What really drives UK innovation? It takes a village.

Dan Hodges, Deputy Director of Strategy, Innovate UK 

When we think of innovation, it’s tempting to picture a lone genius or a single visionary company—Steve Jobs unveiling the iPhone, or Disney reimagining entertainment. But the reality is far more complex. Just as it takes an entire ecosystem to produce something as simple as a burger (from the cow - or plant-based alternative - and the farm, to the logistics, packaging, and health & safety standards), true innovation is the result of a vast, interconnected network of people, institutions, and resources working together—often behind the scenes. 

The Unseen Foundations of Success 

Take Apple, for instance. While Steve Jobs’ vision was crucial, Apple’s meteoric rise was rooted in the fertile ground of Silicon Valley: world-class universities like Stanford and UC Berkeley, a deep pool of tech talent, abundant venture capital, and a collaborative culture. Add to this a robust legal framework for intellectual property, government-backed technologies (think GPS and the internet), and a global supply chain, and you have the core of Apple’s success. I have seen the same countless times through my career: companies don’t just benefit from receiving a grant, they get just as much value from building collaborations, getting business growth advice, connecting to investors, and understanding the regulations they need to navigate in their industry. 

Innovation is never just about the headline act—it’s about the whole cast and crew. 

What is an Innovation Ecosystem? 

An innovation ecosystem is a dynamic web of institutions, resources (human and financial), policies, and cultural factors. It supports ideas from conception to commercialisation, adoption, and widespread impact. In today’s world, innovation is inherently systemic—especially when tackling complex global challenges. It crosses national and sectoral boundaries, demands collaboration, and relies on strong regulatory and market frameworks. 

Consider electric vehicles (EVs). Developing an EV isn’t just about building a new car. It means integrating rapidly evolving technologies like batteries and AI, constructing new infrastructure  like charging points and smart grids, and coordinating with local authorities, developers, and energy providers. No single company can do this alone. It takes a whole village to drive such transformative change. 

How Innovation Ecosystems Emerge 

Most innovation ecosystems aren’t built from scratch; they evolve organically. Silicon Valley, for example, grew out of Stanford’s scientific excellence and openness to entrepreneurship. Alumni started tech companies, venture capital flowed in, and government agencies like DARPA invested strategically. Over decades, this created the powerhouse we know today. 

On a national scale, the UK stands out as a global innovation leader—not because of one company or sector, but due to the strength and diversity of its innovation ecosystem. 

The UK’s Innovation Strengths 

The UK consistently ranks among the world’s most innovative countries. According to the Global Innovation Index (GII), it sits 5th globally, trailing only Switzerland, Sweden, the US, and Singapore. While such rankings gloss over nuances, they highlight the UK’s robust ecosystem. 

A big part of this is the UK’s research base. With three of the world’s top ten universities (including Oxford at number one) and twelve in the top hundred, the UK attracts global talent and investment, fuelling clusters of expertise. The old cliché that the UK is “good at science but bad at commercialisation” is only partly true. In fact, the UK ranks 10th for innovation inputs (like institutions and infrastructure) but 3rd for outputs (including intellectual property, high-tech exports, and unicorn valuations). Pound-for-pound, the UK leads the world in the value of its high-growth tech companies. 

The UK also boasts Europe’s strongest venture capital market, with investment levels far outpacing other countries. And we have some of the strongest science and technology clusters in the world, including Cambridge leading the global pack. 

Strong market and regulatory frameworks, such as intellectual property protection and a competitive tax system, have enabled world-class innovation clusters to emerge: motorsports in Oxford, life sciences in the London-Oxford-Cambridge “golden triangle,” FinTech in London, creative industries in Glasgow, and advanced manufacturing in the West Midlands. 

The Challenges: Productivity and Investment 

But the picture isn’t all rosy. One glaring weakness is productivity. On the GII’s 24 innovation output indicators, the UK ranks a dismal 75th in labour market productivity. As Nobel laureate Paul Krugman put it, “Productivity isn’t everything, but in the long run, it’s almost everything.” Productivity growth drives economic prosperity and living standards, so this is a critical area for improvement. 

Why isn’t the UK’s innovation strength translating into higher productivity? One reason is investment. While R&D spending has risen to 2.8% of GDP, this still lags behind leaders like Switzerland, Sweden, and the US (all above 3.4%). Government R&D spending has jumped 36% over five years, but it takes time for these investments to yield results. 

Another issue is Gross Capital Formation—essentially, how much the UK invests in equipment and infrastructure—where the UK ranks 114th globally. This could reflect short-term thinking, structural economic factors, or shifting international relationships. It may also signal a lower capacity to absorb and adopt innovation, with activity concentrated in a few strong companies and clusters. 

According to Innovate UK’s 2024 survey, only 39% of UK firms engaged in R&D, and while 47% planned to invest, this was down from 53% the previous year. There are other challenges too: skills shortages, gaps in scale-up finance, regional disparities, and the need for more collaboration. 

Innovate UK: Building the Village 

The village metaphor came to mind because over the last five years of being a parent, I’ve heard it too often in that context. I’ve also felt how much harder things are when the village isn’t there, for whatever reason. It (parenting or innovating) can be done, but it takes more work, more effort, more compromise and more difficult days.  

This is why the most successful innovation programmes don’t just focus on providing one thing (such as funding), but rather act as one cog in a system of support. I saw this in my earliest days supporting innovation, seeing collaborative grants not just as a means of funding for businesses, but as a means to build partnerships, and to support access to large companies or university knowledge.  

As providers of innovation support have grown more sophisticated over time, learning from the evidence, we have seen programmes which deliver multiple forms of support in a coherent programme of activity. From our early days as the Technology Strategy Board, we’ve focused on bringing together businesses and partners to tackle fragmentation. By 2021, fostering a thriving innovation ecosystem became one of our five core strategic themes. 

We invest in innovation infrastructure, support skills and diversity, enable adoption and diffusion, and work closely with partners across the system. Our Local Action Plans strengthen regional innovation, and strategic collaborations with organisations like the British Business Bank and the British Standards Institution provide comprehensive support. 

Moving forward, I’m excited to explore how we can take this further, working with partners across the innovation system to better connect our village and further foster a cohesive, ambitious, and thriving innovation community. 

Looking Ahead 

The UK has a world-class innovation ecosystem, but there’s more to be done. Boosting productivity, increasing investment, and ensuring that innovation is broad-based and inclusive are key challenges. Over the coming months, we’ll dive deeper into these issues—skills, finance, regional gaps, and more—in this blog series. 

Innovation is never a solo act. It takes a village—and in the UK, that village is vibrant, diverse, and ready for the future.

If there’s a topic you’d like us to explore, let us know. The conversation is just beginning. 

The Talking Innovation blog series will be featured in the Innovate UK Innovation Insights - our monthly newsletter.