30 October 2025
4 min read
Discover how to fund aerospace innovation from concept to commercialisation. This guide explains how grants, R&D tax relief, Patent Box, Capital Allowances, and IP planning can support every stage of an aerospace project, helping companies manage costs, strengthen cash flow, and reinvest in long-term growth.
Developing new aerospace technologies takes time, precision, and considerable investment. From concept through to certification and launch, innovation requires consistent access to funding, not just for the R&D itself, but also for design, testing, and commercialisation.
Fortunately, a range of public and private funding mechanisms exist to support innovation at every stage of the journey. Here’s how aerospace and defence companies can make the most of them.
At the earliest stage of innovation, funding typically focuses on feasibility, market research, and technical validation. Grant funding is often the best route here, helping companies de-risk ideas before committing significant internal resources.
Current UK and European options include:
→ Innovate UK targeted grants and alternative funding – While the flagship Smart Grants programme is being paused, Innovate UK runs regular themed competitions aligned with government priorities such as net-zero, digital transformation, and life sciences. A searchable funding finder is available via the UK Research and Innovation (UKRI) website.
→ Launchpads – Focused programmes to grow innovation clusters in specific regions.
→ Knowledge Transfer Partnerships (KTPs) – Three-way collaborations between a business, a university, and a graduate to deliver defined innovation projects — a long-running scheme with a high success rate.
→ Innovation Loans – For later-stage R&D projects, these provide repayable funding for commercially viable innovations with strong growth potential.
→ Aerospace Technology Institute (ATI) Programme – Supports UK aerospace R&D that improves competitiveness and reduces environmental impact.
→ Horizon Europe and Clean Aviation Joint Undertaking – EU-level initiatives supporting collaborative R&D addressing key industrial challenges.
These early-stage mechanisms can cover a significant proportion of eligible costs, allowing you to explore feasibility without overstretching internal budgets.
Once a concept is proven viable, businesses begin to refine technical objectives, assess risk, and quantify commercial potential.
At this stage, Capital Allowances can deliver Corporation Tax relief on qualifying capital expenditure used for R&D purposes — such as specialist plant and machinery, testing or laboratory equipment, or integral features of dedicated R&D facilities.
These allowances enable faster tax relief on investment in the infrastructure that supports innovation.
Continued grant funding may also be available for collaborative or scale-up activity under ATI or Horizon Europe.
This is where most R&D expenditure occurs and where R&D Tax Relief becomes most beneficial.
Whether you’re improving existing systems, developing new aerostructures, or experimenting with lightweight materials, the costs of staff time, consumables, prototypes, and certain subcontractors may qualify for tax relief.
Under the merged R&D scheme introduced in April 2024, eligible companies can recover a proportion of qualifying expenditure as either a tax credit or cash benefit, providing a vital source of working capital during development and testing.
As new products move from prototype to production, Patent Box provides a powerful incentive to retain IP in the UK.
By applying a reduced 10% Corporation Tax rate on profits derived from patented technologies, aerospace and defence companies can improve profitability while rewarding long-term innovation.
It’s particularly effective when aligned with R&D tax relief, rewarding both the creation and the commercialisation of innovation.
Once your technology reaches market, the focus shifts from development to protection and optimisation, and that’s where IP strategy becomes critical.
A joined-up approach to IP planning can:
✅ Strengthen competitive advantage
✅ Support future grant and investment applications
✅ Convert innovation into long-term financial assets
This strategic phase ensures the value of your R&D continues long after project completion.
From feasibility to flight readiness, each stage of an aerospace innovation project can be supported by targeted funding mechanisms. Funding should never be viewed in isolation. Combining these mechanisms strategically creates a continuous cycle of innovation and reinvestment — keeping UK aerospace at the forefront of global technology development.
If you have any questions about identifying funding across every stage of your innovation lifecycle, please contact the ABGI Team. A representative will get back to you to discuss your unique needs and explain how we can assist.