Innovation is key to achieving a sustainable economy and supporting high-value jobs. Addressing pressing socio-economic challenges requires the development and large-scale deployment of new technologies across our industrial sectors.

The Innovation Report, from Cambridge Industrial Innovation Policy, University of Cambridge, is an essential resource for government and industry. It brings together, in a single place, innovation and value-added indicators in a concise and accessible format.

The latest version of the report includes updated indicators and datasets as well as new analysis on the Machinery Manufacturing sector. Insights gathered from consultations with major industry and government stakeholders provide a deeper understanding of the data’s real-world implications.

The 2024 UK Innovation Report was launched at an event, in person and online, and explores the UK’s innovation activity and its industrial performance in a global context.

The aim of the Report is to facilitate policy discussions on innovation and industrial performance – and the interplay between them. While numerous sources of data on the topic of innovation exist, the goal is to contribute to the bringing together of innovation and value-added indicators, in one place.

An important theme throughout the report is the analysis of sectoral and regional data to better understand the drivers of national performance and provide more granular policy insights.

The report is organised as follows:

  • Section 1 reviews the UK’s sectoral productivity and economic restructuring during the COVID-19 pandemic and its aftermath.
  • Section 2 examines the latest data on UK research and development (R&D) expenditure and reviews the country’s performance across various stages of innovation.
  • Section 3 delves into the performance of the UK’s machinery and equipment manufacturing sector, incorporating insights from industry expert consultations.
  • Section 4 analyses the UK’s production of science, technology, engineering and mathematics (STEM) graduates and their job opportunities.
  • Section 5 reviews the UK’s low-carbon and renewable energy economy (LCREE) and examines the decoupling of the UK’s economic growth from its greenhouse-gas emissions.

Read the full report here


  • To review the UK’s innovation and industrial performance and compare it with that of other selected countries;
  • To facilitate discussions on the relation between innovation and sectoral competitiveness; and
  • To contribute to the evidence base that is available to inform industrial and innovation policy.


  • Among the five economies examined, the UK experienced the most pronounced decline in labour productivity (-9.2%) in 2020.
  • Between 2019 and 2021, knowledge-intensive services and manufacturing saw some of the fastest productivity growth among the
    economies analysed. In the UK, for instance, labour productivity in manufacturing increased by 9.7%, while in information and communication it rose by 12.2%. It is reported that the UK was the fastest of the G7.
  • The UK’s gross domestic expenditure on research and development (GERD) as a share of GDP was 2.91% in 2021, above the OECD average of 2.72%. However, the UK still lags behind countries such as Korea, the US, Japan and Germany. In 2021, UK government-funded R&D amounted to 0.57% of GDP, below the OECD average of 0.63%. Growth of business expenditure on R&D (BERD) in the UK M&E sector has been slower than in the manufacturing sector as a whole.
  • The UK machinery and equipment (M&E) sector is a major global player, but some sub-sectors have contracted significantly.
  • Labour shortages have impacted growth and incentivised automation across sub-sectors. The consulted firms reported difficulties hiring younger and more diverse workers for the sector. These difficulties cut across sub-sectors and functions, affecting both engineering and technician positions. Investments in automation and factory optimisation have been occurring in the sector and partly explain the reduction in employment.
    At the beginning of 2024, 12% of UK firms in manufacturing and 6.9% in information and communication said they were experiencing a shortage
    of workers.
  • Within M&E sub-sectors, other engines and machinery for plastic and rubber were the sub sectors that experienced the highest reduction in value added between 2008 and 2021, losing £1.2 billion (50%) and £1.1 billion (90%), respectively. In contrast, lifting and handling equipment and other general-purpose machinery experienced the highest value added increments during the same period, gaining £0.4 billion (41%) and £0.5 billion (36%), respectively, becoming the two sub-sectors with the largest value added in 2021.
  • According to ONS data, value added for the UK M&E sector experienced a contraction between 2008 and 2021, with a compound annual growth rate (CAGR) of -0.4%. In contrast, value added for the UK manufacturing sector grew with a compound annual growth rate (CAGR) of 1.3% during the same period.
  • In 2021 productivity of the M&E sector was 37% higher than the average productivity of the whole manufacturing sector and 60% higher than the whole economy. Overall, the UK M&E sector’s productivity (measured in value added per employee) was higher in 2021 than 2011, mostly driven by a reduction in employment during this period. Productivity in the UK M&E sector has remained consistently higher than the UK manufacturing sector as a whole between 2011 and 2021.

The event, held in person and livestreamed online, included:

Welcome by Professor Tim Minshall

Setting the scene from Lord David Sainsbury

Overview of the report from Dr Carlos López-Gómez

Spotlight on the machinery manufacturing sector by Dr David Leal Ayala

Panel discussion and Q&A chaired by Tim Minshall, joined by:

Michael Clark – Deputy Director, Advanced Manufacturing, Department for Business and Trade

Vanda Jones – Executive Director, British Compressed Air Society (BCAS)

Dr Carlos López-Gómez – Head of the Policy Links Unit, Institute for Manufacturing, University of Cambridge

Faye Skelton – Head of Policy, Make UK

Charles Stevenson – General Manager, JCB London Office

Oliver St John – Deputy Director, Innovation, Department for Science, Innovation & Technology

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