The UK is truly the place to be when it comes to innovation. But what is it that’s made Britain such a hotspot for cutting-edge ideas? The truth is, the country has laid the foundations for technological advancement and rapid development by recognizing the crucial role of research and development (R&D). Let’s take a look at why the UK is the European leader in innovation and what it takes to gain this crown.

The UK is an innovation powerhouse

Behind only the US and China, the UK is third in a global ranking of countries with the most promise for technology breakthroughs, according to a KPMG report. Boasting innovative startup clusters in London, the ‘Innovation Corridor’ (the area between Cambridge and London), the North West of England, and Scotland, the UK is widely acknowledged to be the tech startup capital of Europe. In fact, according to a recent report by Tech Nation, scaleup tech investment was 2.5 times higher than expected based on the relative size of the UK economy, and an astonishing 35% of Europe and Israel’s 169 unicorn tech companies were established in the UK.

The country is also considered a leading source for global trends, and was ranked number one on the 2018 Portland Soft Power 30 Index, while London consistently tops the Global Power Cities Index.

Thriving in areas such as fintech, healthtech, AI, and creative industries, the UK is not just ahead of the curve when it comes to tech innovation - it’s creating it. So, what’s been the key to gaining this status as a global innovation leader?

Investment in R&D lays the foundation for innovative products

It’s impossible to overstate the vital role of R&D in innovation, and actors across the tech scene in the UK understand this. R&D creates the foundations upon which future innovations are built and is often seen as the “early-stage component” of innovation.

By investing in R&D, cutting-edge companies are able to sustain a competitive advantage by acquiring patents for products they develop, demonstrating to investors that they have a structure to innovate constantly, and recruiting top talent that is attracted to such companies.

As well as internal spending on R&D, UK companies are able to apply for funding from government-supported schemes and receive tax relief.

The UK government puts R&D at the heart of its Industrial Strategy, and has set the ambitious goal to become the most innovative country in the world by increasing its total R&D expenditure to 2.4% of GDP by 2027.

A huge part of this initiative is Innovate UK, a “non-departmental public body funded by grant-in-aid from the UK government.” Innovate UK has invested over £2.5 billion in innovative businesses across the country, supporting them to “develop and realize the potential of new ideas.” Innovate UK has helped 8,500 organizations create 70,000 jobs, while adding an estimated £18 billion to the UK economy.

Another key element of the UK’s Industrial Strategy is the Industrial Strategy Challenge Fund (ISCF), which forms a core pillar in the government’s plan to increase funding in R&D by £4.7 billion over four years. The fund is awarded to projects from all over the country, and has supported 1,820 organizations since it was formed in late 2016.

The UK government also created the R&D Tax Credit initiative, which gives innovative companies of all sizes money back for every pound they spend on R&D. This helps them push new innovations through the R&D cycle and financially supports businesses to develop new ideas that aren’t yet able to generate revenue.

So, where can we see the successes of these policies in action?

UK innovation in action

FundamentalVR is a health tech startup using funds from the ISCF to develop a modern surgical training platform. The platform will allow surgeons to learn procedures before they operate on human tissue using virtual reality (VR).

R&D Director Derek Nicholson explained that “While medicine has advanced a lot over the last 100 years, the teaching of surgery hasn’t.” The company is using “VR combined with haptic feedback to deliver a totally new way of experiencing surgical procedures,” added founder Richard Vincent.

Innovate UK recently provided funding to agrotech startup Agroceutical, which is working on growing a natural supply of Alzheimer’s medication. Galanthamine is a recognized treatment for Alzheimer’s patients and occurs naturally in certain daffodil species in the Welsh Black Mountains. With the financial help of Innovate UK, Agroceutical is “developing a system to harvest and process the flowers in a sustainable, scalable, and cost-effective way.”

These are just a couple of examples that demonstrate how innovative businesses across the UK are thriving with the help of R&D funding, with many more expected to arise thanks to the government’s R&D spending pledge.

The UK has understood that prioritizing innovation through R&D investment is vital for any country that wants to gain innovator leader status. More importantly, however, is the necessity for an environment in which businesses can freely explore and develop the solutions of tomorrow. With the combination of government dedication to R&D and a thriving, dynamic tech scene, the UK has this nailed.

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