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The results are in for Innovate UK’s State of Innovation 2025 report, providing annual innovation insights from UK businesses.

Now in its third year, the report highlights trends and analysis from a survey of over 2,000 firms of all sizes and sectors across the UK.

Firms were asked questions about their financial performance, appetite to investment, barriers they are facing, and plans for the year ahead.

The report’s findings provide a powerful evidence base for government, funders, banks, investors and trade bodies to evolve their business support services to the meet the needs of UK innovators.

Headline results

Innovation continues to deliver growth

While the UK’s overall economic growth picture remains flat, the results clearly indicate businesses that innovate achieve average sales growth far greater than non-innovating businesses.

This trend is amplified further by ‘frontier firms’, those which are the first to introduce new products or services compared to their rivals. These firms reported a 9% rise in revenue growth, a consistent pattern over the past three years.

Frontier firms key to UK’s economic recovery

After years of disruption, from geopolitical shocks and wars to the pandemic, Brexit and rapid technological advances, the UK economy is still regaining its footing.

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.

Supporting frontier firms is critical for growth as they drive novel innovation, have the greatest demand for finance and support, and demonstrate the strongest investment intentions.

Access to finance remains a barrier

Half of firms cited barriers holding up their innovation activity. Of those, three quarters said a lack of bank or equity finance was the biggest barrier.

Rising demand for support

In 2025, 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 half of UK businesses are planning to invest in research and development, up from 47% the previous year, and among frontier firms, this rises to 71%.

The increased investment intention was observed by small and medium sized businesses, with larger businesses reporting a fall in expected investment.

Opportunity and urgency

Dan Hodges, Deputy Director of Strategy at Innovate UK said:

Growing the UK’s economy faster is the top priority right now, and our survey of 2,000 UK businesses sends a clear message that innovation is crucial to this goal.

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.

Next steps

Please read, share and discuss the findings in the State of Innovation report.

It is hoped these findings will inspire you to promote, support or get involved in innovation.

If you have any questions about the State of Innovation 2025 report, email: support@iuk.ukri.org

A note of thanks

Innovate UK would like to thank the individuals who took time to answer the survey on which this report is based.

Innovate UK would like to thank the Innovation and Research Caucus for their work in managing the survey and analysing the data.