investment

A £7 billion boost for Britain’s scale ups and innovators

The UK government has put high growth companies back at the centre of its industrial strategy, with a Budget that combines a £7 billion boost for innovation funding with the largest overhaul of entrepreneur tax incentives in a generation.

For Chief Financial Officers and Heads of Tax in scaling businesses, this is not simply another political announcement. It reshapes the mix of equity, debt and non dilutive funding available in the UK, and it arrives at a time when R&D tax relief is under greater scrutiny and SME claims are falling.

What is Britain’s “scale up surge”?

The Chancellor’s new package is built around three core pillars.

Reformed equity incentives for founders and teams

The government is:

• Doubling eligibility key schemes such as the Enterprise Management Incentive (EMI).
• Increasing investment limits under the Enterprise Investment Scheme (EIS) so scale ups can raise more growth capital before hitting current ceilings.

EMI has not been updated for around 15 years. Extending the lifetime of options and raising the employee cap is designed to let companies keep offering meaningful equity deeper into their growth journey, rather than hitting a hard stop as headcount passes traditional thresholds.

A £7 billion injection into UK Research & Innovation (UKRI)
A substantial new commitment to UKRI will channel long term funding into science and technology, with an explicit focus on pushing breakthroughs from lab to market and keeping promising firms in the UK rather than losing them overseas at Series B or C.

Targeted scale up programmes and capital

Two specific initiatives stand out:

Innovate UK Growth Catalyst: a new £130 million programme that combines grants with hands on support for cutting edge science and tech firms. A previous iteration of this model turned £156 million of grants into £1.55 billion of follow on investment, a tenfold multiplier.

British Business Bank capital: the British Business Bank will invest £5 billion into growing companies, with the explicit goal of crowding in private capital and helping firms through the “valley of death” between R&D and commercial scale.

Alongside this, the government has committed to cut the administrative cost of regulation by 25 percent across the Parliament, which it estimates will save businesses around £6 billion a year, and has appointed Alex Depledge MBE as Entrepreneurship Adviser until 2026 to lead policy work on barriers to scale up growth.

The market context: innovation investment is under pressure

HMRC’s latest statistics show that total R&D tax relief support fell slightly to £7.6 billion in 2023 to 2024, with the number of claims down 26 percent year on year and SME claims down by around 31 percent.

At the same time, claims are becoming larger on average, reflecting a pivot towards more intensive, higher value R&D and a smaller universe of claimants able to navigate the tightened rules and additional information requirements. For CFOs, that means:

• Access to R&D incentives is still material, but less forgiving.
• Smaller and earlier stage claims are being squeezed out.
• Boards are asking tougher questions about the value and compliance risk of every claim.

Into this environment, the “scale up surge” is effectively a counterweight. It strengthens the growth stage parts of the system (UKRI programmes, Innovate UK, the British Business Bank, equity incentives) precisely as the pure tax based support for smaller claims becomes more demanding.

Why this matters for scale up CFOs

From a finance leader’s perspective, the announcement cuts across several persistent pain points:

• Runway and dilution
  Growth stage equity is more expensive, and international investors often push UK firms to redomicile or list abroad. The combination of EIS, EMI and British Business Bank capital is intended to keep more of that scaling activity, and the associated jobs and IP, anchored in the UK.
• Talent retention
  High calibre engineers, data scientists and commercial leaders are increasingly mobile. More generous EMI limits and longer option lives are a direct response to complaints that UK scale ups struggle to match US style equity packages once they pass a few hundred staff.
• The “valley of death” between research and scale
  Even when grant funded R&D succeeds technically, many businesses stall when capital requirements spike for trials, industrialisation and international expansion. Growth Catalyst and the British Business Bank investment are explicitly targeted at this phase, blending non dilutive support with growth capital.
• Regulatory and reporting burden
  A promised 25 percent reduction in regulatory administrative cost matters most to firms that are already heavily regulated or exporting. For CFOs, the question is how quickly those savings appear in practice and whether they offset rising compliance demands around R&D tax, ESG and financial reporting.

The strategic takeaway is that the UK funding environment is becoming more barbelled. There is tougher scrutiny at the small claim, lower value end, combined with more firepower at the high growth, strategically important end. Finance leaders need to decide which side of that barbell their business will occupy over the next three to five years.

FI Group insight: joining the dots between tax, grants and growth capital

FI Group has observed this shift first hand in its work with high growth clients across technology, life sciences, manufacturing and energy. Many CFOs are now asking a different set of questions:

• How do we sequence R&D tax relief, Innovate UK grants, UKRI programmes and British Business Bank support so that each stage of the roadmap is funded efficiently?
• When does it make sense to lean into EIS and EMI to attract capital and talent, and when should we prioritise non dilutive instruments to minimise dilution?
• How do we evidence the technical and commercial case for these programmes in a way that satisfies both HMRC compliance teams and innovation funders?

FI Group’s consultants are seeing particular interest in integrated innovation funding strategies that map a three to five year plan to specific instruments, rather than treating each grant or R&D claim as a one off transaction. That includes stress testing scenarios where R&D tax relief continues to tighten, while Growth Catalyst and UKRI competitions become more central to the funding mix.

From a third party perspective, FI Group’s role is to help companies translate macro level policy into concrete funding decisions. The consultancy supports CFOs by identifying eligible projects, modelling cash flow impacts, coordinating bids across multiple programmes and ensuring that R&D tax claims and grant funded workstreams are aligned rather than operating in silos.

Practical steps for CFOs in the next 6 to 12 months

For finance leaders in scaling businesses, a structured response might look like this:

Map your growth projects to the new funding landscape

• Segment your roadmap into discovery, development, validation and scale up phases.
• Identify which elements are most aligned to UKRI programmes and Growth Catalyst, and which are better supported through R&D tax relief or commercial capital.

Review equity incentive strategy under the new EMI and EIS rules

• Reassess EMI headroom, lifetime of options and employee eligibility in light of the expanded scheme.
• Model different scenarios for EIS based fundraising, including the impact on existing cap table structures.

Re benchmark your R&D tax position

• Use HMRC’s latest statistics and compliance commentary as a reminder to revisit your methodology, documentation standard and internal review processes.
• Make sure claim narratives are consistent with any UKRI or Innovate UK funded activity, to avoid misunderstandings about double funding.

Engage early with British Business Bank and specialist lenders

• Explore relevant regional and thematic funds, particularly if you are approaching capital intensive phases such as pilots, demonstrations or factory build out.
• Consider how venture debt or revenue based finance might complement grant funding and tax incentives, rather than replacing them.

Build an internal “innovation finance” capability

• Assign clear ownership inside the finance function for tracking grant calls, fund announcements and policy changes.
• Ensure your board and investors understand how public funding instruments fit into the overall capital strategy.

How FI Group supports companies in this landscape

FI Group is an international innovation funding consultancy that works with more than 15,000 clients worldwide, helping them secure R&D tax relief, national and European grants, and innovation loans each year. Drawing on this experience, FI Group helps UK scale ups to:

• Design integrated funding strategies that blend R&D tax relief with Innovate UK, UKRI and European programmes.
• Identify high potential projects for Growth Catalyst and similar competitions and build strong technical and commercial cases.
• Optimise claim quality and compliance under the evolving R&D tax regime, reducing enquiry risk while maximising eligible expenditure.

By treating the new “scale up surge” as one part of a wider funding ecosystem, FI Group enables CFOs and finance teams to convert policy announcements into extended runway, stronger balance sheets and faster routes to market, without undermining long term shareholder value.