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Theme 2

Investment in innovation

Policy questions and key messages

  1. Is the UK spending enough on research and development?
  2. How does the UK perform globally in innovation outputs and outcomes?
  3. How does the UK compare with other leading countries?

The UK remains a top global investor in R&D, but its investment intensity lags behind leading international competitors:

  • In 2023 the UK ranked sixth globally in R&D investment, accounting for 3.5% of world spending, behind Japan (7%), Germany (5.8%), Korea (4.8%), and – especially – China (28.1%) and the USA (29.7%), which co-led the global R&D expenditure landscape.
  • UK R&D expenditure stood at 2.68% of GDP, below the OECD average (2.70%) and leading R&D-intensive economies but above several G7 peers and China.
  • Government support for business R&D has increased over the past 2 decades in the UK and across the OECD, with a strong shift towards tax-based instruments (notably R&D tax credits), but recent literature has questioned the efficiency of broad tax relief and pointed to stronger returns from targeted support.

The UK stands out internationally for the scale and quality of innovation output indicators such as scientific publications and patents, ranking among the top countries for high-impact research and patents in critical technologies:

  • The UK is a global research leader, ranking fourth worldwide in 2022 for total publications, behind only China, the USA, and India, and among the top five for highly cited outputs in technology fields in the areas of physical sciences and life sciences.
  • The UK ranks in the global top 10 for patenting in areas such as AI, semiconductors, and biotechnology but lags well behind leading patenting nations, including the USA, China, Japan, and Korea.
  • In 2025 the UK ranked fourth globally by number of unicorns and third by total unicorn valuation, accounting for nearly three-quarters of total EU-based unicorn value.

Despite its strong position as a global knowledge leader, the UK underperforms internationally on innovation outcomes, with weaker translation of research excellence into high-technology exports and globally leading R&D-intensive firms:

  • The UK has a relatively low share of high-technology exports in total trade, reflecting limited value capture from innovation and an export structure increasingly oriented towards services rather than advanced manufacturing.
  • In 2024 the UK ranked fifth globally for top R&D-investing companies, but its representation has more than halved since 2012, in line with trends in other advanced economies.
  • While the USA remains dominant, China has rapidly expanded its base of R&D-intensive firms, signalling a sustained shift in innovation and production capacity towards East and Southeast Asia.

Global expenditure on R&D

  • In 2023 global R&D expenditure reached approximately US$2.8 trillion, an increase of 54% from 2014.[1] The USA (US$823.4 billion) and China (US$780.7 billion) led global R&D spending.
  • In 2023 the top 10 economies accounted for 87% of global R&D expenditure. The UK ranked sixth worldwide, accounting for 3.5% of total R&D expenditure.
  • Between 2014 and 2023, China’s R&D expenditure grew by 116%, increasing its share of global R&D from 20.0% to 28.1%. By contrast, G7 countries recorded much slower growth of 36.7% and saw their share of global R&D decline from 58% to 52%.
  • The USA was the only G7 country to increase its share in global R&D, from 28.8% to 29.7%, in the last decade.
  • The contribution of other G7 countries to global R&D declined from 2014, including Japan (-3 percentage points (pp)), Germany (-1.5 pp), France (-1.3 pp), the UK and Italy (-0.5 pp each), and Canada (-0.3 pp).

[1] Note: as measured in constant US$ PPP. Only countries in the OECD database are included.

R&D intensity: international comparison

  • Measured as a share of GDP, the UK underperforms relative to the OECD average and other leading R&D-intensive economies.
  • In 2023 the UK’s R&D intensity was 2.68%, below that of countries such as Korea (4.96%), Taiwan (3.97%), the USA (3.45%), Japan (3.44%), and Germany (3.13%).
  • In the same year the UK’s R&D intensity exceeded that of other G7 countries, including France (2.18%), Canada (1.81%), and Italy (1.37%).

UK business research and development

  • In most economies the business sector is the largest contributor to total national R&D expenditure.
  • In 2024 UK business enterprise research and development (BERD) amounted to £55.6 billion.
  • UK business R&D was funded predominantly using own funds, accounting for 76.3% of total BERD. A significant contribution came from overseas businesses and other organisations abroad (15.0%), while UK government funding played a smaller but still important role, at 6.8%.
  • Manufacturing performed just under half of UK BERD (49.1%), closely followed by services, at 45.9%, with other sectors contributing the remaining 5.0%.
  • Four sectors accounted for 55.5% of total UK BERD, namely software development (18.5%), pharmaceuticals (16.8%), miscellaneous business activities (10.7%), and motor vehicles (9.5%).

Government financial support for business R&D in the OECD

  • Chart 2.4. summarises the government policy mix supporting business R&D, measured as a share of GDP, comparing the UK with the OECD average.
  • Between 2002 and 2023, total government financial support for business R&D increased in both the UK (from 0.10% to 0.38% of GDP) and OECD (from 0.15% to 0.23%).
  • Over the same period, the policy mix shifted markedly towards tax relief, such as R&D tax credits:
    • By 2023, tax credits accounted for 74% of government support for business R&D in the UK and 58% in the OECD, up from 32% and 25%, respectively, in 2002.
  • Recent IMF analysis suggests that while tax credits may increase overall R&D spending, they don’t necessarily boost economic growth if funding is misallocated. For example, some resources may be directed towards firms with lower potential impact, while the most promising, high-impact innovators struggle to attract the investment needed to scale up.
  • The IMF argues that governments could achieve greater efficiency by targeting R&D support at firms with high expected returns rather than relying on uniform tax credits or subsidies.[1]

[1] Source: Lehr, N. H. (2025). R&D Misallocation and the Productivity Growth Slowdown. IMF Research Perspective, 27, International Monetary Fund.

World rank of selected innovation outputs

  • The UK is a global leader in innovation output indicators such as scientific publications and patents.
  • In 2022 the UK ranked fourth worldwide for total publications, behind only China, the USA, and India. Together, these four countries accounted for 56.6% of global scientific publications that year.
  • The UK also ranked among the top 10 countries for total patent applications filed between 2018 and 2022 in critical technologies such as artificial intelligence, semiconductors, and biotechnology.[1]
  • Despite these strengths, for patent applications the gap between the UK and leading countries, including Japan, Korea, China, and the USA, remains significant.

[1] Note: Analysis conducted by CIIP in previous innovation reports shows the UK is also among the top 10 applicants in the world for patents filed in quantum and telecommunications technologies, identified as “critical technologies” by the UK Science and Technology Framework, together with artificial intelligence, semiconductors, and biotechnology.

Scientific publications by science field

  • All Science Journal Classification is a system used by Scopus to classify academic publications across four broad subject areas: physical sciences, health sciences, social sciences, and life sciences.[1]
  • The UK’s position as a leading science location can be better understood by looking at specific technology fields in the areas of physical sciences and life sciences and the top 10% most-cited scientific publications.
  • In several critical scientific fields, the UK ranks among the world’s top five countries for publications in the top 10% by citations, in a landscape dominated by China, with the USA accounting for almost 60% of total publications.

[1] Source: Scopus (2026). “What are Scopus subject area categories and ASJC codes?” Elsevier.

Unicorns in the world

  • Unicorns are startup companies valued at US$1 billion.
  • In 2025 the UK ranked fourth in the world for the total number of unicorns still active, with a total of 57 companies, behind the USA (718), China (158), and India (65).
  • In the same year the UK ranked third in the world for the value of its unicorns, behind only the USA and China.
  • Unicorns based in the UK were valued at US$222 billion, compared with US$298 billion for those based across the EU.

From research to market: scientific publications versus high-tech exports performance

  • The UK’s leadership as a science location hub doesn’t always translate into value-capture opportunities.
  • While the UK produces a high volume of scientific publications, it lags behind in technology outputs, as reflected in the relatively low share of high-technology exports in total exports of goods and services.
  • While the number of scientific publications per thousand people increased by around 40% between 2007 and 2022, the share of high-technology exports in total exports declined from 8.7% to 6.4%.

Top R&D-investing companies in the world

  • The EU Industrial R&D Investment Scoreboard benchmarks the EU’s top corporate R&D investors against their global peers. In 2024 the top 2,000 R&D-investing companies included in the scoreboard represented 45 countries investing €1,446 billion in R&D, and accounting for over 90% of global business R&D.
  • In 2024 the UK was fifth in the world for the number of companies among the top 2,000 R&D-investing companies, with a total of 57 companies, behind the USA (674), China (525), Japan (192), and Germany (109).
  • Between 2012 and 2024, the UK lost over 50% of companies among the top R&D-investing companies in the world, a trend similar to other advanced countries such as Japan and Germany.
  • While the USA still led with 674 companies, China’s headquartered companies increased by 465%, from 93 to 525 between 2012 and 2024.
  • These trends reflect the shift that took place in recent decades in production and innovation patterns from Western countries to East and Southeast Asian countries.