Research for the report, ‘The State of Innovation 2025’, found that 60% of businesses reported making changes to products or services over the last year, an increase from 56% in 2024.

‘Frontier firms’ – defined as those which are the first to introduce new products or services compared with rivals – were more likely than others to have made changes ( 76%, up from 68% the year before).

However, half of companies responding to the survey ( 49%) reported that there are barriers constraining their innovation activity – and of those respondents, three-quarters cited a lack of bank or equity finance as the biggest barrier.

Over the next 12 months, just over half ( 51%) of UK businesses are planning to invest in research and development, an increase from 47% in the previous year’s survey. Among ‘frontier firms’, this figure rose to 71%.

However, the increased intention was noted by small- and medium-sized businesses, with larger businesses reporting a fall in expected investment.

Dan Hodges, deputy director of strategy at Innovate UK, said: “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.”

Methodology

The report draws on the 2025 Innovation State of the Nation Survey (ISNS), carried out between March and July 2025, with questions primarily focused on innovation over the previous year. The ISNS was conducted using a combination of computer-assisted telephone interviewing and an online business-to-business panel.

Within each respondent organisation, the research sought a member of the senior management team or a senior decision-maker involved in innovation to be interviewed. Businesses with five or more employees were in scope for the survey. Organisations were additionally screened to ensure they were not charities, not-for-profit organisations or public sector organisations. Fieldwork for ISNS 2025 took place between March and July 2025, resulting in 2,020 respondents. 

• The summary report, including full methodology, can be found at the UKRI website.