Building an innovation nation

To coincide with Andy Burnham’s speech at Manchester’s innovation summit, Gordon Brown has been in the news this week channeling the spirit of John F Kennedy and the moon landings to challenge the UK to choose to become an innovation nation. He points to the strong foundations we already have with world class universities with research outputs which punch above their weight and some major recent achievements in areas like protein mapping and viral vector vaccines. He estimates that if the UK could match the levels of innovation investment in Sweden or Japan every household could be £5000 better off. 

The UK is good at innovation. The 2026 Global Innovation Index ranks it 6th in the world, ahead of Japan. Brown’s focus is on how Britain needs to get better at scaling and the investment that makes it happen. We’re good at ideas and we’re good at start ups but not so good at the investment that turns them into global companies (even when we do manage to scale companies, three quarters of the venture capital comes from overseas). His proposed policy agenda is positive and needed - R&D credits for firms of all sizes,  long-term support for 127 innovation clusters and investor incentives, all as part of a ‘chain of hope’ to unlock talent and innovation regionally and nationally. 

But there is another part of the picture that deserves more attention. We need more start ups that grow into global businesses. But most businesses will never develop something like AlphaFold, nor do they need to. What matters is whether they can keep improving their products, services and the way they work. These businesses account for a large share of British employment and their ability to improve has a major bearing on the country's productivity.

What Britain does well

There is a lot to be positive about. Arm, founded in Cambridge in 1990, designs the processors used in most smartphones. Raspberry Pi began as a project to get children programming and grew into a business selling tens of millions of low-cost computers. The Oxford-AstraZeneca vaccine took university research and turned it into a vaccine delivered to billions of people.

And the UK is innovative in other ways. Octopus Energy developed its own customer and billing platform, Kraken, to run its energy business and now licenses the platform to other energy suppliers around the world. Brompton spent decades refining its folding bicycle, building a global brand through steady improvements to its product and manufacturing.

These are different kinds of innovation. They show that progress does not always depend on a major new invention. It can come from improving a product, changing how a business operates or finding a better way to serve customers. That is a more realistic starting point for most firms.

The innovation gap

Government figures show a less encouraging picture. The UK Innovation Survey, published in June 2026 and covering the period from 2022 to 2024, found that just 34% of UK businesses with ten or more employees were classed as “innovation active”. A decade earlier, the figure was 53% (NCUB, 2026). 

And that’s with a definition of being ‘innovation active’ that is still quite broad. A business qualifies if, over three years, it has introduced a new or improved product, service or business process, or simply had an innovation project under way, even if the project was later abandoned.

Two thirds of established British businesses did not meet that threshold.

Over the same period, the proportion of businesses investing in different forms of innovation fell across almost every category. The biggest drop was in design, where the proportion fell from 12% to 9%.

This is reflected in research. Nicholas Bloom and John Van Reenen's work on management practices found that, within every country they studied, there is a long tail of very poorly managed firms, and that management quality tracks closely with productivity, profitability and survival. Later work by Bloom and colleagues links better management practice directly to more innovation at firm level. 

In 2017, Andy Haldane, then chief economist at the Bank of England, drew on this work to argue that Britain's productivity problem was not simply a question of how well its leading businesses performed. It was also about the much larger number of firms falling behind.

If Gordon's projected £5,000 improvement in our personal bank accounts is to become a reality, it will depend on more than a handful of big, successful technology companies. It will also depend on what happens across the wider business economy.

Why it’s harder for smaller firms

The figures show a significant difference by business size. The government’s UK Innovation Survey, covering 2022 to 2024, found that 47% of large businesses were actively innovating, compared with 34% of small and medium-sized businesses (SMEs). Separately,  Innovate UK's State of Innovation 2025 report found that around half of businesses faced barriers to innovation. Of those, three-quarters identified a lack of bank or equity finance as the biggest obstacle.

Access to finance clearly matters. But there are other reasons why innovation can be difficult to sustain.

Large businesses can separate the work of running today's operation from the work of shaping their future. In his work on organizational learning, James March described how organisations have to balance making the most of what an organisation already knows with exploring new possibilities. The first tends to offer more immediate and predictable returns, so it often wins out.

Tushman and O’Relilly’s ideas about "ambidextrous" organisations from their book Lead and Disrupt (2021), shows how larger businesses can manage this tension by giving new ventures their own teams, budgets and leadership, while the main business continues to operate. They can also spread their investment across several projects, knowing that some will fail.

Research on SMEs suggests that in smaller firms the balance between running the business and exploring new ideas is done by individuals rather than by specific departments in the organisation. But the day job usually gets in the way of future planning. They are also likely to lack the same capabilities a larger company has. The idea of "absorptive capacity", describes how a company's ability to spot and use new outside knowledge depends on what it already knows. Recent analysis for Innovate UK found that absorptive capacity varies widely between UK sectors. A business with no insight, research or development function finds it harder to spot or act on opportunities.

There are some encouraging signs. Innovate UK’s State of Innovation 2025 survey found that smaller firms were planning to increase R&D investment while larger firms expected to cut back, and that innovation activity among micro and small businesses picked up in 2025 after several years of decline. One year of recovery against a decade of falling activity doesn’t make a trend, and plans are not the same as delivery. But it does suggest that many smaller firms want to do more. What they often lack is a clear place for innovation in the way the business is run.

Building innovation into the way a business works

Smaller businesses do not need a dedicated innovation department or an elaborate process. They need a practical way to make time for improvement, decide which ideas are worth pursuing and follow through.

In our work at Become we’ve noticed how a few straightforward changes can make a real difference.

Don’t just think about products.

Innovation can mean improving a service, changing a process, rethinking packaging or pricing, finding a better way to reach customers or making it easier for people to buy. These changes are often cheaper and quicker to test than developing an entirely new product. Looking at innovation more broadly gives a business more options.

Put it in the calendar.

An annual awayday might generate plenty of ideas, but that does not mean much will happen afterwards. A short meeting every quarter, with someone responsible for following up and a modest budget for testing ideas, is often more useful. The aim is to make looking ahead part of the normal working routine.

Start with customers, not technology.

Useful ideas often come from understanding customers and their problems better. Regular conversations with customers, some qualitative research and a closer look at how people's needs and expectations are changing can reveal opportunities that a technology-led brainstorm might miss.

This is also where understanding the culture around a market matters. What people value, how they make decisions and what they expect from a category can change over time. Businesses need to understand those changes if they want to develop products and services that remain relevant.

Test small and act quick

Randomised trials involving more than 750 early-stage firms found that teaching founders to treat their ideas as hypotheses to be tested led to better performance, and to fewer but better-judged changes of direction. New products often need to build their market rather than assume it already exists so testing should where how well customers understand the concept. Low cost experiments, clear questions and quick decisions about whether to back the idea or drop it.

Share the load. 

SMEs do not have to build everything in house. Suppliers, customers, universities and other firms in the same cluster can all add knowledge and resource. Analysis for Innovate UK found that collaboration between firms is one of the strongest influences on whether new ideas and technologies are taken up. Innovate UK's Knowledge Transfer Partnerships, which place a graduate in a business to work on a specific project with university support, exist for exactly this purpose and remain under-used. The innovation clusters Brown describes won’t have value to many companies unless there are practical ways for them to get involved and benefit from the expertise around them.

Keep track of ideas and what happens to them.

Ideas are easily lost in a busy business. A shared list showing what has been suggested, what is being tested and what has been put into practice is often enough. Review it regularly and make decisions about what happens next. This doesn’t need to be some sort of elaborate system. What matters is that ideas are recorded.

Innovation for everyone

Kennedy’s mission was to unify and align a nation and to mobilise their abilities around a big idea. In his words, a goal that will “serve to organize and measure the best of our energies and skills”. In his article Gordon Brown notes that “he had wanted a national project that everybody could feel part of, and revealed he would have preferred to have chosen a project on Earth – if he could have found one with the same power to inspire a national mission that the whole population could enthusiastically embrace.”

Aiming to produce more ARM’s and Krakens is a vital project. But in a nation where ‘innovation inactive’ businesses have increased from roughly 50% to 66% of the economy we need to be kickstarting innovation at every level of the economy. Thousands of companies making lots of smaller improvements can drive growth as effectively as one or two at the top, and have the benefit of creating the kind of innovation culture that helps those Unicorn companies to emerge. I have no doubt that those 33% of companies that aren’t innovating are as full of creative ideas and new possibilities as the others. Unlocking that potential should be part of the ‘innovation space race’ being called for by Burnham and Brown.

In Kennedy’s words “it will not be one man going to the moon…it will be an entire nation. For all of us must work to put him there”. 

Sources: Gordon Brown, The Guardian, 9 October 2026; World Intellectual Property Organization, Global Innovation Index 2026; Department for Business and Trade, UK Innovation Survey 2025 (June 2026); Innovate UK, State of Innovation 2025; Bloom and Van Reenen (2007), Quarterly Journal of Economics; Bloom et al. (2019), American Economic Review; March (1991), Organization Science; O'Reilly and Tushman (2021), Lead and Disrupt, 2nd edition, Stanford University Press; Mu, van Riel and Schouteten (2022), Journal of Small Business Management; Cohen and Levinthal (1990), Administrative Science Quarterly; Roper and Nana-Cheraa (2023), Understanding Sectoral Absorptive Capacity in the UK: A New Analysis, Enterprise Research Centre; Camuffo, Cordova, Gambardella and Spina (2020), Management Science; Camuffo, Gambardella, Messinese, Novelli, Paolucci and Spina (2024), Strategic Management Journal.