Theme 5
Technology scaleup
Policy questions and key messages
- Is UK investment in technology R&D more focused on early-stage research than its peers?
- How concentrated is technology scaleup activity across sectors in the UK?
- To what degree are the UK’s research outputs being developed or commercialised within other countries?
The UK excels in curiosity-driven science, placing more emphasis on basic research than its OECD peers:
- In 2022, 14% of UK business enterprise R&D (BERD) was directed at basic research, above the OECD average of 8%.
- BERD in the UK also places less emphasis on experimental development (50.9%) than the OECD average (69.3%) and leading countries like the USA (78.7%).
- From 2017 to 2022, 39% of R&D performed by the UK government was on basic research, compared to an OECD average of 28%, and above the levels seen in industrialised countries such as the USA (18%) and Korea (26%).
A few sectors dominate technology scaleup and innovation metrics across UK business and academia:
- Life sciences, software, and fintech dominate technology scaleup and innovation metrics across the UK business and academic sectors. This sectoral concentration boosts national innovation indicators but may limit the resilience and diversity of the UK’s innovation economy.
- For example, the top 2,000 firms invested €1,446 billion – over 90% of all business-funded R&D worldwide in 2024. Among them, 57 UK-owned companies invested €38.7 billion. UK pharmaceutical firms accounted for 52.4% of this figure. Compared to the EU and the USA, UK firms are largely absent in the tech hardware and software sectors, which represent just 1.1% and 4% of R&D expenditure of UK-headquartered firms.
The high mobility of spinouts, startups, and industrial R&D risks eroding UK value capture:
- The majority of UK university spinouts’ initial public offerings (IPOs) since 2012 have occurred overseas (80% total, with the majority on the US NASDAQ), a reversal from the early 2000s, when 80% of spinout IPOs took place on UK-based stock exchanges.
- Similarly, the majority of spinouts that achieved exit through acquisition between 2012 and 2021 were acquired by foreign firms: ~36% by US-headquartered acquirers, and ~24% by European-headquartered acquirers. About one-third were acquired by UK-headquartered businesses.
- Acquisitions of UK firms by foreign companies have accelerated since 2014 – up 6.8 times by 2024. Many deals target high-value companies, raising concerns about local job retention, IP ownership, and strategic decision-making shifting overseas.
Business enterprise expenditure on R&D (BERD) by type of research
- Three types of research can be identified:
- Basic research seeks to generate new knowledge about fundamental principles and underlying phenomena, without a practical goal in mind.
- Applied research also creates new knowledge but is focused on solving a practical problem or achieving a specific objective.
- Experimental development builds on research using existing knowledge to create new products or processes, or improve existing ones.
- Business R&D in the UK placed more emphasis on basic research than other OECD countries. From 2017 to 2022, 13.6% of R&D performed by businesses in the UK (BERD) was on basic research, compared to an OECD average of 7.7%.
- This was above the levels seen in industrialised countries such as France (7.2%), Germany (6.6%), and the USA (6.5%).
- Business R&D in the UK also placed less emphasis on experimental development (50.9%) compared to the OECD average (69.3%) and leading countries like the USA (78.7%).
Gross domestic expenditure on R&D (GERD) performed by the government
- Only 4.7% of R&D in the UK was conducted by government organisations, with an emphasis on basic research.
- This was below the OECD average (13.5%) and the levels seen in countries such as Germany (14%), France (11.8%), the USA (9.5%), and Japan (7.9%).
- From 2017 to 2022, 39% of R&D performed by the UK government (GOVERD) was on basic research, compared to an OECD average of 28%.
- This was above the levels seen in industrialised countries such as the USA (18%) and Korea (26%).
Share of business enterprise expenditure on R&D (BERD) funded by government
- Public UK investment in research and development as a share of BERD was high in a few sectors:
- the manufacture of basic metals
- the manufacture of computer, electronic, and optical products
- the manufacture of machinery and equipment, and
- the manufacture of air and spacecraft and related machinery.
- But sectors with strong R&D potential and economic importance for the UK, such as the manufacture of food products, beverages, and tobacco, and the manufacture of motor vehicles, trailers, and semi-trailers, received less public investment than their international peers.
National applied research organisations by total funding
- The UK Catapult Network’s core government funding of £289 million was around two times lower than that received by internationally comparable applied research organisations in 2022. Catapult’s core funding increases to around £320 million per year between 2023 and 2028.
- Comparator countries have additional organisations (beyond the ones shown in this chart) with significant budgets, such as Kosetsushi in Japan and the Helmholtz Association in Germany.
- Across all organisations, a significant portion of other revenue is represented by industrial contract R&D, publicly funded contract R&D, and collaborative R&D, as well as intellectual property (IP) revenue and technical consulting, among other revenue streams.
R&D expenditure by the world’s top 2,000 firms
- A few sectors dominate technology scaleup and innovation metrics across UK business and academia.
- In 2024 the world’s top 2,000 R&D investors collectively invested €1,446 billion in R&D, which accounted for more than 90% of global business-funded R&D.
- In the same year 15% of the total R&D in the EU Industrial R&D Investment Scoreboard was conducted by five US giant tech companies: Amazon, Alphabet, Meta, Microsoft and Apple.
- The top 2,000 included 57 UK-based firms (2.85%), and there were just 2 UK companies in the top 100 (AstraZeneca and GSK).
- UK-owned businesses specialised in health industries and financial, accounting for 52.4% and 14.5% of UK R&D expenditure, respectively.
- Compared to the EU and USA, UK firms were largely absent in the tech hardware and software sectors, which represented just 1.1% and 4% of R&D expenditure of UK-headquartered firms.
UK Patent Box tax relief claimed, tax year 2023–2024
- The Patent Box is a UK tax regime that applies a reduced 10% corporation tax rate to profits derived from patented products.
- Using the amount of Patent Box tax relief claimed by eligible UK companies as a proxy for the exploitation of intellectual property, we see that large manufacturers in the UK dominated the commercialisation of patented innovations.
- In the 2023–24 tax year, large firms accounted for 94% of total Patent Box tax relief claims.
- In terms of sectors, manufacturing accounted for 42% of total Patent Box claims in the same year.
- Large companies generally outpaced SMEs and micro-sized companies in patent applications.
Number and sectoral distribution of unicorns in the world, 2025
- At the end of 2025, the UK was the fourth country in the world in terms of high-value startups, with 57 unicorns and 3 decacorns (startups with a valuation exceeding US$10 billion).
- The sectors with more high-value startups were financial services (20 companies), enterprise tech (13 companies), and insurance (seven firms).
- But the UK’s high-value startups placed less emphasis on industrial sectors. Compared to industry-focused startups in competitor countries – such as SpaceX in the USA and DJI in China – the UK’s industrial startups were more service-oriented, exemplified by companies like OVO Energy and Motorway, an online second-hand-car sales platform. [1]
- As per the venture capital investments in recent years, most of the high-value startups (46) were headquartered in London.
- The UK’s startup ecosystem was also home to a further five “exited” unicorns (i.e. sold to larger corporates or admitted to a public stock exchange). Two of them were eventually acquired by Chinese and US investors. [2]
[1] Source: CBINSIGHTS (2025). The Complete List Of Unicorn Companies.
[2] Source: Beauhurst (2019). UK Unicorn companies – a free report on £1b businesses.
Location of initial public offerings (IPOs) and acquirer’s headquarters for UK-based university spinouts
- The high mobility of spinouts, startups, and industrial R&D risks eroding UK value capture.
- The University Commercialisation and Innovation (UCI) unit at the University of Cambridge collected data from 884 spinouts across 15 top UK universities.
- Using this sample, the report leveraged information provided by PitchBook and other sources to identify whether these spinouts had listed on a stock exchange, identifying where they (first) listed globally. A total of 36 IPOs (4%) and 117 acquisitions (13%) were reported in the data sample.
- Results show that during the early period, 2002–11, 80% of spinout IPOs took place on UK-based stock exchanges. This reverses for the more recent period, 2012–21, with 80% of IPOs taking place overseas (the majority on the US NASDAQ).
- For the 10 years from 2012 to 2021, roughly a third of acquisitions of spinouts from the 15 universities that participated in the study were by UK-headquartered companies. A further 36% were acquired by US-headquartered companies, and 24% by European-headquartered companies.
Acquisitions in the UK by foreign companies
- The high mobility of business R&D risks eroding UK value capture.
- Acquisitions of UK firms by foreign companies accelerated from 2014 – up 6.8 times by 2024.
- For example, the proportion of foreign-controlled companies in the aerospace supply chain rose from 14% in 1990 to 41% in 2014.[1]
- Many deals target high-value companies, raising concerns about local job retention, IP ownership, and strategic decision-making shifting overseas.[2]
[1], [2] Source: Civitas (2015). Losing Control, A study of mergers and acquisitions in the British aerospace supply chain.
