FRONTIER FIRMS DRIVE STRONGER SALES GROWTH ACROSS UK ECONOMY
Britain’s most innovative companies are significantly outperforming their peers, with new research pointing to a clear relationship between innovation activity and sales growth across the UK economy.
According to the latest State of Innovation 2025 findings, businesses that actively innovate are expanding far more rapidly than those that do not. Companies engaged in innovation recorded average sales growth of 7% during 2025, rising to 9% among so-called frontier firms operating at the leading edge of their industries. By contrast, businesses that did not innovate saw sales growth of just 0.4%.
The data suggests that innovation is becoming more widespread across the UK. Nearly three in five companies reported introducing new or improved products or services during the year, an increase on the previous year and evidence of a broadening innovation base across sectors.
That momentum is expected to continue. More than half of the 2,000 businesses surveyed said they plan to invest in research and development over the next 12 months, indicating growing confidence in innovation as a driver of competitiveness and long-term growth.
However, the findings also highlight persistent structural challenges, particularly for smaller companies. Almost half of businesses said they encountered barriers to innovation over the past year, with access to finance emerging as the most significant constraint. Nearly three-quarters of innovating firms cited difficulties securing bank lending or equity investment.
Micro-businesses were disproportionately affected. The proportion of smaller firms reporting obstacles such as limited access to finance, uncertain customer demand, regulatory complexity, shortages of skills and reduced public funding rose sharply during 2025. In contrast, larger companies reported a decline in such barriers, suggesting that scale offers a degree of insulation from the pressures facing smaller enterprises.
The divergence underscores a growing concern among policymakers and business leaders that while innovation is delivering clear economic benefits, its rewards may be increasingly concentrated among larger and better-capitalised firms. Without improvements in access to finance and support for early-stage businesses, the gap between leading innovators and the rest of the market risks widening further.
As the UK seeks to accelerate productivity and economic growth, the findings reinforce the role of innovation as a central driver — while also highlighting the need to address the constraints that prevent smaller firms from fully participating in that growth.
