Ministers have set aside £20M to boost innovation in driverless car technology.
The cash will be used to match funding put forward by successful bidders for projects to develop automated vehicles.
The government announced earlier this year that driverless car trials would take place in four cities to develop the technology and gauge how it is received and used by the public.
Business secretary Sajid Javid said today: “To boost productivity, Britain will need to capitalise on new technologies like driverless vehicles, securing high skilled jobs for those who want to work hard and get on, and contributing to a more prosperous future for the whole of the country.
“Our world beating automotive industry, strengths in innovation and a light touch regulatory approach to testing driverless technology combine to make the UK market competitive and an attractive destination for investors.”
Bidders for cash from the new fund must put forward projects in areas like safety, reliability, inter-vehicle communication and benefits for the elderly.
Meanwhile the government has published a code of practice for trialling driverless cars.
The Department for Transport and the Department for Business, Innovation and Skills have also established a joint policy unit.
The Centre for Connected and Autonomous Vehicles will co-ordinate government policy on driverless cars and related technology.