UK Tech Struggling To Innovate Under Labour, Survey Finds

Ayming UK, a London-based consultancy specialising in innovation funding, has published new research detailing some of the challenges currently being faced by British tech firms.

One of the key takeaways published in Ayming’s third UK Innovation Barometer, was that while investment is a top priority for the Labour government, more needs to be done to create the right climate for innovation in the country.

The research surveyed 200 business and finance leaders (e.g. C-suite, Heads of R&D and Innovation). Ayming suggested accessibility to cash and grants, which remains the biggest barrier to innovating in the United Kingdom, needs to be improved.

Barriers to innovation

Indeed, Ayming found that UK businesses are calling for urgent, targeted government support to drive innovation and economic growth in 2025.

Digging down into the findings, the survey found that a lack of financial resources has become the most significant barrier to innovation, with over half of UK businesses (56 percent) relying on self-funding to drive their R&D efforts.

But the research found that only 39 percent of firms report utilising innovation grants, with eligibility requirements holding more than a third (37 percent) of firms back from accessing the funding stream.

This funding shortfall has placed acute pressure on smaller firms, which have particularly suffered from the instability of R&D funding schemes in recent years, Ayming noted.

As a result, many SMEs have been forced to deprioritise R&D expansion: only 14 percent of SMEs named innovation as a top priority, down from 31 percent in last year’s report.

That said, despite financial constraints, UK businesses are increasingly adopting a long-term approach to R&D, with 44 percent establishing innovation strategies that span the next decade.

Funding framework reform

“These findings come at a pivotal moment for UK business,” noted Benjamin Craig, associate director of R&D Incentives at Ayming.

“Investment is clearly a priority to the new Labour Government, evidenced by the sentiment of the Autumn Budget and the International Investment Summit,” said Craig. “But the absence of reform to R&D funding frameworks is disappointing, and the Chancellor must consider whether the current system truly fosters the entrepreneurial growth essential for driving prosperity across the UK.”

“Labour’s focus on stabilising funding streams will however be hailed as a welcome change by UK businesses,” Craig added.

“Under Conservative leadership, the R&D and innovation landscape suffered from haphazard and inconsistent changes to the system – so the long-term forecast of Labour’s modern Industrial Strategy and the OBR’s new decade-long growth forecasts are vital foundations for long-term growth,” said Craig.

“As we start 2025, businesses need the Government to lay out a clear approach to innovation if they’re going to succeed in putting it at the heart of commercial strategies”.

Key findings

So what areas did Ayming’s third UK Innovation Barometer identify as needing attention? Well some of its key findings include:

• 39 percent of businesses cite a lack of financial resources as the greatest barrier to innovation, closely followed by a lack of skills and talent (37 percent).
• 44 percent of businesses have established innovation strategies spanning the next decade, highlighting a need for corresponding long-term and sustainable funding options, following years of instability.
• Cost pressures are sidelining SME innovation. Cost reduction is the biggest priority for small businesses (50 percent), while just 14 percent named innovation as a top priority – down from 31 percent in last year’s report.

Spending cuts

The question remains whether the UK government and the public purse has the financial wiggle room to offer additional funding to drive innovation in the years ahead.

It should be remembered that the Labour government in August 2024 had confirmed that it was rolling back on tech and AI spending plans announced by the previous Conservative government.

Since Labour was voted into power last year, it has been cutting spending, including the £1.3 billion earmarked for tech and AI projects.