Businesses are calling for urgent, targeted government support to drive innovation and economic growth in 2025, a survey of 200 business leaders by innovation funding consultancy Ayming has found.
The findings, published in Ayming’s third UK Innovation Barometer, reveal that a lack of financial resources has become the most significant barrier to innovation, with over half of UK businesses relying on self-funding to drive their R&D efforts.
Only 39% of firms report utilising innovation grants, with eligibility requirements holding more than a third (37%) of firms back from accessing the funding stream.
Craig: pivotal moment for UK business
The company says this funding shortfall has put acute pressure on smaller firms, which have particularly suffered from the instability of R&D funding schemes in recent years. As a result, many SMEs have been forced to deprioritise R&D expansion: only 14% named innovation as a top priority, down from 31% in last year’s report.
That said, despite financial constraints, businesses are increasingly adopting a long-term approach to R&D, with 44% establishing innovation strategies that span the next decade.
Benjamin Craig, Associate Director of R&D Incentives said: “These findings come at a pivotal moment for UK business. Investment is clearly a priority to the new Labour Government, evidenced by the sentiment of the Autumn Budget and the International Investment Summit.
“But the absence of reform to R&D funding frameworks is disappointing, and the Chancellor must consider whether the current system truly fosters the entrepreneurial growth essential for driving prosperity across the UK.
“Labour’s focus on stabilising funding streams will however be hailed as a welcome change by UK businesses. Under Conservative leadership, the R&D and innovation landscape suffered from haphazard and inconsistent changes to the system – so the long-term forecast of Labour’s modern Industrial Strategy and the OBR’s new decade-long growth forecasts are vital foundations for long-term growth.
“As we start 2025, businesses need the Government to lay out a clear approach to innovation if they’re going to succeed in putting it at the heart of commercial strategies”.
Innovation, they say is a key priority for the new Government with the Prime Minister underscoring the importance of “crowding in investment” to attract global capital at the International Investment Summit with a focus on regional regeneration that narrows the economic gap across the country.
Companies are aligning their innovation roadmaps with government green and regional priorities, but they need reliable support to get there
Yet, experts caution that unless innovation funding is accessible nationwide, regional disparities may persist. CapEx grants, where the government covers 50% of costs to de-risk projects for private investors, could prove to be a vital tool for increasing investment in underserved regions.
Historically, spurring growth was heavily tied to encouraging innovation by offering grants and tax incentives to businesses. While incentives remain key, this Government is putting an emphasis on activating direct investment. With nearly £22 billion pledged for carbon capture in Teesside and Merseyside, and a £500 million green infrastructure grant for Wales, the Chancellor is making a case for how sustainable investments can drive jobs and growth in these areas.
Jonathan Memel, Senior Manager for Grants, said: “UK companies are aligning their innovation roadmaps with government green and regional priorities, but they need reliable support to get there. It’s not just about reducing economic disparities; it’s about positioning the UK as a global leader in green tech and sustainable industrial development.
“The framework looks positive but to make this vision a reality, grant funding must be robust, targeted, and accessible to businesses of all sizes across the UK. Labour must double down in its commitment to ensure these schemes become catalysts for growth, rather than isolated achievements.
“As the Government reshapes its innovation policy, expanding grant funding could prove to be the linchpin of the UK’s competitiveness. This is the time to make decisive investments in the UK’s future as an innovation leader, ensuring that the transition to a greener economy not only meets net-zero goals but fuels national and regional growth in tandem.”
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Ayming’s innovation barometer
