The UK Innovation Report 2025 – 5 things every founder needs to know

The UK innovation landscape is shifting fast. Despite economic pressures and global disruption, scale-ups are continuing to prioritise R&D, but regulatory complexity and HMRC scrutiny are shaping how that investment plays out.

Drawing on responses from 500 scale-up leaders and 250 investors, the UK Innovation Report 2025 provides a clear view of how businesses are investing, the barriers they face, and the priorities shaping the year ahead.

Here are five insights every founder should be aware of:

1. R&D investment is rising

UK scale-ups are investing heavily in innovation. The average annual R&D spend now stands at £1.46 million, or 12% of total expenditure. This level of commitment underscores the role of R&D as a driver of growth and competitiveness.

2. Regulation is slowing progress

More than half of businesses (52%) cite regulatory complexity as their biggest barrier to accelerating R&D. A further 37% highlight administrative burden, pointing to the increasing challenges of navigating HMRC’s regime.

3. HMRC scrutiny is intensifying

One in four scale-ups has faced an HMRC enquiry in the past year. For founders, this highlights the importance of compliance-first processes and accurate, defensible claims.

4. Investors are prioritising innovation

92% of investors surveyed consider R&D vital for business growth, and many are actively involved in shaping portfolio companies’ innovation strategies. For scale-ups, R&D is no longer just a tax consideration — it is a core measure of resilience and ambition.

5. AI is leading the agenda

91% of companies see AI as having the most positive impact on their pathway to innovation in 2025. Adoption is no longer optional; it is becoming a baseline expectation for ambitious scale-ups.