The report draws on the Innovation State of the Nation Survey, a major new initiative from Innovate UK.
The survey aims to provide the most up-to-date and comprehensive look at what life is really like for innovating businesses on an annual basis.
Drawing on data provided from over 2,000 UK businesses, the new State of Innovation 2024 report provides a detailed and timely view of businesses’ innovation activities, their:
- priorities
- challenges
- plans for the year ahead
Headline results
Innovation is a strong driver of growth
Despite the recent economic challenges, innovation continues to be a strong driver of growth.
Businesses that innovated over the past year reported average sales growth (7%) over three times greater than other firms (2%).
Declining innovation levels in UK firms
Innovation levels in UK firms have declined in recent years.
Stimulating more innovation is a priority to help deliver UK economic growth.
56% of UK businesses reported making changes to products or services over the last year, a fall from 61% in 2023.
Innovation rates fell most in small, micro and non-frontier businesses, widening the gap with larger and frontier firms.
Innovation held back by range of barriers
Business innovation has been held back by a range of barriers.
These need to be removed to unleash innovation.
Almost half (46%) of innovating businesses reported factors had constrained their innovation activity.
Cost-of-doing-business pressures were consistently the most reported barrier in both 2023 and 2024.
People and collaboration drive R&D
People and collaboration drive research and development (R&D) and additional innovation will not be achieved without a skilled and connected workforce.
A third of businesses reported recruitment difficulties were restricting their innovation work.
39% of firms collaborated with other organisations for innovation over the last year, a decrease from 41% in 2023.
Greater barriers for smaller businesses
Smaller businesses face greater barriers but are less likely to seek support or invest in innovation.
Micro businesses (39%) are nearly half as likely to seek external support than large businesses (75%).
Large businesses (86%) are twice as likely as micro businesses (41%) to invest in R&D over the next year.
Continued pressure on innovation
Pressure on innovation may continue over the next year, but businesses report an increased demand for innovation support.
96% of those planning to innovate over the next year want to maintain or increase their spending on R&D and innovation.
The proportion of firms reporting that R&D grants would be useful to them over the next 12 months doubled from 27% in 2023 to 52% in 2024.
Extensive consultation with stakeholders
The survey was designed in collaboration with the Enterprise Research Centre after extensive consultation across Innovate UK and external stakeholders.
It provides novel findings on several themes within Innovate UK’s plan for action, such as on the diversity of innovation teams, and how businesses are collaborating for innovation.
Data has also been analysed to allow a look at frontier, those typically first among their competitors to introduce new products and services to market, versus non-frontier firms.
The data highlights differences in innovation behaviour at, and behind, the technology frontier.
The importance of measuring innovation
Innovation is one of the key drivers of productivity growth, which in turn drives economic growth and improvements in living standards.
Understanding the state of innovation has never been more important given the macro challenges faced in recent years such as:
- the lasting shock of the COVID-19 pandemic
- the changing relationship with Europe
- the cost-of-living crisis
This new evidence will help inform the work Innovate UK does in its aim to support business-led innovation across all sectors, technologies and UK regions.
Building a rich innovation picture
In the longer term, the survey will help build a rich picture of the state of business-led innovation in the UK.
It will monitor the levels of innovation, the health of the innovation ecosystem and the ambitions of businesses for the future.
Critically, it will help inform us on what support is necessary for these aspirations to be achieved.
Next steps
Please read, share and discuss the findings in the State of Innovation report.
It is hoped these findings will inspire you to promote, support or get involved in innovation.
If you have any questions about the State of Innovation 2024 report, email: support@iuk.ukri.org
A note of thanks
Innovate UK would like to thank the individuals who took time to answer the survey on which this report is based.
Innovate UK also thanks the Enterprise Research Centre and Innovation and Research Caucus for their work in managing the survey and analysing the data.
The result is a valuable contribution to building a stronger innovation economy across the UK.
Top image: Credit: urbazon, E+ via Getty Images