How to unleash British innovation

Share

• The UK has fallen out of the world’s top five in the Global Innovation Index for the first time in over a decade

• Patent filings in Britain have gone backwards

• If Britain is too expensive, too slow or too uncertain, then companies will look elsewhere

For years, politicians of all stripes have talked about turning Britain into a ‘science and technology superpower’. It is an appealing slogan. The UK has world-class universities, top researchers and a reputation for remarkable scientific discoveries. On paper, the country should be an innovation leader.

But as new research from the Centre for Policy Studies shows, the results tell a different story.

The UK has fallen out of the world’s top five in the Global Innovation Index for the first time in over a decade.

Patent filings in Britain have gone backwards. In the year 2000, the UK citizens and residents produced 727 patent applications per million people. Today, that figure has dropped to 677. Britain now produces fewer patents per head than France, Germany, Sweden and the United States.

This matters because patents signal that research is being turned into commercially useful inventions. In the science and technology field, they offer a useful gauge of whether the UK is generating the kind of innovation needed to position itself as a global leader. Yet, across most measures of patent activity, the UK’s performance remains weak compared to other fast-moving, innovation-driven economies.

Innovation depends on a broader ecosystem that extends well beyond the lab, spanning universities, start-ups, investors, manufacturers and R&D-intensive firms. In the world’s most innovative economies, breakthroughs are driven by both academic excellence and strong business engagement that transform ideas into scalable products and services.

In the case of the UK, the innovation system is characterised by a strong scientific base but a comparatively weaker business engagement. Take Cambridge and Oxford, for example. Both universities produce the highest number of scientific publications per capita globally and have the most cited scientists in the world. However, this is not matched by industrial dynamism. In other words, it lacks a dense network of R&D-active firms, robust patenting activity, and the scale-up ecosystem needed to translate research into economic output. Cambridge and Oxford rank only 69th and 77th globally as innovation clusters, a striking contrast to their top five standing in university rankings.

The lack of business participation is also evident in R&D spending patterns. In leading innovation economies, every dollar invested in higher education R&D is typically matched by $7 to $9 in business R&D. In the UK, that ratio is less than $3.

This gap persists despite there being one of the most generous systems of R&D tax credits and patent box reliefs in the developed world. In 2021, government support for business R&D reached 0.48% of GDP, more than double the OECD average. The UK has also introduced numerous strategies aimed at positioning itself as a global innovation superpower. Yet, despite this sustained policy effort, business participation in innovation remains persistently low relative to its peers.

This should force a rethink. If the incentives are there but firms do not want to innovate, expand or manufacture in Britain, then the real problem must be in the wider business environment.

Industry leaders in science, technology and advanced manufacturing have explicitly highlighted issues like industrial energy costs, a burdensome tax system, planning delays, regulatory complexity, patchy infrastructure and a less rewarding labour market as a barrier to new investment and expansion in the UK. 

These are not abstract complaints. They are showing up in real investment decisions. 

In 2023, AstraZeneca chose to move a planned £400 million manufacturing investment from north-west England to Dublin. In 2025, Merck cancelled plans for a major London research centre worth £1 billion and closed several UK lab sites. Britishvolt, once presented as a flagship battery venture, and West Crumbria Mining’s metallurgical coal project collapsed amid bureaucracy, delays, and uncertainty. Further infrastructural constraints, such as lack of lab spaces have added problems to life sciences firms who have been unable to expand, relocate or upgrade facilities.

Taken together, these factors have undermined the UK’s innovation clusters and accelerated the relocation of high-growth firms to overseas markets. Recent policy changes including increases in National Insurance contributions, a rising minimum wage and the additional compliance requirements under the Employment Rights Act have been widely cited by businesses as compounding these pressures.

Businesses do not innovate because the state tell them to. They innovate when the surrounding conditions make it worthwhile to take risks, invest capital, hire people and scale up. If Britain is too expensive, too slow, too uncertain or too difficult, then companies will seek to scale up great ideas elsewhere.

 – the best pieces from CapX and across the web.