UK innovation strategy seen as key to fixing growth and scale-up gap

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UK innovation strategy and growth

Highlights

ScaleUp Institute identifies a £15 billion investment gap in UK scale-up finance and calls for pension fund consolidation, listing reforms, and expanded role for British Business Bank and National Wealth Fund.
The article highlights that half of the UK’s fastest-growing export clusters, including machine manufacturing, chemicals and minerals, are located in poorer regions outside the Oxford-Cambridge-London axis.
It stresses that stronger competition policy, better management training, and expanded vocational opportunity are necessary to address lost talent and improve innovation commercialisation and retention.

Budget debate centers on scale-up finance

As reported by Financial Times, the argument is that innovation should sit at the core of the government’s economic strategy if Britain is to close a long-running productivity gap with the U.S. The case rests on the UK’s strong research base, including leading universities and advances in areas such as AI, mRNA vaccines, precision medicine, robotic surgery, carbon capture and quantum computing.

The central policy challenge is not only invention but commercialisation. The text argues that Britain continues to produce innovative businesses that remain smaller than expected or end up under overseas ownership, citing DeepMind, Arm and Oxford Ionics as examples.

The ScaleUp Institute identifies a 15 billion pound investment gap and calls for deeper capital markets that reward long-term risk-taking. Proposed measures include further pension fund consolidation, listing regime reforms, fuller use of British Business Bank and National Wealth Fund balance sheets, and public stakes in promising scale-ups where needed, alongside cooperation with Europe through Scale-up Europe fund equity instruments.

Regional clusters and talent seen as growth drivers

Beyond Oxford, Cambridge and London, the article argues that the UK’s innovation capacity is spread across the North, Scotland, the Midlands and Wales. It says poorer areas already contain half of the country’s fastest-growing export-oriented clusters, including specialisms in machine manufacturing, chemicals and minerals.

The piece also says a stronger pro-competition regime and better management training are needed to improve the diffusion of innovation across the economy. That approach is presented as a way to support new entrants, strengthen advanced manufacturing and renewables, and help re-industrialisation avoid backing uncompetitive sectors.

A further constraint is described as the waste of talent across women, ethnic minorities and lower-income communities. Expanding vocational training and widening opportunity are framed as necessary steps to unlock a broader pool of inventors and entrepreneurs, and to ensure Britain not only invents new technologies but develops, scales and retains them.

Our earlier article on John Healey’s push to mobilise public finance institutions ahead of the Budget explained how the government wants state-backed lenders and funds to channel more capital into businesses and regional growth, including a planned northern England scale-up fund. It also highlighted the fiscal squeeze from higher borrowing costs and weak growth, which is narrowing the Chancellor’s room for manoeuvre and raising the stakes for Budget decisions on investment support.

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