The UK has long been a global leader in research and development (R&D), with a proud history of scientific breakthroughs, industrial ingenuity and home-grown innovation. Back in 2022, the UK topped the global rankings for field-weighted citation impact (FWCI) – a key measure of research quality – with a score 54% above the world average and significantly ahead of the EU27 average.
Yet, despite this strength, the country continues to face a persistent challenge in converting innovation into long-term economic value.
The Government’s Industrial Strategy aims to address this issue head-on, setting out a 10-year plan to increase business investment and grow the industries of the future. The intentions of the strategy have been rightly welcomed by industry, who must now work closely with government to ensure it is successfully delivered.
For the UK to fully unlock the value of its home-grown innovation, it must overcome three critical barriers: the lack of patient capital, a widening skills gap and a culture that undervalues scale.
Addressing these challenges will be essential to ensuring that innovative ideas not only start in the UK – but that they can stay, scale and succeed here, too.
The capital conundrum
Commercialising R&D is a long-term endeavour. From early-stage discovery to market-ready products, the journey can take years or even decades, particularly in advanced engineering sectors such as aerospace. However, the UK’s presence among the world’s leading R&D investors has been steadily eroding. In 2022, only three of the top 100 R&D-investing companies were headquartered in the UK. More strikingly, the number of UK companies in the top 2,000 global R&D spenders has declined by almost half – from 118 in 2013 to 63 in 2023.
This perhaps points to a broader issue. While the UK hosts a significant number of R&D-active firms, few now operate at the scale or depth needed to lead globally. That gap is perhaps accentuated by an investor and management reward culture that prioritises short-term returns – such as dividends and share buybacks – over long-term growth underpinned by sustained investment. Commercialisation, by contrast, requires patient capital, robust infrastructure and a tolerance for risk over extended timeframes. Yet investors often favour liquidity and rapid exits, an approach that is at odds with the extended timelines required to build globally competitive industrial and technological capabilities.
The pressure for short-term performance is evident. Last year, 76 firms delisted from the London Stock Exchange’s growth market, AIM – a 62% increase on the previous year. Low liquidity, diminished investor confidence and a shrinking pool of capital are driving high-growth companies away from public markets.
While seed funding and early-stage venture capital are relatively accessible, domestic scale-up capital remains in short supply. This is particularly true for capital-intensive sectors like manufacturing, where the cost of scaling is high and the path to profitability is longer and more uncertain. As a result, many promising UK-based companies struggle to make the leap from prototype to production, or from domestic success to global scale.
The Industrial Strategy acknowledges this gap, and the British Business Bank’s financial capacity was expanded to £25.6 billion at the Spending Review, with an additional £4 billion earmarked over four years for eight growth-driving sectors, including clean energy industries and digital and technologies. This is a positive move, especially alongside the Government’s final report of the Pensions Investment Review, which outlines plans to reform the UK pensions sector to boost investment in productive UK assets and improve long-term returns. Building on this will be key to closing the funding gap for ventures that require time to mature.
Public-private partnerships and sovereign investments vehicles could also play a larger role in anchoring strategic technologies in the UK. By co-investing alongside private capital, these entities can help de-risk early commercialisation and provide the long-term stability that innovative manufacturers need to scale.
Effective action to close the funding gap will help strengthen the UK’s industrial base and enable us to capture the full economic and strategic value of our own innovations.
The talent imperative
Innovation doesn’t happen in isolation – it depends on people. The UK’s manufacturing sector is already grappling with a shortage of skilled workers, particularly in areas like digital engineering, robotics and clean energy systems. Make UK reports around 50,000 vacancies across the industry and demand for technical talent is only going to increase as R&D becomes more complex and interdisciplinary.
The Government has committed an additional £1.2 billion annually for skills development by 2028-29, with a focus on the workforce across the Industrial Strategy’s eight high-growth sectors. It also outlines reforms to attract international talent through a new Global Talent Taskforce and Fund. These are positive steps.
To further support industrial innovation, the UK must significantly strengthen its technical education infrastructure – including university technical colleges (UTCs), apprenticeships and advanced manufacturing degrees – to ensure a skilled workforce that meets the needs of high-growth sectors.
It must also encourage greater mobility between academia, industry and investors, ensuring that research insights are translated into commercial applications. Manufacturers, in turn, need to invest in upskilling their workforce to keep pace with emerging technologies.
Culture that supports scale
The UK has a vibrant start-up ecosystem, but it struggles to scale industrial businesses to global leadership. Too often, success is measured by exits – IPOs or acquisitions – rather than long-term value creation. This mindset limits the country’s ability to build the next generation of industrial champions.
The Government is addressing some of the structural barriers to scale, including high energy costs, planning delays and regulatory complexity. But beyond policy, there needs to be a cultural shift. The UK must celebrate scale, reward ambition and support companies that choose to grow here rather than sell early. This could include national campaigns that spotlight successful scale-ups, incentives for long-term growth investment and greater visibility for founders who build enduring businesses, helping to embed a culture that values ambition and resilience.
Manufacturers are central to this effort. They are often the link between R&D and real-world impact – turning prototypes into products, and lab discoveries into cutting-edge industrial processes. To thrive, they need access to innovation infrastructure such as testbeds, pilot plans and digital twins. As recognised in the Industrial Strategy, they also need resilient, UK-based supply chains that can support scaling efforts.
What comes next?
The Industrial Strategy sets a clear direction for aligning innovation with long-term economic growth, but its success will depend on industry, government and others, including academia, to ensure effective delivery and sustained commitment. For manufacturers, the ability to scale R&D into full-scale production remains a critical challenge – particularly in capital-intensive sectors such as advanced manufacturing and clean energy.
These industries require not only technical expertise, but also patient capital, long development timelines and infrastructure and an operating environment that supports industrialisation at scale. The public and private sectors working together to tackle these issues will help bridge the gap between research and real-world application – the so-called ‘valley of death’.
Above all, the UK must foster a culture that values long-term industrial growth over short-term wins – supporting manufacturers not just to innovative, but to scale and lead globally.
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