First Special Report
On 13 March 2026 the Science, Innovation and Technology Committee published its Third Report of Session 2024–26, Flying Blind: Innovation, Growth and the Regions (HC 538). The Government Response was received on 28 May 2026 and is appended to this Report.
Appendix: Government Response
Summary
The government is grateful to the House of Commons Science, Innovation and Technology Select Committee for their report on Innovation, Growth and the Regions. The Committee rightly highlights the critical role of innovation in driving regional growth across the UK, and we welcome the Committee’s recommendations to go further to develop innovation ecosystems and clusters across the UK.
The UK benefits from a globally recognised innovation ecosystem. Our universities, research institutes and businesses are internationally recognised for their R&D excellence and capacity for innovation. This underpins world-leading clusters of innovation across the UK, from the Harwell Cluster in Oxford, to the life sciences cluster in Manchester, to Edinburgh’s AI cluster, and South Wales’ Semiconductor Cluster.
The government is making a record £86 billion investment in research and development (R&D) over the Spending Review period to grow this ecosystem, with investment through UKRI higher than ever before. This will drive innovation and create new jobs in every region of the UK. We are taking a new outcome-focused approach to this funding, focusing resources where they will deliver the greatest impact across the country. This will see our R&D investments focused across three ‘buckets’:
protecting and promoting discovery and curiosity driven research, and university support; delivering on government and societal priorities; and supporting innovative company growth, helping UK businesses scale and commercialise cutting-edge technologies.
This investment also supports UK participation in Horizon Europe, the world’s largest programme of research and innovation cooperation, worth over £80 billion from 2021 to 2027. Horizon Europe provides UK businesses and researchers with access to curiosity driven research funding, world- class collaborations, and opportunities to grow and scale up their innovations.
We strongly agree with the Committee’s view that clusters of innovation excellence emerge through sustained and coordinated investment. We have ambitious plans for growing these clusters in partnership with local leaders. Each of the buckets will play a critical role in that approach.
We will deliver sustained excellence in the R&D ecosystem by supporting basic, curiosity driven research that underpins the entire system and leads to new discoveries in universities across the UK. Businesses invest in cutting-edge knowledge, talent and capability; if they cannot access world- class capability in the UK, they will invest elsewhere. So, it is imperative that we do not move away from the focus on excellence which is a magnet for international investment, and central to the networks of ideas and people that allow clusters to thrive.
Our R&D investments in strategically important sectors and technologies will drive collaboration between universities and businesses in these clusters, translating research into new applications, patents and spin-outs. In parallel, our investments to support innovative companies will support cutting-edge firms in clusters to adopt new technologies, and attract the investment they need to scale here in the UK, delivering growth locally and nationally. In 2023/24, 67% of innovation funding through Innovate UK was invested outside the Greater South East, highlighting the strength of innovation clusters in all regions of the UK.
The Committee is right to reflect that the R&D system cannot drive the growth of clusters in isolation. Public R&D investment will only translate to local growth if there is local business capacity to absorb, commercialise and diffuse its outputs. That capacity is driven by many policy and investment levers beyond the R&D system.
That is why we strongly agree on the need for central government to partner with local leaders to align the full range of local and national policy levers to support cluster-led growth. This requires clear choices about the sectoral and geographic clusters those levers must be aligned around. It is only by making those choices that we can develop clusters that are internationally competitive.
Our modern Industrial Strategy is how we are doing this. Through it we are not only prioritising key clusters across the UK but are coordinating investments and policy reforms to grow those clusters. We have already taken significant steps to do that, for example by:
- Reforming the mandate of the British Business Bank and investing a further £1.6 billion in its Nations and Regions Investment Funds, alongside putting £5 billion behind British start-ups.
- Investing a record £15.6 billion in transport links within our city regions.
- Creating the new £2.3 billion City Investment Funds to give established regional leaders control over long-term, self-sustaining capital.
- Committing to work with mayors and businesses to develop a roadmap for future fiscal devolution, to be published at this year’s Budget.
However, the Committee has made many helpful recommendations for how we can go further to support the development of clusters across the UK. Our response provides a reply to these, and in general we agree with the key thematic areas the Committee has highlighted.
The national R&D ecosystem and devolution.
We agree that strategic cluster development should remain a priority, as is tracking the impact of our interventions. We are changing the way that UKRI works with places to achieve that.
UKRI’s investments are already driving growth in all corners of the UK from Sci-Tech Daresbury near Runcorn and the Offshore Renewable Energy Catapult in Blyth, to the Met Office in Exeter and compound semiconductors in South Wales. However, we are reforming how they work in order to build deeper relationships with local leaders to identify clusters with the opportunity to be globally competitive. Where these can be identified, and other levers aligned around them, UKRI will align their wider portfolio of investments behind those clusters over time. As a start, we are delivering the UK’s largest, cluster-focused regional innovation programme ever through the £500 million Local Innovation Partnerships Fund. It represents a new way of working with places, empowering partnerships of local businesses, universities and civic leaders to shape innovation investment around local strengths and opportunities. We will monitor carefully how the first rounds of funding through this scheme deliver effective outcomes and will build on it where they do.
Over time, our goal is for closer integration of R&D interventions like the Local Innovation Partnerships Fund with Local Growth Plans and funding devolved to mayors, such as the Local Growth Fund. Innovation investment will only translate into growth if it is supported by wider economic levers, including planning, transport, skills, housing and business support. Initiatives such as the Oxford-Cambridge Growth Corridor show this and we have established the UK’s first AI Growth Zone in Culham, backed by £2.5 billion for fusion at UKAEA, awarded £15 million to the Cambridge Innovation Hub and worked with the private sector to secure multi-billion-pound investments in Oxford, Bedford, and Cambridge. The Northern Growth Corridor also demonstrates this integrated approach through a £10.4 billion investment in local transport, and £1.7 billion from City Investment Funds, alongside major R&D investments such as the £51 million state-of-the-art National Cryogenics Facility at Sci-Tech Daresbury.
Data and transparency.
We strongly agree with the Committee that effective innovation policy depends on clear, reliable regional and national data. Action on the Committee’s recommendations is already underway to improve regional reporting, impact tracking and analytical capability across the system. This includes work to enhance the granularity and accessibility of data on public R&D investment, business R&D, innovation activity and outcomes. We will continue to refine our approach to prioritise data that supports action, learning and collaboration across the R&D and innovation system. To track regional innovation and growth we will continue to develop innovative tools and insights. DSIT’s Innovation Clusters Map, which we refreshed in 2025, provides the most comprehensive national assessment of UK innovation clusters, bringing together data on research, business activity, investment and skills.
Over the next year, the actions we will take to do this include:
- Improving the granularity and transparency of regional
and cluster data. - Developing metrics to monitor clusters’ performance over time,
co- developing these with local leaders. - Ensuring robust monitoring and evaluation of the Local Innovation Partnerships Fund.
Aligning all the above with the Innovation Clusters Map through its annual update cycles.
While gathering better data and insights is an important goal, it is important to recognise the technical and methodological challenges involved, particularly in attributing local economic impact and capturing complex innovation dynamics. Similarly, we should recognise that better data often requires new or expanded collection methods and information management systems, which can take time and resource to implement. We are committed to these improvements, but it will be important to strike the right balance between the costs of better data collection and the value of the insights gained from that data. In particular, we must ensure that administrative burdens on businesses and researchers do not disincentivise them from engaging with the R&D and innovation system. We will strike this balance by seeking to aggregate insights from data that already exists where possible, using data-science approaches where needed to gain new insights while avoiding new burdens on innovators.
Commercialising innovation and driving its diffusion and adoption.
We agree with the Committee that we must continue to improve the ability of institutions and businesses to commercialise innovation in all clusters. We are taking ambitious and proactive steps to do that. UKRI has launched a £40 million proof-of-concept fund, and we expect the overall funding will grow across the Spending Review, and new programmes will provide follow-on support for projects supported through proof-of-concept funding. We are also improving transparency around spin-out activity, supporting technology transfer capability and making it easier for innovative firms to navigate support as they grow.
Across the wider innovation system, UKRI and Innovate UK (IUK) have created a single front door for businesses through the Innovation Hub helping to simplify access and improve coherence. As announced in their recent Prospectus, IUK’s ‘Velocity’ approach will also provide high potential businesses with tailored support through an account management service. We are also focusing on creating demand for innovation, through reforming our approach to procurement to make it easier for innovation firms to sell to the public sector, and incentivising public sector programmes to adopt innovation.
To support adoption and diffusion of technology across the UK, the five AI Growth Zones we have announced are removing the biggest practical barriers to adopting AI at scale, particularly access to compute, power and investment-ready infrastructure. We will expand the Made Smarter Adoption programme, with up to £99 million from 2026.
In summary, we share the ambitions of the Committee and will achieve them through a systemic and integrated approach. Our focus is not on individual institutions or one-off interventions, but on aligning policy, and investments across the innovation system over time. By protecting excellence in research, improving how innovation translates into business growth, and enabling places to build on their distinctive strengths, we are laying the foundations for sustained, innovation-led prosperity across the UK. Our approach will join up R&D funding, start up and scale up provisions, skills, infrastructure, regulation and procurement.
The remainder of this document provides the government’s responses to the Committee’s specific recommendations.
Chapter 3: The research and development ecosystem
Recommendation:
The Government should establish a national framework for cluster development that embeds regional Key Performance Indicators and tracks cluster lifecycles. As part of this, it should develop regional economic profiles that line up clusters with key sources of economic activity, such as original equipment manufacturers, major education and health facilities, government and defence facilities, and their supply chains, with an analysis of opportunities for supporting innovation and diffusion. As part of this framework the Government should define its role in supporting the development of regional clusters, versus that of the private sector.(Paragraph 13)
The Government should publish annual data covering the performance and impact of innovation clusters. These should set out any gaps around infrastructure, skills, and commercialisation outcomes and detail how public investment is being used across different parts of the country. (Paragraph 14)
Government Response:
The government partially agrees with these recommendations. We strongly agree that a coordinated approach is important and tracking the impact of that approach is equally important.
We are already coordinating development of regional clusters through a number of existing mechanisms. Our current approach, as reflected in our modern Industrial Strategy, is to support clusters through sustained investment in R&D, skills, infrastructure and innovation diffusion, while enabling local leaders, businesses and institutions to shape development in line with regional strengths. This is underpinned by actions set out in the Industrial Strategy, which UKRI’s organisational objectives and key results are aligned behind.
For this reason, we do not consider that a separate national framework for cluster development is required at this point in time.
Over the next year we will develop a more robust and joined-up approach to monitoring the development of innovation clusters over time. This will allow policymakers to make more informed decisions and support better engagement with local leaders about where and how to support priorities.
This will include identifying key metrics for high-priority innovation clusters and using them to track development of capabilities and competitiveness over time. In parallel, UKRI will produce programme and region-level evaluations of the key innovation clusters supported by the Local Innovation Partnerships Fund, focusing on the effectiveness of funded projects, private co-investment stimulated through the projects and the success of the programme in supporting innovation-led local growth.
The published DSIT Innovation Clusters Map 2025 already includes a suite of these metrics at cluster level, however, we will expand the metrics it captures. The next update to the Innovation Clusters Map this autumn will provide DSIT with data which for the first time allows us to track the performance of priority clusters on a year-by-year basis, including the level of public R&D investment that supports them. For subsequent updates, we will look to develop and expand the scope of data to align with the theoretical underpinnings of cluster growth, including wider factors that stimulate growth at cluster and regional level such as metrics on trade, access to finance, skills and cluster competitiveness.
While expanding our understanding of cluster development is critical, better data often requires new information collection methods and data management systems that take time and resource. Therefore, improving and publishing data is not an end in itself and we will continue to refine our approach to prioritise the most valuable data and metrics.
Recommendation:
The Government should establish a portal where innovators can be matched with suitable funding and support to help them cut through the current tangle of options. Innovate UK should announce targets for increasing engagement with innovators across the country, using metrics such as outreach and targeted support, more accessible and streamlined application processes, and additional support personnel in the regions. (Paragraph 22)
Government Response:
The government agrees with this recommendation. Through the Innovation Hub, we have created a single portal to identify public funding and innovation support opportunities and will continue to improve it. This will allow innovators across the UK to navigate public funding and access support more easily.
UKRI, principally through Innovate UK, play a central role in delivering a coherent innovation system, and to this end have created a single front door for businesses through the Innovation Hub. The Hub helps innovators identify appropriate funding, advisory services, and access schemes available through other partners across government. In its prospectus published 19 March, Innovate UK set out its plan to move towards a more integrated and hands-on model, with clearer sector focus, enhanced advisory and account management support, and a stronger role in validating innovation and connecting high potential businesses to investment.
At the heart of this will be the ‘Velocity’ approach, which will provide high potential businesses with targeted support, connecting them to relevant opportunities through an account management service. This will be a part of a ‘no wrong door’ commitment across the public sector innovation system. Innovate UK will provide timely, targeted support: stepping in at the moments that matter most and removing friction at every stage.
We agree on the importance of metrics around engagement with innovators too, which is why UKRI’s Corporate Plan Update for 2025–27 sets out objectives and key results that directly support improved access to innovation funding and stronger regional engagement. These include simplifying and improving the user experience for applicants; increasing the reach and effectiveness of business-facing support delivered through Innovate UK; and strengthening place-based innovation by supporting clusters, institutions and partnerships across the UK. UKRI will report against key results covering accessibility and efficiency of funding processes, breadth of engagement with businesses and innovators, and the contribution of innovation investment to economic growth and regional capability in their Annual Report and Accounts.
Together, these objectives and metrics provide a clear basis for monitoring progress in reducing the complexity of UKRI’s offer and on UKRI’s levels of engagement with innovators nationwide in line with the Committee’s report. Objectives will also be supported by an uplift in engagement with strategic authorities as UKRI evolves towards a more integrated and coordinated approach working across its councils.
Recommendation:
The Government should incentivise complementarities between institutions in London, Oxford and Cambridge and those in other regions, such as through programmes to help spinout companies to scale up elsewhere in the country. Good practice examples include the partnership between the Universities of Cambridge and Manchester. The Government should put in place a mechanism for identifying these opportunities, setting out the details in its response to this report. (Paragraph 31)
Government Response:
The government agrees with this recommendation and is already acting on it. We agree that collaboration between universities in the Greater South East and institutions across the UK can support spin-outs to scale and drive regional growth.
We also agree with the Committee that the Cambridge-Manchester partnership demonstrates how this can work in practice. Through Research England, £4.8 million is being provided over three years to support this partnership. The university-led collaboration is testing new approaches to place-to-place innovation working, sharing commercialisation expertise and supporting start-ups and scale-ups to attract investment and create high-value jobs. DSIT and UKRI will continue to work closely with this partnership, gathering learnings that could be used to build other cross-regional partnerships.
UKRI funding programmes provide routes for universities to identify and develop similar collaborative opportunities. Funding streams such as the Research England Development (RED) and Connecting Capability Fund (CCF) support joint commercialisation capability, while sector-led networks such as TenU and SETSquared help spread effective commercialisation practice across institutions.
While support is available, we do not seek to direct specific institution partnerships from the centre. Instead, UKRI works to ensure that funding frameworks and programmes create the environment for universities across the UK to build partnerships to support spin-out growth and wider innovation-led development. For example, the Universities of Oxford and Liverpool have recently launched their own partnership because of the complementarities they identified between their innovation capabilities and relevant local authorities’ collaborative ambitions.
Over the next year we will particularly focus on how further partnerships could be used to harness the strengths of other universities in the Northern Growth Corridor. Where these can help deliver our Northern Growth Strategy, we will work with universities to support their development.
Recommendation:
The Government should publish a strategy setting out how it plans to exploit the full potential of the Oxford-to-Cambridge Growth Corridor – including locations outside these cities. This strategy should identify the existing and potential strengths of places between Oxford and Cambridge and set out plans to support them. (Paragraph 32)
Government Response:
The government agrees on the importance of exploiting the full potential of the Oxford to Cambridge Growth Corridor and partially agrees with the recommendation. Since January 2025, we have taken significant steps to unlock and accelerate growth across the region that delivers benefits for the whole country. We agree with the Committee that we must exploit the Corridor’s full potential which is why we are taking an infrastructure-first approach, ensuring that future growth can be realised in a way that is sustainable for communities and brings benefits to all people who live and work in the Corridor. The government remains committed to delivering a long-term plan for the Corridor and will continue to articulate these plans over the course of this Parliament.
We have funded major transport infrastructure investments to strengthen connectivity across the Corridor, including £2.5 billion for East West Rail and £120 million to reopen the Cowley Branch Line in Oxford, backed by an additional £35 million from local partners. These landmark investments will directly tackle long standing infrastructure barriers and unlock new transport links between high-value clusters. Improved east to west connectivity will also benefit towns between Oxford and Cambridge – such as Bedford and Milton Keynes – by supporting growth and making it easier to live, work and collaborate across the region. We have also committed to building two new reservoirs in Oxfordshire and Cambridgeshire to ensure there is sufficient water capacity for the long-term future of the region.
We agree with the Committee’s report referencing the important issue of housing and we are already providing over £800 million to support housing and development in the Corridor, including to support potential Development Corporations in Greater Cambridge and Greater Oxford, subject to consultation and statutory processes. We are consulting on the next generation of New Towns, which could include Tempsford and Milton Keynes as key sites for further development and growth and help realise the potential of the central area of the Corridor through new homes, local employment opportunities and supporting infrastructure. We will deliver a new National Forest in the Corridor, as part of our wider commitment to ensure growth does not come at the expense of making beautiful and healthy places to live and work. Together, these measures ensure the foundations are in place for the Corridor to realise its full potential.
We also agree with the Committee that the Corridor is already world-leading in terms of its status as an innovation hub and in key science and technology sectors. To bolster this position, we have established the UK’s first AI Growth Zone in Culham, backed by £2.5 billion for fusion at UKAEA; awarded £15 million to the Cambridge Innovation Hub; and have worked with the private sector to secure multi-billion pound investments in Oxford, Bedford, and Cambridge, including major commercial investments such as Universal Studios in Bedfordshire. This will support significant job creation, skills development and supply-chain opportunities, with benefits extending to surrounding towns and regions across the Corridor. We agree with the Committee’s reflection on this, and these investments support attracting high-value firms and talent into the region to support long-term economic growth.
To help attract further inward investment, we published an investment prospectus for the Corridor in October 2025 to demonstrate the strengths and opportunities in the Corridor to businesses and investors.
We are clear that growth in the Oxford to Cambridge Growth Corridor must deliver benefits for the whole of the UK. Securing growth in the Corridor is a core part of our wider growth strategy focused on boosting productivity, living standards and investment across all regions. The Corridor’s success supports national supply chains and investment in priority sectors, while knowledge and expertise are shared through partnerships between leading universities, such as the Cambridge and Manchester Universities Innovation Partnership. Lessons from the Corridor are also informing approaches in other growth regions, including the Northern Growth Corridor, to support innovation-led growth nationwide.
Recommendation:
The Government should publish an assessment of whether funding to Golden Triangle institutions should be made contingent on projects having a quantifiable economic impact elsewhere. (Paragraph 33)
Government Response:
The government disagrees that funding to institutions in the Golden Triangle should be made absolutely contingent on demonstrating quantifiable economic impact elsewhere but we agree that this is a factor that should be considered. Indeed, we already consider both national and local impact when evaluating business cases for investment in R&D and innovation. Our goal is always to drive quantifiable economic results throughout the investment process. In particular, when evaluating R&D investments we consider both their immediate local impacts as well as the potential consequences they can have across the UK through their interactions with other assets and institutions. This approach focuses on building excellence wherever it exists, with investments coordinated and managed to maximise impact and prevent duplication.
Recommendation:
The Government should appoint a minister to champion innovation in each region of the UK – not just the Golden Triangle. These ministers should be tasked with ensuring that regional needs, opportunities and interests are considered in decisions on investment and infrastructure. (Paragraph 34)
Government Response:
The government disagrees with this recommendation. Ministers have UK- wide responsibilities and are accountable for ensuring that decisions on innovation, investment and infrastructure support national growth while reflecting the distinct needs, strengths and opportunities of different places across the UK. We have appointed senior figures who coordinate action for strategically important areas such as the Northern Growth Envoy and the Oxford-Cambridge Growth Corridor Champion. Importantly, these roles are not limited solely to innovation activity but have a wider role in coordinating economic growth. This is why DSIT and UKRI are working closely with Northern Growth Corridor Envoy Tom Riordan to ensure DSIT’s investment portfolio delivers the objectives of the Northern Growth Strategy.
Furthermore, consideration of regional impacts and requirements is already embedded in the way we develop and deliver innovation policy and investments. This includes targeted, place-based investment programmes; coordinated action across innovation, skills and infrastructure policy; and sustained engagement with mayoral combined authorities, devolved administrations and local leaders to ensure regional perspectives inform national decision-making. As part of DSIT’s English Devolution Framework commitments, the Minister for Science, Innovation, Research and Nuclear meets annually with mayors of the Established Mayoral Strategic Authorities. UKRI has also put in place a more regular process of engagement between its executive chairs and local leaders, to build local partnerships and guide investment decisions over time.
This approach is reflected in existing strategic frameworks, including the Northern Growth Strategy, which sets out a long-term, place-based plan to support productivity, innovation and business investment across the North of England. This sets out commitment to building local partnerships with mayoral authorities, to align the national innovation system with their plans for local growth. We consider this model to be more effective than the creation of additional, region-specific ministerial roles, which could fragment accountability and duplicate existing responsibilities.
Chapter 4: Data and transparency
Recommendation:
Future disclosures of departmental R&D spending should include breakdowns by region and cluster. The Government and UKRI should also develop a framework for tracking impact and publish annual regionally disaggregated reports that set out how public R&D funding supports innovation across the country. These should include company-level data on funding, innovation diffusion and take-up, and geographic distribution. (Paragraph 43)
Government Response:
The government partially agrees with the recommendation and strongly agrees with the principle of tracking impact of R&D locally. We are strengthening transparency and providing insights on regions and clusters across our R&D investments.
Firstly, we publish regional data through UKRI’s annual publication of regional funding allocations using ONS International Territorial Levels (ITL), alongside project level data available via the Gateway to Research portal (public database of UK-funded research projects). We will continue to improve this data to increase its utility for local partners and other stakeholders.
Secondly at cluster level, DSIT’s published Innovation Clusters Map provides a consistent view of UK innovation clusters and includes firm-level data to support analysis of funding and activity within and across clusters and there will be future annual updates to continually improve it with new data. Work is ongoing with delivery partners to improve the availability and consistency of regional R&D data, including data relevant to innovation ecosystems and local economic strengths. We are delivering this because we strongly agree with the Committee that quality data on the geographic distribution and impact of public R&D funding is essential.
Thirdly, we will continue to strengthen data capability across government in order to have a more complete view of where R&D investment is being delivered. We will ensure that the government’s internal data on R&D spend captures where spend is happening, allowing us to have a clear view on where R&D is delivering impact in line with the Committee’s recommendation. This complements the existing Government Research and Development Survey (GovERD) Official Statistics publication reporting UK government R&D expenditure and activity, with geographic breakdowns at International Territorial Level 1 (ITL1) regional level as reported in the GovERD 2023 data (ONS, 2025).
On the Committee’s recommendation around impact tracking, our approach is that each place-based R&D intervention is supported by tailored monitoring and evaluation frameworks already. This continues to be central to the delivery of place-based programmes such as the Innovation Accelerator Pilot, which had an evaluation strategy agreed with local partners, which is informing the evaluation of the new £500 million Local Innovation Partnerships Fund – the largest ever place-based innovation programme. We are using these insights to support R&D funding across the UK.
On diffusion and take up, we agree these are important outcomes, though more complex to measure consistently at firm level and fine geography. Nevertheless, there are a number of data sets we already use to inform our innovation policy. Nationally, the UK Innovation Survey provides regular evidence on adoption trends, complementing the firm-level and project- level funding data available through the Gateway to Research portal. More recently, DSIT has also published findings from the Innovation Diffusion and Adoption Survey.
In line with our overall approach to data, new collection methods and information management systems are likely to be needed. We will take a considered and holistic view of data improvements and continue to refine it over time, recognising that we must strike a sensible balance between data collection and the administrative burden this may impose on funding recipients.
Recommendation:
The Government and UKRI should, in response to this report, and on an annual basis thereafter, set out how the R&D budget will be allocated by sector, region and cluster. The Government should also, in its response to this report, and on an annual basis thereafter, set out the current level of private sector R&D investment by sector, region and cluster. This should include detailed mapping of not just total investment but key metrics such as company formation, job creation and intellectual property filings. (Paragraph 44)
Government Response:
The government partially agrees with the recommendation. We agree on the value of transparency around the geographic and sectoral distribution of R&D investment that the Committee rightly underscores.
UKRI already publishes backward looking spend data by region, and has published priority sectors and Research Council allocations for the Spending Review period 2026/27 – 2029/30 in line with the Committee’s recommendation. These funding awards are also captured at cluster level in the Innovation Clusters Map. DSIT’s Innovation Clusters Map provides the most comprehensive national assessment of UK innovation clusters, bringing together various elements of the data the Committee has highlighted. This year’s mapping includes R&D tax credits qualifying expenditure to help start integrating wider private sector spend data. There is always a relationship between data collection and the administrative burden grant applicants experience in the R&D ecosystem, so we will continue to ensure any new data collection processes strike a sensible balance between providing valuable new insights and these burdens.
On the wider R&D budget, both DSIT and UKRI have published details of their planned R&D spend across the Spending Review period (2026/27–2029/30).1 DSIT also publishes detail of its R&D spending through the Departmental Estimates process to help outline investments across a range of priorities. However it is important to note that much of DSIT’s Partner Organisation and UKRI funding is competitively awarded based on excellence, meaning information on the exact sector and region of potential grant awards can only be reported retrospectively.
Where R&D funding is explicitly allocated to regions, these are publicised by UKRI. For example, details of the regions selected for earmarked funding under the Local Innovation Partnerships Fund.2 The ONS publishes Business Enterprise Research and Development (BERD) data, including regional breakdowns, which provides us with a robust source of information on private sector R&D investment. We also agree with the Committee on the importance of private sector leverage insights and DSIT previously commissioned the OECD to examine how public R&D investment leverages private investment at a regional level, generating new evidence on “leverage rates”. Building on this, we will track private sector leverage and match funding through monitoring and evaluation for place- based programmes, including Innovation Accelerators and the Local Innovation Partnerships Fund, recognising that these effects take time to materialise. Projects will report on core metrics quarterly, including tracking of external co-investment in clusters, focusing on their effectiveness and the success of the programme in supporting innovation–led local growth. These evaluations will also capture wider impacts including job creation, company formations and intellectual property filings.
Recommendation:
The Government should in its response to this report set out how it intends to ensure the Secretary of State’s mandate to use public spending to unlock private sector investment is taken up by Government departments, UKRI, Innovate UK and other public funders of R&D to inform their funding allocations. (Paragraph 45)
Government Response:
The government agrees with this recommendation and agrees that public R&D investment should play a strong catalytic role in unlocking private sector investment. This principle is reflected in the mandate given to UKRI and its councils, including Innovate UK.
Through our reforms of UKRI we have a target of, and a plan for, a portfolio level leverage ratio of at least £3 of private investment for every £1 of public investment. Across its portfolio, and in particular the components targeted at government priorities and innovative company growth, UKRI will prioritise funding allocations and delivery models that improve investment readiness, reduce risk for private investors, and support stronger connections between publicly funded innovation and markets. UKRI’s Corporate Plan for 2025–27 places clear emphasis on maximising the impact of public funding by crowding in private capital, strengthening business engagement, and supporting pathways from research and innovation to commercial growth.
Innovate UK has a central role in this approach as the UK’s national innovation agency. As set out in its recent prospectus changes in how it supports firms will further strengthen its focus on unlocking private sector investment. This includes acting as a trusted source of technical due diligence, supporting businesses to demonstrate commercial potential, and aligning public grant funding with credible pathways to follow-on finance. This will build on its existing success and, for example, Innovate UK’s Investor Partnerships have unlocked £448 million in aligned equity investment from 105 investor partners.
Innovate UK will also continue to work ever more closely with partners across the public finance landscape, including the British Business Bank, and seeks to ensure that funded businesses are able to move into equity, debt and other forms of private investment. The heads of Innovate UK, British Business Bank, NWF and other public finance institutions meet regularly to discuss integration through the Strategic Public Investment Forum.
Government departments beyond DSIT, whether delivering R&D through UKRI or independently, have a similar focus on unlocking private sector investment. We agree with the importance of monitoring their success in achieving this. Where programmes are intended to attract private investment, this is monitored through programme-level monitoring and evaluation, including the collection of data on co-investment and follow-on investment from private sources.
In addition, DSIT is working to improve the quality and consistency of R&D spending data across government and to embed its use in decision-making. DSIT regularly commissions data on departmental R&D spending, and asks departments for information on the private sector investment their R&D programmes attract, or are expected to attract. This will provide a clearer, cross-government view of progress on unlocking private investment and performance across key R&D sectors. In addition, UKRI is working to standardise the recording of private sector leverage across its portfolio, including consistent data on co-investment, follow-on funding and subsequent investment into supported or spin-out businesses, such as equity or venture capital.
Chapter 5: Commercialising innovation
Recommendation:
The Government should accelerate delivery of the University Spinout Dashboard and commit to making it an annual publication. The dashboard should include standardised data on equity terms, intellectual property agreements, institutional support, and regional outcomes. (Paragraph 54)
Government Response:
The government agrees with the recommendation. We published the national Spin-out Register in June 2025 via HESA with Research England, which now provides a validated public record of spin-out companies. Research England published a first iteration of a UK university spin-out dashboard in January 2026 based on the register and other public data. We strongly agree with the Committee on the importance of this type of data which is why the first dashboard includes insights on variations in spin-out production, underpinning research capabilities, and types of investment raised. Future interactive iterations are being developed, including further economic impact measures, using feasible and materially insightful indicators informed by Research England-commissioned expert advice.
The dashboard will focus on data that can be published consistently, including institutional policies, activity metrics, and available regional indicators. Detailed information on equity stakes, intellectual property terms and individual commercial agreements is commercially sensitive and cannot be disclosed without risking investment and negotiations.
Recommendation:
The Government should consider making funding to build the capacity of technology transfer offices contingent on their ability to deliver significant volume of throughput and provide evidence of success in building capacity and developing skills in their local economies. (Paragraph 58)
Government Response:
The government partially agrees with this recommendation. Research England already funds knowledge-exchange capacity through the Higher Education Innovation Fund (HEIF), which enables universities to develop their commercialisation capability and support local economic activity. We agree on the Committee’s focus on success and HEIF provides flexible investment in institutional capabilities, including Technology Transfer Office (TTO) capacity, through a competitive, performance-driven allocation mechanism. A current review of HEIF will increase focus on delivering economic growth priority, including increasing incentives for university contributions to local economic growth. This aligns with our belief that effective technology transfer offices can and should play an important role in supporting commercialisation.
We agree with the Committee that throughput is crucial and Research England has piloted shared technology-transfer approaches through programmes such as the Research England Development Fund and the Connecting Capability Fund, enabling institutions to collaborate and build capacity and volume of throughput. Research England will publish the independent evaluation of the six-month shared TTO pilot too. Research England invested over £4.7 million into 13 different shared TTO pilots in response to recommendation 4 of the independent review of university spin-outs. The evaluation highlights strong sector enthusiasm for shared services, with most projects meeting or exceeding their KPIs. The pilot demonstrated effective knowledge sharing and collaboration, including pooled training, access to legal advice and development of templates that the Committee rightfully identified as important indicators for the capacity of technology transfer offices.
Recommendation:
In its response to this report, the Government should set out how it plans to support the establishment of a Northern Gritstone or Midlands Mindforge for every region of the UK. (Paragraph 61)
Government Response:
The government partially agrees with this recommendation. We recognise the important role of investor-led vehicles such as Northern Gritstone and Midlands Mindforge in university commercialisation and scale-up. These models depend on investor appetite and committed institutional leadership rather than central direction.
Our role is to enable the conditions for investment to emerge where there is clear local demand, credible leadership and commercial viability. Where investment funds form that meet these conditions, we intend to and have supported them through UKRI and the British Business Bank in line with the Committee’s recommendation.
Research England has supported collaborative commercialisation activity involving universities participating in investor-led initiatives, supporting the development of Northern Gritstone and Midlands Mindforge. In parallel, the British Business Bank has supported investment into university-linked innovation funds, including participation in Northern Gritstone. It also operates regional investment funds, including the Northern Powerhouse and Midlands Engine funds, providing debt and equity finance to innovative SMEs and complementing university-linked commercialisation initiatives.
Together, these interventions help investor-led models develop where partners judge them viable, without government directing specific institutional structures from the centre.
Recommendation:
The Government should establish a series of regional branches of the British Business Bank, with a substantial presence on the ground in undercapitalised regions, to ensure that the Bank’s policies are aligned with the needs of innovative businesses across the UK. (Paragraph 74)
Government Response:
The government partially agrees with the recommendation. We recognise the importance of ensuring that access to finance reflects the needs of innovative businesses in every part of the UK. The British Business Bank (BBB) operates a substantial regional presence through its Nations and Regions Investment Funds, which work with capital allocators embedded locally to deliver debt, guarantees, and equity finance to SMEs. To date, BBB has dedicated £1.6 billion of funding across the nations and regions to ensure companies across the UK are able to access the capital they need to scale and grow. These Nations and Regions Investment Funds provide micro-loans, debt, and equity products, ensuring businesses can access the finance they need regardless of location, and enabling BBB to maintain a strong on-the-ground presence across the UK.
The BBB is now adding further resources:
- £350 million for new East and South-East Investment Funds, expanding BBB’s footprint into these regions and strengthening access to early-stage and growth finance
- An additional £100 million supporting ten, high-potential innovation clusters across the UK.
Together, these programmes address the issue identified by the Committee’s recommendation, without the need for branded regional branches, ensuring that the Bank’s policies remain closely aligned with business needs across all nations and regions of the UK.
Recommendation:
The Government should expand the Proof of Concept Fund and ensure it meets the needs of existing or emerging clusters of innovation. It should also increase the size of available awards to £1 million. (Paragraph 78)
Government Response:
The government agrees with the need to provide sufficient proof-of- concept funding in supporting research commercialisation and the development of spin-outs. UKRI is already taking steps to strengthen the provision of this funding and expects overall proof-of-concept funding to grow across the spending review.
The £40 million proof-of-concept programme sits within a wider UKRI landscape of translational funding, some of which exceeds £1 million per award where relevant to the technology. For example, the Medical Research Council’s Developmental Pathway Funding Scheme provides support and is not subject to a fixed upper award limit where costs are justified, and typically funds over £1 million. For businesses, Innovate UK competitions can also offer substantial awards, including funding of up to around £1 million in appropriate cases.
UKRI will set out plans for building on its existing proof-of-concept funding offer this summer via its delivery plans. This will include specific plans for funding within individual sectors, as part of the new cross-UKRI programmes supporting Industrial Strategy sectors.
Recommendation:
The Government should introduce a mechanism for businesses that ‘graduate’ from proof of concept funding, to funnel them directly through subsequent stages of investment. (Paragraph 79)
Government Response:
The government agrees with this recommendation, which is why the ‘UKRI Venture Builder’ pilot programme will go live in 2026/27 as an extension to Innovate UK’s ICURe programme. UKRI Venture Builder will support just spun-out ventures who demonstrate potential for high growth aligned to IS growth sectors, with an objective to become investible (pre-seed investors) by end of the programme. In phase 1, the pilot will focus on Frontier AI, Engineering Biology and Advanced Materials.
Further support will be available to businesses as they grow and progress through stages of investment. Innovate UK set out their approach to providing an integrated end-to-end support offer in their Prospectus on the 19 March. The Velocity account management service will work with businesses, connecting them to the investment community as they become investment ready.
This will be further enhanced by Innovate UK’s strengthening relationship with public finance institutions like the British Business Bank and the National Wealth Fund. Businesses will have access to a connected pipeline, with Innovate UK acting as a due diligence engine briefing investors on which businesses are ready to raise capital.
We agree with the Committee on the importance of directly funnelling through the investment stages and this connected system of support will allow businesses with high potential for growth to progress from initial proof of concept support through to subsequent stages of investment.
Recommendation:
In its response to this report, the Government should set out how it intends to ensure the Catapult network is more effectively targeted at addressing regional disparities, including its assessment of whether removing the imperative for Catapults to raise private funds would increase their impact in the UK’s regions. (Paragraph 83)
Government Response:
Catapults are national capabilities, designed to support businesses across the UK to scale, translate R&D in new products and services, commercialise emerging technologies and strengthen the UK’s global competitiveness. Catapults operate across all parts of the UK, from the Offshore Renewable Energy Catapult’s Operations & Maintenance Centre of Excellence in Grimsby, to the Compound Applications Semiconductor Catapult in Wales. Their presence locally helps generate high value jobs, develop skills, attract inward investment, while anchoring technology clusters.
While their primary goal is not to drive regional economic development, they generate significant regional benefits through their operations, partnerships and impact on the skills base. We agree that Catapults can and should continue to do more to strengthen their regional impact. However, this must remain secondary to their core role as national capabilities for research and innovation translation to drive business creation and growth. To deliver impact, Catapults must be located where industrial capability, research excellence and market opportunity already exist. Establishing Catapults away from such strengths would reduce industry engagement and overall impact.
Innovate UK’s Prospectus published in March 2026 confirms its commitment to embedding regional strengths across its programmes, including Catapults, and to ensuring that the benefits of innovation are felt across the UK in partnership with devolved nations, Mayoral Authorities and Local Innovation Partnerships.
The government disagrees with the recommendation that removing the requirement for Catapults to raise private funding would enhance their impact in regions. The current funding model, combining core public grant with competitively won public R&D funding and private sector revenues, ensures Catapults remain responsive to both public policy priorities and real market demand. This balance prevents displacement of private activity and keeps Catapults focused on helping businesses scale, rather than competing with them.
Removing private funding requirements risks making Catapults more reliant on public funding, weakening their engagement with businesses, and reducing industry pull, the very mechanism that drives commercial adoption, scaling of firms, and inward investment across regions. The existing model already provides the flexibility to adjust funding levels to reflect sector maturity, regional context, technology trends, and the availability of alternative funding sources such as collaborative R&D. Some of the catapults most successful at attracting private investment are in lower-productivity regions.
Recommendation:
The Government and Innovate UK should develop a standardised and transparent set of performance indicators for the Catapults. These should include measures of industry engagement, commercialisation outcomes, support for technology and innovation adoption, regional economic impact, and wider societal benefits by region. (Paragraph 84)
Government Response:
The government agrees with the recommendation on the importance of clear, consistent and transparent performance reporting across the Catapult Network. This is why Catapults already operate under a standardised set of key performance indicators, developed as part of the current Catapult business case covering the 2023–2028 funding period. These indicators underpin the monitoring and evaluation of all Catapults and are applied consistently across the Network, ensuring comparability, transparency and accountability.
The common metrics include:
- Industry engagement measures such as the number of discrete partners and CR&D industry match funding
- Business growth indicators, including private and public funding secured, headcount growth and turnover growth of Catapult supported SMEs
We also agree with the Committee’s recommendation to strengthen the evidence base. However, this must be balanced against the reality that Catapults operate in diverse technology domains, at different stages of market maturity, and with varied industry structures. Overly prescriptive KPIs risk reducing the Catapults’ responsiveness to business needs, or distorting their focus over time.
DSIT and Innovate UK are working to expand the data available on Catapult activities, including in areas such as innovation adoption, market readiness, and longer-term economic outcomes. Ahead of agreeing the next 5-year core grant for Catapults (April 2028 onwards) we will implement an improved approach to measuring performance of the Catapults. This will balance the need for robust data, against the administrative burden on organisations which need to remain agile.
The Committee also raises the issue of transparency which we agree is important. Since their creation in 2011, several assessments of the Catapult Network have been conducted to evaluate its impact. The outcomes of these reviews consistently indicated positive results, confirming that Catapults contribute effectively to the UK innovation ecosystem. Furthermore, Catapults ensure public access to information via annual impact reports, independent evaluations, and case studies presented on their websites.
Recommendation:
There should be a minister in the Cabinet Office responsible for innovative procurement, supported by a dedicated unit and responsible for exploring new approaches to engaging SMEs, spinouts, and scaleups, particularly those developing UK-owned intellectual property; and making use of testbeds to trial emerging technologies and new procurement models. (Paragraph 88)
Government Response:
The government agrees that public procurement can shape markets, create demand for new technologies and widen access for small businesses to scale-up.
Chris Ward, Parliamentary Secretary in the Cabinet Office, is the minister responsible for public procurement, including innovation. He is part of a cross-government group including ministers from HM Treasury, DSIT and DBT who meet regularly to develop policy ensuring government procurement drives innovation in public service delivery, encourages small businesses, start-ups, and scale-ups in the UK to bid for public contracts, and supports innovative and priority growth sectors identified by the Industrial Strategy. The government, via this group, is exploring the creation of a dedicated unit to increase procurement of innovation, balancing the need to empower departments and drive activity from the centre.
The Cabinet Office continues to work closely with DSIT and the Commercial Innovation Hub to drive and develop innovation practices across the civil service and the Government Commercial Function. Finally, departments across government have also been asked to establish Director General level Procurement of Innovation Champions to support and advocate for increased innovation within their own departments as part of the delivery of the Entrepreneurship Prospectus published in November 2025. The Chancellor, Auditor General and Chair of the Public Accounts Committee have jointly written to departments to explain that taking risks in pursuit of innovation can be good value for money, even if innovation fails.
We are also appointing senior Innovation Champions to identify unmet innovation needs and drive innovation procurement. In defence, the Ministry of Defence has committed 10% of its equipment budget to novel technologies and is investing £400 million per year through UK Defence Innovation to pull emerging technologies through to frontline use. The government has appointed Amelia Gould to lead UKDI with the core purpose of exploring better methods of engaging innovative tech companies and supporting the development of their technologies into armed forces deployment.
Recommendation:
The Government should encourage the development of specialist investor capability in science and tech across the UK, particularly in strategic deep tech sectors such as quantum. It should support the development of regional investor and investment readiness training programmes, expand partnerships between technical experts and investment networks and reduce business rates on lab space for early-stage companies. It should create investor envoys for key deep tech sectors, modelled on the existing trade envoys, to liaise between stakeholders and the Government. (Paragraph 93)
Government Response:
The government agrees with the overall intent of this recommendation. We recognise the importance of improving access to finance for science and deep tech companies, and the need to strengthen specialist investor capability across the UK, particularly in strategic sectors such as quantum and have recently announced a specialist procurement programme ProQure that will be part of stimulating the private sector investment base. The British Business Bank will play a key role here through its expanded capacity which will allow it to make £2.5 billion of investments per year from 2026/27. This will allow for a greater focus on building the ecosystem of specialist investors in IS8 sectors including in strategic deep tech sectors. Expansion of the Bank’s Enterprise Capital Funds and Investor Pathways will also support new and emerging specialist fund managers. We agree with the Committee the need to expand specialist knowledge which is why we will continue to build on initiatives such as the Cluster Innovation Hubs, the successful Science and Technology Venture Capital Fellowship Scheme and related programmes that build investor skills across the UK, alongside plans for a Local Growth Network to develop regional investment ecosystems.
We are making progress and delivering against the Mansion House Accord, which will be reported once commitments begin to convert into committed capital flows. The second annual progress update on the Mansion House Compact (16 October 2025) shows that, by February 2025, signatories doubled their unlisted equity investment in DC default funds from £0.8 billion to £1.6 billion. Through the Science & Technology Venture Capital Fellowship, we are supporting the next generation of fund managers to develop the capability to invest in Science & Technology. We agree with the Committee’s reflection that investor awareness of deep tech opportunities is crucial, this is why the scheme includes regional events to showcase innovation ecosystems across the UK and build investor awareness of opportunities within deep tech and life sciences.
By the end of 2026, a total of 40 mid-career investors will have completed the Programme, providing specialist training and network-building support to enable them to progress into S&T fund management roles. A formal launch of the Alumni Network took place in March, providing a trusted community for continued professional development, knowledge-sharing and sustained engagement between investors and DSIT on Science and Technology policy. We are currently focusing our efforts on these areas rather than specific investor envoys for deep tech sector.
Recommendation:
The Government should publish a long-term strategy for science infrastructure investment. It should instruct the British Business Bank to ring-fence a percentage of its funds to support the development of innovation infrastructure in partnership with the private sector. (Paragraph 101)
UKRI should revise its Infrastructure Roadmap to include a detailed mapping of existing capabilities, identify underserved regions, and prioritise infrastructure development that supports economic resilience and long-term growth. (Paragraph 102)
Government Response:
The government partially agrees with the recommendation. We agree with the Committee on the importance of mapping existing capabilities and prioritising infrastructure development. In 2018 to 2019, the government commissioned UKRI to develop a research and innovation infrastructure roadmap, based on an understanding of our existing landscape and identifying future opportunities to grow our capability. This guided decision making and supported the identification of priorities up to 2030, enabling a more strategic approach to major infrastructure investments. A landscape analysis and opportunities report were published in 2019 and they have provided confidence, strategic direction and a common approach to research and innovation infrastructure planning. The roadmap programme, in combination with UKRI’s Infrastructure Fund approach to investment NAO 2016 report recommendations on ‘BIS’s capital investment in science projects’ to ensure we are continuing to support long-term economic growth.
UKRI is currently undertaking a refresh of the infrastructure roadmap which will be published later in 2026. The scope includes research and innovation infrastructure accessible to users, both publicly and privately funded. Hence its scope is broad and it could be used more widely by other funding bodies. Where places can identify innovation and R&D clusters with the potential to be world-leading, UKRI will partner with them to align its investment levers, including infrastructure, behind that cluster. The programme has engaged with almost 300 operational research and innovation infrastructures across the UK and beyond to update our understanding of the landscape. An additional ten workshops have been held in the nations and regions of the UK with stakeholders from industry and sector groups, regional and national government and the academic research community.
The programme will demonstrate the impact and benefits of infrastructure investment to world-class research and innovation, our lives and livelihoods. It will identify transformative opportunities to guide future investment to grow our regional and national strengths, support economic growth and advance technological development.
On the longer-term strategy for science infrastructure investment, we believe it is the role of the National Wealth Fund to support the development of innovation infrastructure in partnership with the private sector. The National Wealth Fund is the UK government’s principal investor and policy bank with £27.8 billion of capital. In January NWF published its Strategic Plan, setting out its focus on the government’s economic growth and clean energy missions. NWF’s strategy is centred around: unlocking growth opportunities on the pathway to clean energy, accelerating place- based investment and strengthening sovereign & strategic capabilities. NWF’s Strategic Plan identifies 25 sectors and value chains – including batteries, nuclear and transport infrastructure – where it expects to be active over the next five years. These sectors reflect areas where the NWF can address access-to-finance gaps most effectively. NWF focuses on large capital-intensive investments in its priority sectors, where there is an undersupply of private finance. It deploys a range of financial products including equity, debt and guarantees.
While long-term strategic planning for UK science and innovation infrastructure is critical, the BBB is not structured or mandated to undertake infrastructure investment, and introducing such a role would create duplication and confusion across the public finance landscape. BBB’s role in the market is focused on supporting SMEs, start-ups, scale-ups and venture/growth markets, using loans, guarantees and equity to address access-to-finance barriers for smaller businesses. It does not finance large capital-intensive infrastructure projects.
Given these distinct and complementary roles, we believe that allocating a ring-fenced infrastructure mandate to BBB would blur institutional boundaries, duplicate existing NWF functions, and undermine the clarity achieved through recent reforms to the public finance ecosystem. The NWF is the appropriate vehicle through which government should continue to develop and deliver long-term science and innovation infrastructure investment including an example of a recent NWF investment supporting technology development is that NWF committed up to £599m to Rolls- Royce SMR to support the development of its small modular reactors.
In terms of a framework, we recognise the importance of research and innovation Infrastructure, and we are working with UKRI and other stakeholders to determine how it can best deliver government priorities across the whole lifecycle of infrastructure investment (options analysis, construction, operation or repurpose, upgrade, and decommissioning). DSIT is exploring options including developing a framework and toolkit to support R&D infrastructure investment decisions.
Recommendation:
The Government should publish a Regional Graduate Retention Strategy, backed by investment and cross-department coordination. This should include support for university-industry collaboration to create high skilled local employment, linked to analysis of public services such as housing, transport, and education – which are needed to create the conditions for graduates to build careers throughout the UK. (Paragraph 104)
Government Response:
The government partially agrees with the recommendation and recognises the central role that university–industry collaboration plays in driving local growth and innovation. However, the combination of the below authorities, plans and statutory guidance means we do not commit to a Regional Graduate Retention Strategy at this time.
We already support and encourage collaboration between Mayoral Strategic Authorities (MSAs), local authorities, and higher and further education institutions – through policies such as Local Growth Plans – in recognition of both the role that universities play in local communities and economic growth, and the importance of providing local employmentopportunities for skilled graduates. Local Growth Plans, developed by MSAs, are driving this government’s growth mission across our regions. These are 10-year strategic frameworks that support MSAs to convene local partners, including universities, and provide a framework for places to create opportunities for skilled graduates and retain talent, providing a boost for local economies and addressing many of the issues highlighted in this recommendation.
In addition, Local Skills Improvement Plans (LSIPs) provide a robust, evidence based assessment of current and future skills needs in a local area, enabling further and higher education providers to align their curriculum with local labour market demand, and giving students and graduates a clear line of sight to strong employment pathways and helping them access high quality job opportunities close to where they studied.
The new strengthened role of Strategic Authorities in LSIPs will further enhance the LSIPs by linking them to place based economic planning, ensuring that local skills priorities sit within support wider growth strategies, including investment zones, innovation clusters and regeneration plans. Our updated statutory guidance encourages designated Employer Representative Bodies and Strategic Authorities to work proactively with local higher education institutions to ensure that technical, professional and advanced skills needs are fully reflected in curriculum planning, and promotes deeper collaboration between employers and universities, improving the visibility of local career opportunities.
Chapter 6: Diffusion and absorption
Recommendation:
The Government should prioritise the diffusion and adoption of innovation and technologies across the UK. This will require greater emphasis on building skills for smaller businesses; increased advice and support on regulatory matters for smaller businesses; making finance available to companies to adopt technologies, such as AI; and facilitating engagement between universities and local businesses. In its response to this report the Government should set out its plans to do this, including how it intends to scale up support for the Made Smarter Adoption programme to better engage SMEs and non-tech businesses across all regions. (Paragraph 115)
Government Response:
The government agrees with the importance of diffusion and adoption of innovation and technologies across the UK. That is why we are expanding the Made Smarter Adoption programme, committing up to £99 million from 2026 to support a further 5,500 small and medium-sized manufacturing businesses to adopt new technologies, and extending this proven model through a dedicated scheme for the Professional and Business Services sector.
Studies consistently demonstrate the UK’s productivity gap, citing low and volatile investment, skills mismatches, and poor diffusion of technology and innovation.3 Small and Medium-sized Enterprises (SMEs) in particular face barriers adopting new digital technologies, including a lack of information, skills and resources.4 We are working to tackle these issues by implementing the ten recommendations set out by the SME Digital Adoption Taskforce, including by bringing industry together at roundtables with No.10 to collaboratively deliver digital adoption support for small businesses, and running local-level SME Digital Adoption pilots. We will be publishing an update in the Spring. This work sits alongside support already available to help companies adopt digital technologies such as AI, including the Digital Catapult, Hartree Centre and the Cyber Action Toolkit from the National Cyber Security Centre.
To drive widespread diffusion and uptake specifically of AI, across the workforce and SMEs in every region and locality, we will increase understanding of AI tools and capabilities, provide targeted support with integration, and improve access to upskilling materials. This will include working with industry to upskill 10 million workers by 2030 and expanding BridgeAI to focus on guidance and support for SMEs.
Through Innovate UK, the government is also committing £52m to support a new national network of Robotics Adoption Hubs. Run by universities, businesses, or public sector organisations selected through open competition, these will provide companies of all sizes access to expert advice, live demonstrations, and networking opportunities. The window for applications has recently closed, with Hubs expected to be operational from the second half of 2026.
Recommendation:
The Regulatory Innovation Office should work with universities, SMEs, and spinouts to map the full pathway from research to market, identifying where disproportionate burdens or barriers exist. It should also publish a regional support strategy with measurable objectives and deliverables. (Paragraph 119)
Government Response:
The government partially agrees with this recommendation, and we share the Committee’s objective of supporting faster, safer and more predictable routes from research to market for innovative technologies. The Regulatory Innovation Office (RIO) role is deliberately focused as it identifies and helps address regulatory barriers in priority technologies where regulation is a constraint on growth, investment and scale up. In doing so, it draws on evidence from across the innovation system, including businesses, researchers, investors, regulators and departments, to understand where regulatory complexity, fragmentation or uncertainty is slowing progress. We agree with the Committee on the importance of deliverables and both progress and impact are reported by RIO annually, with the One Year On report released in autumn 2025 and the next expected in October 2026.
RIO works with regulators and lead departments in areas of focus to map the systems where this helps address fragmentation, for example, the Engineering Biology Regulators Network is leading work to map the regulatory environment for innovative cosmetics, following the RIO work in engineering biology. Many of the issues a mapping and regional support strategy exercise would cover, including finance, skills, commercialisation, scale up and local growth support, sit beyond regulation and are being addressed through wider departmental and cross government activity, including the Industrial Strategy, which this wider response has highlighted. Other activities across government include our response to the Independent Review of University Spin-outs, UKRI’s commercialisation and spin-out support, and DSIT’s wider work on regional innovation ecosystems and business support across the UK, which partially addresses the Committee’s recommendation.
Chapter 7: Devolution
Recommendation:
The Government should, in its response to this report, and on an annual basis thereafter, set out a framework to clarify the roles and responsibilities of sub-national authorities in the innovation landscape, particularly in areas that do not yet have formal devolution arrangements. This framework should include guidance on strategic planning, data- sharing protocols, and mechanisms for cross-regional collaboration. It should create a model that ensures all regions, regardless of devolution status, can access strategic planning tools, funding, and representation in national innovation policy. (Paragraph 131)
Government Response:
The government partially agrees with this recommendation.
Through our English Devolution White Paper we set out our ambition to support more local leaders, working in partnership with businesses and universities, to unlock their regions’ innovation potential to ensure everyone benefits from innovation-led growth. These commitments are complemented by funding programmes, such as the £2bn Investment Zones focused on creating the conditions for investment and innovation, that support innovation across all parts of the UK to ensure all regions, regardless of devolution status, can access tools, funding, and representation in national innovation policy.
As set out above, DSIT and UKRI are making significant reforms to build closer partnership with local leaders to back locally led, high-potential innovation clusters in support of national objectives, including the Industrial Strategy. Where places can identify and evidence clusters with the potential to be competitive globally, UKRI will align its portfolio of activity behind them over time. It is only by making those choices, and building excellence and capability over time, that we can develop clusters that are internationally competitive.
Underpinning this approach are focused programmes, including the Local Innovation Partnerships Fund, which is empowering partnerships of local leaders, research organisations and industry to grow innovation clusters across the UK to help deliver innovation-led economic growth. We anticipate that if this first wave of Local Innovation Partnerships Fund is successful then this programme could be expanded. The programme has allocated funds to each of the seven regions with established Mayoral Strategic Authorities and has also recently announced the outcome of competitive awards for regions without devolution deals, including up to £20 million for the Great South West to develop, test and use autonomous technology like drones on land, at sea and in the air. The Great South West is a part of England that does not have Mayoral-level devolution at present, but where a ‘triple helix’ partnership of local leaders, research organisations and industry came together to put forward a high quality bid for support.
Beyond support through Local Innovation Partnerships Fund, we are driving regional innovation through the government’s Industrial Strategy commitments, where we reiterated our full support for Freeports and Investment Zones. UKRI has networks of place-based staff who work with local partners to share information about relevant opportunities across UKRI and to help build local capability, including through and developing jointly-owned collaborative innovation plans across the UK.
This approach will allow us to continue to grow R&D excellence wherever it is found. This will build on progress already made, with UKRI improving the regional distribution of R&D funding from 47% to 50% outside the Greater South East from FY21/22 to FY23/24.
In summary, because of the actions we are taking in this area address the Committee’s recommendations, we do not believe a new framework is required at this time.
Recommendation:
The Government should commission an independent review examining the link between R&D, new businesses and growth in jobs and GDP since 2008, and task it with recommending how to make public investment in R&D increase productivity, growth, and jobs. This should use examples such as Greater Manchester as case studies in raising productivity, to identify lessons for other regions. (Paragraph 132)
Government Response:
The government disagrees with this recommendation but recognises the importance of understanding the economic impacts of public R&D investment.
A substantial body of evidence already exists linking public and private R&D investment to productivity and GDP growth at a national level, including work by Oxford Economics (2020 The relationship between public and private R&D funding), Frontier Economics (2023 Rate of Return to Investment in R&D), and DSIT (2025 The value of public R&D) which found that, on average, £1 of civil public R&D investment generates £8 in net economic benefits for the UK over the long term. There are also academic studies examining firm level impacts of publicly funded R&D, which has informed R&D investment policy over time. At a regional level, National Institute of Economic and Social Research (2021 From Ideas to Growth) research examined drivers of innovation and productivity across firms, regions and industries in the UK, while recently DSIT commissioned the OECD to evidence regional “leverage rates” (2025 Leveraging government R&D investment…).
In addition, UKRI completed the Spin-Out Review previously, which looked at the strengths and opportunities to go further to deliver our commercialisation ambitions through our support for spin-out companies.
Footnotes
1 https://www.gov.uk/government/publications/dsit-research-and-development-plans-to-2029-to-2030/dsit-research-and-development-rd-plans-to-20292030, and https://www.ukri.org/publications/explainer-ukri-budget-allocations/budget-allocations-for-uk-research-and-innovation/.
2 https://www.ukri.org/what-we-do/browse-our-areas-of-investment-and-support/local-innovation-partnerships-fund/
3 Technology Adoption Review, 2025 Technology Adoption Review 2025; The UK’s Capital Gap, 2025 The UK’s capital gap
4 SME Digital Adoption Taskforce final report, 2025 SME Digital Adoption Taskforce: final report – GOV.UK