Britain is suffering from a plunge in R&D investment while other countries such as Korea and Spain have surged ahead, according to a new report.
The National Centre for Universities and Businesses (NCUB) has called for action to reverse what SSE and Diageo chair Sir John Manzoni describes as a “worrying trend”.
Data from the NCUB shows a 6.3% drop in UK business R&D investment since 2021 – equivalent to a fall of £3.4 billion – compared to rises in Korea (+12.5%), Japan (+8.5%) and Spain (+17%). The OECD has seen 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.
Sir John, who chairs the NCUB 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.”
The report is backed by evidence from 2,000 UK firms and interviews with industry leaders, revealing that the UK is stuck in a loop of “low growth curbing R&D and lower R&D curbing growth”.
Firms face tight finance and fragmented, short-term support and funding schemes. The solution, it says, is coordinated, predictable delivery that restores confidence and crowds private investment back in.
It states that 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.
Backed by leaders from top companies, the NCUB calls for business-led R&D to be placed at the heart of Britain’s plans for renewal.
Its recommendations include greater focus on priorities, simplifying the “maze of overlapping schemes that deter smaller firms” and establishing Make UK Research and Innovation as the key driver.
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