After years of low growth, flat productivity and rising costs, the UK is at a pivotal moment. This report, produced with partnership from Source Advisors, examines how the UK can unlock greater business investment in innovation to kickstart growth. Businesses want to invest, hire and grow, and innovation is core to this. From ensuring our frontier industries stay at the cutting‑edge, to AI re‑shaping business processes across the economy, innovation drives UK competitiveness, productivity and growth. Yet too often businesses feel the system holds them back. Fewer than half of the businesses we surveyed believe they are investing optimally in innovation. There are therefore major opportunities to unlock business investment and kickstart growth by making the UK innovation system more competitive.
Over the last 18 months, the government has set out a clear ambition for growth, backed by major strategies on industry, skills, trade, and infrastructure. These are strongly welcomed by businesses. But there is a disconnect between that ambition and how businesses feel as they innovate on the ground. Over half of business leaders surveyed, across all sizes and sectors, said that the UK was a less competitive site for innovation investment compared to three years ago. Firms are under pressure from increasing costs (including tax rises), find innovation support disjointed, and don’t see delivery against the ambition set out by government. There is an urgent need for the government to shift gears from strategy to full-throttle delivery by ensuring policies pull in the same growth-focused direction, providing joined-up support to innovators, and delivering at pace on existing
policy commitments.
The UK’s innovation support system is strongly focused on supply-side support for early-stage R&D, for example through R&D tax credits, innovation funding, and research infrastructure. There is comparatively little policy focus or public investment on ensuring demand-side pull for innovation. Yet market demand is the single greatest influence on business innovation investment; over 75% of innovators said it has a significant influence on both how much and where they invest. Tilting the UK’s innovation system towards building market demand – providing a clearer route from R&D to deployment in the UK, rapidly improving public procurement of innovation, and providing support for technology adopters – would have an outsized impact on the environment for investment in the UK.
This report therefore sets out three major shifts required to unlock business innovation investment:
Make innovation for growth a whole-of-government responsibility
Businesses’ innovation decisions are shaped by policy decisions far beyond DSIT or DBT. Tax policy, public procurement, regulation, planning, skills, and energy policy are all pivotal. Yet firms experience these levers as disjointed and often pulling in opposite directions. Embedding innovation impacts into policy appraisal across departments and developing joined-up end-to-end support for innovators, would provide clearer pathways from research to deployment and build confidence that the UK is serious about growth.
Shift gear from strategy to delivery, fast
While government strategies are broadly welcomed, businesses are not yet seeing change on the ground. HMRC delays undermine the value of R&D tax credits; Innovate UK's processes remain slow and administratively burdensome; and regulatory reviews routinely lag behind international competitors'. The government should be laser-focused on delivering committed policy at pace and removing friction in the innovation support system that pulls against policy intent.
Build the UK’s market for innovation
Market demand is the single biggest driver of business innovation investment. Innovators need adopters to survive. But while adoption of new innovations is risky and difficult, the UK currently provides minimal support for technology adoption. Public procurement is risk-averse, fragmented, and too often fails to scale promising technologies. And private-sector adoption, especially among SMEs, lags international competitors. A step-change is needed: expanding challenge-based procurement, scaling the DSIT Commercial Innovation Hub, and deploying business support for adoption of new technologies across all sectors.
Taken together, these changes would tilt the UK’s innovation system toward delivery, speed and clear routes to deployment at scale in the UK, giving businesses and investors the confidence to invest for the long-term in the UK, driving productivity and long-term economic growth.
Get tailored, actionable insights for your organisation
Alongside the report and summary documents, to help navigate the evidence in the report, we have set out below a series of suggested AI prompts to turn the report into tailored, actionable insights for your organisation.
How to use these prompts:
- Upload the report to your AI tool or paste the link to the report into the chat so the tool can read it.
- Choose your track (businesses, policymakers, innovation stakeholders, international stakeholders & investors) and paste a prompt from below. Personalise the placeholders ([...]) according to your role and industry.
- Any questions or remarks? Get in touch with Nicola Eckersley-Waites.
For businesses
For innovators
Using the CBI report “Innovation investment: Firm foundations for growth”, summarise the insights most relevant for an innovative [company size] in [sector] for an internal report. Include: how innovators make the case internally for building innovation investment; how innovators handle risk; and how new technology is influencing innovation. Extract 3-5 firm‑actionable recommendations and practical next steps. Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
For adopters
Using the CBI report “Innovation investment: Firm foundations for growth”, summarise the insights most relevant for a [company size] in [sector], adopting new technologies within the business, for an internal report. Include: how adopters make the case internally for building innovation investment; how adopters handle risk; and how new technology is influencing innovation investment. Extract 3-5 firm‑actionable recommendations and practical next steps.
Focus on the first half of the report (pg 7-33). Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
The influence of AI and related technologies
Summarise the report’s findings on the impact of AI and related technologies on business innovation investment and decision-making to date. Based on this, suggest 3 recommendations for our [company size] business in [sector] for consideration in investing in, adopting, and using new digital technologies. Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
Navigating the UK innovation policy environment
Based on the report’s findings, provide a brief summary for an internal report of the UK’s innovation policy environment strengths and weaknesses, most relevant to an [innovator/adopter business] in [sector]. Focus on the second half of the report (pg 34-61) and the executive summary. Provide 3-5 brief bullet points that could be used internally within our firm to communicate the state of play on UK innovation policy to non-policy colleagues. Only use the CBI report.
For policymakers
Policy overview to unlock innovation investment
Using the CBI report “Innovation investment: Firm foundations for growth”, extract what government should prioritise to boost private innovation investment. Produce a short set of recommended actions for [my department/authority], grouped under the report’s three major system shifts. Use concise, civil‑service‑style formatting. Do not create new policies not mentioned in the report.
Understanding business innovation investment decisions
Based on the report, provide a brief summary (5-6 bullets) of the findings on how businesses make innovation investment decisions, and the internal and external factors that influence them. Pull out the most important findings relevant to inform decision making for policymakers in [department/organisation]. Use concise language prepared for a senior-level briefing of a policymaker in [department/organisation] who is a not an innovation expert. Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
Fast-tracking delivery
Using the findings in the report, create an implementation heatmap of where government [or department/organisation] should focus on accelerating or improving delivery to unlock business innovation investment.
For each policy lever, set out the current state, business feedback and key bottlenecks, and 90‑day delivery actions. Show quick wins vs structural changes.
For innovation ecosystem and international stakeholders
Understanding UK strengths and opportunities
You have the PDF of the CBI report “Innovation investment: Firm foundations for growth”. I am a [role] in [organisation] in [sector]. Outline the current strengths and weaknesses of the UK’s innovation policy system based on business feedback captured in the report most relevant to my organisation. Where possible compare to [country or region]. Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
Opportunities for engagement
From the CBI report “Innovation investment: Firm foundations for growth”, identify the biggest friction points for unlocking business innovation investment in the UK. Suggest 5 ways [my organisation type] could help businesses overcome these, based on the report’s analysis. (Note to AI: prioritise The State of UK Innovation; Policy Implications; Recommendations.) Only use the CBI report, and indicate which insights are drawn directly from the report, and where you have extrapolated to apply to my context.
