The Department for Culture, Media and Sport and government quango Innovate UK have teamed up to launch the competition to demonstrate the capabilities of IoT.

Councils will be able to claim up to 100% of their eligible project costs if they make up 30% or less of total project costs.

Digital economy minister Ed Vaizey said: “This competition will be instrumental in discovering new connections between city services and their users, and identifying many more advantages that IoT could offer.”

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Projects could help to offer environmental improvements, economic opportunities, and more efficient delivery of services such as transport, health and energy, he said.

They must be collaborative and led by a local authority or local enterprise partnership (or equivalent body outside England), and include several businesses.

The projects must demonstrate a specific benefit for citizens, the city region and the environment, economic benefits for businesses and councils.

Appropriate security and privacy assurance must be in place, and the projects must work across a variety of sectors, the government said.

The competition is part of a wider £40 million government investment in IoT announced in March 2015.

A recent report by Arup estimated that the global value of the IoT sector will exceed £255 billion a year by 2020.

Nick Appleyard, Innovate UK’s deputy director for government partnerships, said: “IoT is on the brink of connecting communities and commerce across the UK.

“The transformative technology will make our lives more connected, allowing us to make more informed decisions based on data and drive the productivity of companies.”

He said that the UK has an opportunity to become a world-leader in the IoT sector.

The deadline for registration is at noon on 23 September 2015, with the deadline for applications at noon on 30 September 2015.