UK Business R&D Falls While Rivals surge

The National Centre for Universities and Businesses (NCUB), led by Sir John Manzoni and backed by leaders from top companies, today launches a major report urging action to reverse declining British business R&D.

Data shows a sharp 6.3% drop in UK business R&D investment since 2021—a loss of £3.4bn—while rivals like Korea, Japan and the United States surge ahead. The NCUB taskforce urges government to deliver a clear reset: with simpler, more focused policies aimed at reversing the decline and restoring the UK’s competitive edge.

With the backing of industry leaders and insights from over 2,000 UK firms, the report warns that without swift reform, Britain risks falling behind in business R&D, along with losing ground in productivity and growth.

Key Findings At A Glance:

• UK business R&D spending has dropped by 6.3% since 2021 (real terms) – A loss of £3.4bn. In contrast, Korea (+12.5%), Japan (+8.5%) and Spain (+17%) all saw significant growth, with an OECD average growth of +7.2%.

• SMEs saw the steepest declines, but reductions among large R&D performers in key manufacturing sectors drove significant impacts. Pharmaceuticals and scientific R&D contracted sharply.

• Foreign-owned firms increased R&D investment, now accounting for nearly half of total business R&D, while UK-owned firms retrenched.

• R&D-related FDI activity declined sharply, with the number of new Greenfield R&D projects down around 30% since 2022/23, indicating fewer new international entrants despite higher spending among established foreign investors.

• National and regional imbalances appear to be deepening, with growth concentrated in London, the West Midlands, and Northern Ireland, and declines elsewhere.

A survey of 2,000 UK firms and interviews with industry leaders reveals that the UK is stuck in a loop: low growth curbs R&D; lower R&D curbs growth. Firms face tight finance and fragmented, short-term support and funding schemes. The solution is coordinated, predictable delivery that restores confidence and crowds private investment back in.

The economic stakes are high: even a modest 0.1 percentage point fall in R&D intensity could cost the UK economy around £10 billion mostly in lost productivity.

Taskforce recommendations

The Taskforce calls for a reset of the UK’s R&D system to put business-led R&D at the heart of Britain’s plans for renewal:

• Focus – Establish a small number of long-term Industrial R&D Priorities, jointly owned by government, business and universities, aligning public investment, regulation and skills behind shared missions.
  

• Simplify – Consolidate schemes and create a single digital front door for businesses to access R&D support, replacing the maze of overlapping schemes that deter smaller firms.
  

• Reform – Make UK Research and Innovation (UKRI) explicitly accountable for driving private R&D investment and leverage, alongside academic research excellence.

Sir John Manzoni, Chair of Diageo, Chair of SSE, and Chair of the Business-led R&D Taskforce said: “Britain’s business investment in R&D has fallen by £3.4 billion in just two years—more than double the UK’s entire annual aerospace R&D budget. That is a worrying trend for any country serious about long-term growth."

"The UK has a world-class record in fundamental science and research, but we have not effectively translated that excellence into industrial R&D. Weak growth, rising costs and policy churn are eroding business confidence to invest, while smaller firms face even greater challenges—tighter margins, limited finance and complex bureaucracy. The public system that supports R&D needs to work better for business: we need focus, simplicity and reform, with UKRI accountable for driving both world-class research and stronger business R&D. Only decisive action will ensure Britain’s research strength translates into industrial capability and economic growth.”

Professor Dame Nancy Rothwell, Deputy Chair of the Industrial Strategy Council and member of the Taskforce, said: “The UK’s research base and universities are world-class — a genuine national asset. But to turn that strength into growth, the whole system has to work together."

"From my work with the Industrial Strategy Council, it’s clear that lasting success depends on long-term alignment between government, business and academia. We need an R&D system that looks beyond political cycles and delivers stability, skills and collaboration at scale."

"These reforms would help connect our research excellence with industrial capability — translating ideas into innovation, investment and jobs across the UK.”

Sir Jon Symonds CBE, Chair, GSK and member of the Taskforce said: “We’ve had no shortage of R&D and innovation strategies in the UK — but what’s missing is delivery and coordination. Far too much of the UK’s research excellence takes place in silos, and this fragmented landscape can obscure the opportunities available to global, innovative industries. That lack of visibility and strategic delivery deters long-term investment. Global companies look for environments that are stable, predictable and ambitious."

"Without clear priorities and consistent follow-through, Britain will keep losing projects and talent to countries that offer greater clarity. The next decade will be defined not by what we plan, but by what we deliver.”