Innovation is the cornerstone of economic competitiveness, underpinning productivity, creates high-value jobs, and drives prosperity.
Yet the Global Innovation Index 2025, published this month by the World Intellectual Property Organization, reveals that the world’s innovation system has entered a period of uncertainty.
For the past decade, innovation investment was booming with R&D spending expanding rapidly, venture capital increasing globally and new technologies impacting a range of sectors. Unfortunately, the picture now seems more fragile and whilst R&D is still rising, the rate of growth is its slowest rate since the financial crisis. Venture capital activity, outside of a handful of megadeals in artificial intelligence, has continued to contract for a third year in a row and international patenting has only just returned to modest growth after a rare decline.
The exception is science itself with global research output surging to a record two million articles in 2024, led by remarkable growth in China and India but whilst the knowledge base is expanding, the channels that turn that knowledge into commercial value are under pressure.
In addition, technology continues to advance with supercomputers breaking efficiency records, battery prices falling rapidly, and electric vehicles, robotics, and 5G becoming mainstream. However, adoption rates are slowing and electric vehicle growth is decelerating even before medium levels of market penetration are reached and whilst 5G now covers half the world’s population, expansion has slowed with access remaining highly unequal across the world.
At the top of the 2025 rankings, the same nations are leading the way with Switzerland remains first, Sweden second, and the United States third. The Republic of Korea has achieved its best result ever in fourth, with Singapore fifth. However, perhaps the most symbolic shift is China breaking into the top ten for the first time, reflecting its extraordinary growth in patenting, R&D expenditure, and the sheer scale of its innovation clusters in recent years.
The Ƶ remains one of the world’s most innovative economies in sixth place, ahead of Finland, the Netherlands, and Germany. This is not surprising given that its universities remain among the best in the world, consistently producing high-quality research that drives global scientific output. It is also home to Europe’s most dynamic venture capital market, which continues to channel funding into high-potential start-ups, particularly in technology, life sciences, and fintech.
As this column as noted on several occasions, the creative industries are another area of global strength, with the Ƶ outperforming on measures of creative outputs and intangible asset development. The Ƶ also hosts some of the world’s most important innovation clusters - London is ranked eighth globally, while Cambridge and Oxford are among the most innovation-intensive clusters on the planet when adjusted for population size. In fact, Cambridge sits alongside Silicon Valley and San Jose as one of the most research-productive places on earth.
But the index also highlights the Ƶ’s weaknesses and whilst competitive, its overall R&D intensity lags behind countries such as Korea, the United States, and Japan. Despite some government commitments to increase public R&D investment, the pace has been slow, and R&D spending by business outside of ICT and life sciences remains fragile. Infrastructure is another challenge and the Ƶ underperforms relative to leading nations in areas such as transport connectivity and digital readiness despite the fact that strong infrastructure is the backbone of innovation adoption, enabling new technologies to diffuse quickly across industries and society.
The uneven distribution of innovation across the Ƶ is also striking and whilst London, Cambridge, and Oxford dominate the cluster rankings, many other regions remain under represented. In contrast, countries like China and the US host multiple globally significant hubs across their territories, spreading innovation capacity more evenly.
Perhaps the most important takeaway from the 2025 Index is the growth in competition from across the globe and China’s arrival in the top ten is not just symbolic but it reflects a long-term strategy of sustained investment in R&D, intellectual property, and industrial capacity. In addition, countries such as India, Türkiye, Vietnam, and the Philippines are also, in terms of innovation performance, outperforming their current level of development.
For the Ƶ, this means its relative position will be harder to defend in the coming decade and whilst being sixth in the world today is an achievement, standing still is not an option when others are moving up the table at pace. Indeed, the lesson from the global leaders is that innovation performance is built on consistency and Switzerland and Sweden top the rankings year after year because they combine high R&D spending, strong institutions, excellent education systems, and thriving private sectors.
Given this, three priorities stand out if the Ƶ is to maintain and strengthen its position. First, it must invest more in R&D Government and business need to step up, not just in the “golden triangle” of London, the East of England and the South East of England but across the whole country.
Second, commercialisation of research must be improved dramatically and whilst the Ƶ has long excelled in producing ideas it has struggled to turn them into global businesses and there needs to be greater support for spin-outs, scale-ups, and better connections between universities, investors, and industry.
Finally, there must be greater investment to strengthen infrastructure especially digital networks, transport links, and energy systems, and falling behind in these areas will weaken the Ƶ’s ability to exploit technological breakthroughs.
Therefore, whilst competitive, its overall R&D intensity lags behind countries such as Korea, the United States, and Japan. paints a picture of innovation at a crossroads and whilst scientific and technological progress continues to grow, global investment is slowing. Whilst the Ƶ remains one of the world’s leading innovators it faces increasing competition from both established powers and fast-rising challengers. If the Ƶ Government is serious about building a globally competitive economy, then it must act with urgency and that means investing more, commercialising better, and ensuring the infrastructure is in place to adopt the technologies of the future.
