What’s the state of the nation’s innovation? Innovate UK’s state of innovation 2025 report

Innovate UK have published the results for their State of Innovation 2025 Report, providing insights from UK businesses across the innovation landscape.

Now in its third year, the report draws on survey responses from more than 2,000 firms of all sizes and sectors across the UK, highlighting key trends and analysis that inform leaders in business, academia, and policy.

The report captures direct feedback from businesses on their financial performance, appetite for investment, barriers they face, innovation activities, and plans for the year ahead. Together, these insights provide a strong evidence base for government, funders, banks, investors, and trade bodies to adapt and evolve their business support services to better meet the needs of UK innovators.

Key Findings from the Report:

Innovation continues to deliver growth

While the UK’s overall economic growth remains flat, the report finds that businesses that innovate achieve higher average sales growth than non-innovating firms.

Frontier firms key to UK’s economic recovery

60% of businesses reported making changes to products or services over the last year, an increase from 56% in 2024 and a return to 2023 levels.
76% of frontier firms innovated over the last year, up from 68% from the year before.

Access to finance remains a barrier

50% of firms cited barriers holding up their innovation activity. Of those, 74% said a lack of bank or equity finance was the biggest barrier.
Other barriers playing a significant role in constraining innovation were uncertain demand (50%), regulations and legislation (50%), lack of public funding (45%), lack of other public support such as advice (41%), lack of skills (40%) and lack of internal finance (17%)

Rising demand for support

Businesses reported an increased use of external finance for their innovation activities, with use of grants up 2%, government loans up 6%, bank loans up 7% and equity finance up 8%.
The proportion of firms seeking external advice rose three percentage points to 38%, mostly related to business growth strategy, as well as advice on digital technologies, product innovation and reducing environmental impact.

Cautiously optimistic outlook

Over the next 12 months, just over 50% of UK businesses are planning to invest in research and development, up from 47% the previous year,
As in previous years, this proportion is significantly higher among frontier, medium-sized and large firms

In essence, the report presents a summary of the headline UK findings based on what businesses have said bout innovation in 2025, as summarised in the graphic below. A fuller review of the data from ISNS 2025, including additional regional and sectoral insight, is available in the technical report published by the Innovation & Research Caucus.