The Research Council's Digital Economy Programme has awarded Imperial College London a £5.9m five-year grant to research smart city capabilities for the UK.
Energy, health, transport and utility resources will be examined to discover how digital technologies can better enhance the way cities around the country operate.
The College hopes to use data, and conduct analysis to develop a more integrated infrastructure that will help new businesses and enhance the quality of life for residents.
David Willetts, Minister for Universities and Science, said: "This project will be able to harness the digital technology expertise we have in the UK and has the potential to bring many benefits such as the prevention of traffic jams and the management of water resources."
The Research Council suggests that old structures should support new technologies in UK cities, just as Victorian sewers service new hospitals, or intelligent cars use old roads, and it hopes a more integrated approach between infrastructure, transport and resources can be achieved.
The research will also look to create new business models to ensure that the best smart city ideas are also commercially viable.
"This programme is about using the city as a lab and working with real data to increase jobs and help the economy," said Professor David Gann, head of innovation and entrepreneurship at Imperial College Business School.
"By creating a platform for simulated services, existing companies and entrepreneurs will be able to evaluate and explore their business concepts, meaning they will be able to identify business opportunities more quickly."
The Research Council has a budget of £120m to allocate over four years to programmes that support research into the use of digital technologies.
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