Recent analysis has revealed that UK R&D spending has fallen by £2.8 billion in real terms since 2021, sparking concerns over the nation’s long-term growth ambitions. As the government continues to promote innovation-led recovery, this downward trend threatens to undermine competitiveness, productivity, and the ability of UK businesses to commercialise cutting-edge research.
Against this backdrop, advisory firms such as FI Group, specialists in R&D tax incentives and grant funding, are urging companies to act strategically to maintain momentum in innovation.
Globally, research and development is a recognised driver of productivity and competitiveness. According to OECD data, every £1 invested in R&D can generate multiple pounds in economic growth through knowledge transfer, commercialisation, and new business creation.
For the UK, where sectors such as life sciences, aerospace, energy, and digital technology underpin the industrial strategy, sustained investment is essential. Yet recent figures show businesses have scaled back spending in real terms, at a time when other countries, including Germany and the United States, are intensifying their R&D commitments.
Several factors are contributing to the contraction in UK R&D expenditure:
Without intervention, these challenges could limit the UK’s ability to meet its target of becoming a science and technology superpower by 2030.
Despite the decline, opportunities remain for firms willing to be proactive. Businesses can:
FI Group’s International Grants Guide 2025 highlights that public-private partnerships and European programmes remain accessible to UK firms, offering significant non-dilutive support for R&D investment.
According to Dr. Fawzi Abou-Chahine, Funding Director at FI Group UK, companies must take a strategic approach:
“Falling R&D spending is a wake-up call for businesses. By combining tax incentives with national and European grants, firms can offset inflationary pressures and maintain their innovation trajectories. The key is aligning projects with funder priorities and presenting compelling technical and commercial cases.”
With over 15,000 clients supported worldwide and £1.7bn in funding secured annually, FI Group provides both technical and financial expertise to help companies navigate complex R&D frameworks.
For UK businesses concerned about declining R&D budgets, immediate steps include:
Companies looking to safeguard their innovation strategies can explore FI Group’s dedicated services on R&D tax credits and UK grant competitions.
