Innovation among UK businesses is on the rise, with research and development investments set to increase and returns for “frontier firms” growing, according to a government report, but funding remains a key barrier.
For the third annual edition of Innovate UK’s State of Innovation report, it was found that despite an overall picture of flat economic growth in the UK, businesses investing in innovation achieved far greater average sales growth than “non-innovating” counterparts.
This was a trend most championed by what the report calls “frontier firms”, companies that are the first to introduce new products and services compared to their rivals. So-called frontier firms were found to report a 9% rise in revenue growth, a consistent pattern over the past three years that the report has existed.
The report found that the UK business landscape is in a metamorphosis, with 60% of companies reporting plans to significantly change products or services compared with last year.
Around half of the firms studied in the report cited barriers holding up innovation activity, with lack of bank or equity finance being the biggest.
“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,” said Dan Hodges, deputy director of strategy at Innovate UK.
“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.”
