Research & development spending

The UK's R&D ecosystem remains a critical driver of innovation and economic growth, but its distribution is highly uneven. Government spending on R&D has increased across all regions since 2022, supported by further commitments in the Spending Review and Industrial Strategy to raise the annual R&D budget to £22.5 billion by 2029/30.

However, business investment in R&D shows a more mixed picture, with declines in regions such as the North East, North West, and Midlands, while London and the South East continue to dominate, accounting for over 54% of total R&D expenditure. This concentration reinforces the strength of the “Golden Triangle” but risks leaving other regions underdeveloped despite their potential. Government has signalled that it is looking to crowd in greater amounts of private capital, generating £3 of business R&D investment for every £1 of public spend. To achieve this, the Government may need to start bringing in a greater range of partner firms, and looking beyond the South East to find areas where capital can be deployed to deliver the best value for money, potentially generating outsized returns.

Higher education institutions play a pivotal role in regional R&D, particularly in areas where university spending nearly matches business investment, such as the North East. Universities have proven to be vital anchors for innovation, producing successful spin-outs like Arm and KETs Quantum, and the UK is fortunate to have world-class research facilities in every nation and region. Building on these links will help the UK to remain a hotbed of ideas, innovation and invention.