germany quantum funding initiative is significant for three reasons:
- It adds new non dilutive grant funding on top of already stretched corporate R&D budgets.
- It reinforces the UK’s position in a European quantum ecosystem, despite wider geopolitical competition.
- It supports industrialisation, via Fraunhofer Glasgow and metrology standards, not just academic collaboration.
For quantum companies that sit at the intersection of capital intensive hardware and long time to revenue, those signals matter.
Implications for CFOs in quantum and deep tech companies
CFOs in quantum and advanced technologies face a particular set of pressures:
- Rising capital and operating costs, especially for cryogenics, specialised optics, fabrication and high performance computing.
- A more stringent R&D tax relief regime, with lower SME generosity and increased compliance requirements.
- Investor expectations that companies secure grant funding and strategic partnerships to de risk later equity rounds.
The UK Germany initiative touches all three.
- Portfolio funding, not single instrument funding
The bilateral call should be viewed as one instrument in a broader portfolio that may include UKRI quantum competitions, European schemes such as Horizon Europe and EuroHPC, and private equity or corporate venture. CFOs will need to map where a bilateral project sits in the overall funding stack and how it interacts with R&D tax relief under the merged scheme.
- Cross border risk and governance
Bilateral projects add complexity around IP, background and foreground rights, export control and data governance. These are not purely legal questions. They influence future valuation and route to market. A robust collaboration agreement and internal governance framework should be costed into project planning from the outset.
- Match funding and cash flow management
Even with generous intervention rates, grant funded projects require substantial company co investment. Combined with the longer cash cycle created by HMRC’s tighter R&D compliance posture, this places pressure on working capital. Scenario analysis should include delayed grant payments, slower R&D tax repayments and contingency for technical overruns.
- Strategic positioning in a crowded field
Competition for quantum funding is intense. Companies that can clearly articulate how their technology links to national missions in health, security, climate or infrastructure will be better placed. That requires close alignment of technical roadmaps, commercial strategy and policy narratives, and CFOs have a key role in ensuring that financial plans reflect those priorities.
FI Group insight: navigating UK Germany quantum funding
Quantum and deep tech businesses should treat the UK Germany initiative as a catalyst to professionalise their funding strategy rather than as a one off opportunity.
FI Group works with quantum, photonics and advanced computing companies across the UK, Germany and the wider EU to:
- Structure R&D tax relief claims under the merged scheme and Enhanced R&D Intensive Support.
- Build coherent grant pipelines that combine Innovate UK, bilateral calls, Eurostars and Horizon Europe where appropriate.
- Benchmark project portfolios against funder priorities and state aid rules in multiple jurisdictions.
- Support documentation and financial evidence that withstands both grant audit and HMRC enquiry.
In prior publications on UK R&D spending and quantum computing funding, we have highlighted the need to blend national and international grants with tax incentives to offset inflationary pressures and maintain innovation momentum. Companies seeking a deeper dive into UK competition mechanics can draw on funding advisers’ guidance on UK grant competitions and R&D tax services published on our website.
Actionable steps for quantum innovators
For leadership teams looking to respond pragmatically, a structured approach helps. Over the next 6 to 12 months:
- Map your quantum roadmap against funding themes
- Identify which parts of your roadmap relate to quantum computing, sensing, communications or enabling technologies such as photonics and control electronics.
- Cross reference against existing UK quantum calls and likely bilateral priorities.
- Identify strategic German partners early
- Use existing research links, Fraunhofer networks and industry clusters to shortlist potential partners in Germany.
- Consider complementary strengths along the value chain, for example UK start up hardware with German systems integrators or vice versa.
- Build a funding and tax model for the project
- Model project costs under likely grant intervention rates and internal match funding.
- Overlay potential R&D tax relief benefits and their timing, recognising that claims will fall under the merged scheme.
- Stress test cash flow for delayed grant payments or changes in HMRC processing times.
- Prepare governance and IP foundations
- Draft a template collaboration agreement covering IP ownership, access rights, publication and export control.
- Ensure your internal project accounting can separate costs by country, partner and work package to satisfy both grant auditors and tax authorities.
- Monitor call details and align internal gates
- Set an internal review cadence tied to expected publication of the Innovate UK and VDI call documentation.
- Align technical, commercial and finance sign off so you can move quickly once scope, eligibility and evaluation criteria are confirmed.
FAQs on the UK Germany quantum funding initiative
Before final guidance is released, many innovators share similar questions. The answers below summarise what is known so far and how companies can position themselves.
Q1. When will the UK Germany quantum funding call open?
The government announcement states that a £6 million joint quantum R&D funding call from the UK and Germany will launch in early 2026, with Innovate UK and VDI Germany each contributing £3 million. Exact opening and closing dates will be set out in the formal competition briefing notes.
Q2. Who is likely to be eligible to apply?
While detailed eligibility is pending, prior bilateral calls suggest that consortia will include at least one UK and one German organisation. UK applicants are likely to include SMEs, large companies and research organisations eligible under Innovate UK rules, with German partners funded under VDI managed schemes. Academic only projects are unlikely to be prioritised over industry led collaborations.
Q3. Can companies combine this funding with R&D tax relief?
In principle, UK companies can still claim R&D tax relief on eligible expenditure, but the interaction between notified state aid and the merged scheme can be complex. Some costs supported by notifiable grants may need to be excluded or treated under the RDEC style mechanism. CFOs should model scenarios and seek specialist advice to avoid double counting or non compliant claims.
Q4. How does this initiative relate to other quantum grants in the UK and EU?
The bilateral call will sit alongside national instruments such as the UK National Quantum Technologies Programme and specific Innovate UK competitions, as well as European schemes including Horizon Europe and EuroHPC. Companies may be able to run sequential or complementary projects, but duplicating costs across programmes is prohibited.
Q5. What should CFOs and leadership teams do now?
The most productive actions now are partner scouting, project prioritisation and funding strategy design. That includes mapping where bilateral projects fit within your wider quantum roadmap, planning match funding and stress testing cash flow. Being ready with a credible, costed project concept when call details appear will be more valuable than reacting at the last minute.
