As we approach the midpoint of 2025, the UK’s innovation ecosystem finds itself in a period of notable transition, and has done for a few months now! Innovate UK, the nation’s principal innovation agency, has launched significantly fewer funding competitions this year compared to previous years. This marked reduction has raised concerns across the innovation landscape, prompting many to question what is driving the slowdown.

From my perspective as Director of RedKnight Consultancy Ltd, the picture is more complex than any one factor. While headline-grabbing changes, such as the pausing of the Smart Grant programme have attracted attention, the root cause of the slowdown is likely broader and more political in nature. In this article I examine the intersecting structural, strategic and political developments shaping the 2025 funding landscape, and offer guidance on what innovators should expect next.

Leadership Changes and Strategic Realignment

One of the clearest changes to Innovate UK this year has been the appointment of Tom Adeyoola as its new Executive Chair, succeeding interim chair Dr. Stella Peace. Adeyoola, an experienced tech entrepreneur and founder of Metail, brings fresh thinking to Innovate UK at a time of strategic realignment. He has indicated his focus will be on simplifying delivery, supporting commercialisation, and scaling impactful innovations.

While his arrival is welcome and timely, it follows a long leadership vacuum. The agency’s previous Chief Executive, Dr. Indro Mukerjee, announced his departure in early 2024. For over a year, Innovate UK was without permanent leadership, a period during which senior planning and programme development was, unsurprisingly, affected. Speculation about further structural reforms, including a potential shift away from UKRI oversight, has only added to the uncertainty.

Such transitions, while necessary for long-term evolution, often cause temporary disruptions. It’s likely that a “wait and see” mentality pervaded much of Innovate UK’s internal operations during this period, which may help explain why fewer competitions launched in early 2025.

Budget Delays and Political Caution

In addition to leadership changes, 2025 opened under the shadow of delayed public funding announcements. UKRI’s overall budget, which includes Innovate UK’s core funding, was not confirmed until well into the new fiscal year. With the newly elected Chancellor, Rachel Reeves, instructing departments to find 5% “efficiency savings,” concerns mounted that innovation spending could face cuts.

While the government ultimately reaffirmed its commitment to protect record levels of R&D investment, the months of uncertainty had already forced Innovate UK to adopt a cautious stance. In the absence of budget clarity, launching large-scale competitions would have been imprudent.

Crucially, this budget uncertainty did not occur in a vacuum. It coincided with the Labour government’s broader emphasis on fiscal discipline and “value for money” across Whitehall. As a result, agencies like Innovate UK have been pushed to prioritise demonstrable economic impact, with funding steered increasingly towards mission-led challenges and commercial outcomes.

More Than Just Smart Grants

Much of the discourse around the slowdown in Innovate UK activity has centred on the pausing of the Smart Grant programme, a competition that previously ran multiple times per year and accepted proposals from all sectors. Its suspension in January 2025, following plummeting success rates (as low as 2.8%), sparked frustration across the SME landscape.

However, Smart is (or was) just one competition. And while its pause is significant, it does not explain the broader absence of activity across the funding landscape. In fact, many other well-known programmes have also failed to materialise this year.

For example, the Biomedical Catalyst (BMC), a joint programme with the Medical Research Council (MRC) that funds early and late-stage health innovations, has yet to run a 2025 round. This is concerning given its importance to UK life sciences. Other expected competitions, such as the Digital Security by Design (DSbD) programme, Energy Catalyst, and sector-specific open calls under the Innovate UK Net Zero and Transformative Technologies portfolios, have also been noticeably quiet.

This suggests that what we are seeing is not just an operational reset, but a deeper political or strategic pivot. The government’s shift towards targeted mission delivery, including net zero, AI, and health, appears to be driving a reprioritisation of which competitions run and when. The result is fewer, more selective funding opportunities.

Targeted competitions still active, but narrower in scope

Despite the broader slowdown, Innovate UK has continued to deliver select competitions in 2025, albeit with a much narrower focus. Notable examples include:

• Ofgem Strategic Innovation Fund (SIF) – Round 4, offering up to £30 million for energy networks to develop net-zero enabling innovations.
• First of a Kind (FOAK) 2025, supporting innovations in the rail industry through the Department for Transport.
• Contracts for Innovation, (formerly known as the Small Business Research Initiative or SBRI) help public sector organisations to solve complex challenges by running a competitive funding opportunity, to develop and adopt new solutions and technologies.
• Farming Futures R&D Fund, which is part of Defra’s Farming Innovation Programme, delivered in partnership with Innovate UK.
• Innovation Loans, which have continued to operate in 2025, offering debt-based support for later-stage commercialisation.

These initiatives indicate that funding is still flowing, but only in highly strategic areas, often aligned with regulatory partners or central departments. This shift brings opportunity and risk. The opportunity lies in tackling national priorities with scale. The risk is projects that don’t fit these missions, but are nonetheless high potential, may fall between the cracks.

SMEs in limbo, waiting for the next model

The gap left by paused competitions, like the Smart Grant and BMC is being most keenly felt by SMEs. With the Smart Grant shelved and few alternatives available, many early-stage businesses are unsure where to turn.

Innovate UK has acknowledged this and is expected to launch a new SME support model later in 2025. It had been suggested around spring time, and yet here we are, fast approaching summer. Whenever it is launched, the new model will reportedly be designed to address criticisms of previous schemes, including administrative burden, low success rates, and misalignment with business needs.

Until that replacement launches, however, the funding landscape for SMEs remains fragmented. Some may turn to investor partnerships or seek opportunities in Horizon Europe or regional funds, but these alternatives pose their own unique challenges. Regional funding can (and often is) tremendously bureaucratic and administratively heavily for relatively small amounts of money. Horizon Europe on the other hand, whilst accessible again to UK participation following its agreed association with the programme, provides additional challenges and competition against the leading deep tech entrepreneurs across the continent.

Political Underpinnings and a New Industrial Vision

Looking at the bigger picture, Innovate UK’s 2025 activity must be viewed in the context of a broader industrial policy rethink. The new government has placed innovation at the heart of its economic strategy, but it wants greater direction, accountability and returns.

Innovate UK, as the delivery arm for that vision, is clearly being reshaped to match. The signs are clear: mission-led investment, productivity metrics, streamlined governance, and a greater role for blended finance (e.g. loans, equity, partnerships).

This approach has merit, particularly if it addresses the UK’s persistent scale-up challenge, but it requires a delicate balance. Pulling too far towards strategic mission’s risks alienating the diverse base of inventors, researchers and SMEs that make up the innovation ecosystem.

Outlook and Recommendations

As we move into the second half of 2025, we are likely to see a gradual return to activity, albeit under a reshaped framework. Key recommendations for stakeholders include:

• Stay Informed: Watch for announcements on the SME replacement scheme, as well as thematic competitions. Always prioritise a thematic opportunity ahead of an open competition.
• Adapt Your Strategy: Align proposals with national missions (e.g., Net Zero, health, AI) to increase funding chances.
• Explore Alternatives: Investigate other sources of public funding (e.g., Horizon Europe), regional growth funds, or blended finance models. Use RedKnight’s Grant Matcher tool as a starting point.
• Plan for the Long Game: Use this lull to build partnerships, strengthen your value proposition, and develop robust R&D and commercialisation strategies.

The 2025 slowdown in Innovate UK funding is real, but it’s not just about Smart Grants. A combination of political change, fiscal caution, leadership transitions, and strategic refocusing has converged to create a temporary yet significant shift in the innovation funding landscape.

RedKnight believes the fundamentals remain strong. The UK is still committed to R&D investment and Innovate UK, under new leadership with Tom Adeyoola, can recalibrate support in a way that works better for SMEs, industry, and public value.

However, what’s needed now is transparency, timeliness, and a clear roadmap. If delivered, the ecosystem can recover from this pause stronger, more focused, and better aligned with the challenges and opportunities ahead.

Innovation in the UK isn’t down and out, but it is in transition. And as always, RedKnight is here to help innovators navigate what comes next.