Innovation by UK companies has increased but access to finance remains a key barrier, new research reveals.
In its latest ‘State of Innovation’ report, Innovate UK said 60% of businesses made changes to products or services over the last year, up from 56% in 2024 and a return to 2023 levels.
The trend was stronger for ‘frontier firms’, those which are the first to introduce new products or services compared to their rivals, with 76% innovating in the last year, up from 68%.
In addition, 51% of UK businesses are planning to invest in research and development in the next 12 months, up from 47% in 2024. Among frontier firms, this rises to 71%.
Despite the positivity, half of firms highlighted barriers holding up their innovation activity, with three quarters saying a lack of bank or equity finance is the biggest challenge.
Dan Hodges, deputy director of strategy at Innovate UK, said:
“The results provide both reasons to be cheerful, and some cause for concern. It’s encouraging to see investment intention rising, particularly among SMEs, but large firms could be pulling back, signalling some uncertainty.
“The findings underline both opportunity and urgency. When businesses can secure the funding, resources and advice they need, they innovate more and grow quicker.
“Removing friction should be a key focus to help firms to turn this ambition into reality, and in turn strengthen the UK’s economic position.”