MPs urge overhaul of the UK’s investment system to turn innovation into growth

The UK is not short of innovation. But we lack a system that consistently helps innovative businesses scale, attract investment and commercialise their ideas.

This is one of the core findings of a report by the House of Commons’ Business and Trade Committee on access to growth finance, echoing many of the concerns raised in our evidence to the inquiry.

We welcome the committee’s recognition that the UK’s growth challenge is to ensure that innovative businesses can protect, finance and develop their ideas into successful commercial enterprises in the UK.

In our evidence, we explained that for many early-stage technology companies, patents are among their most valuable assets. Strong patent portfolios help deter competitors, provide confidence to investors and demonstrate intrinsic value. Patents therefore play a critical role in commercialisation and scale-up, helping innovative businesses secure the capital needed to grow.

We noted that intellectual property (IP) strategy should be viewed as a core component of business growth and commercialisation, not simply as a legal consideration. Patent attorneys and trade mark attorneys help businesses identify, protect and leverage their intellectual assets, enabling them to secure investment, enter new markets and build long-term value. A stronger understanding of IP among businesses, investors and policymakers will be essential if the UK is to improve its record of turning innovation into economic growth.

The committee’s report identified several structural weaknesses that prevent this process from working as effectively as it should. Among the most significant is the failure of many businesses to engage fully with the IP system.

Evidence submitted to the inquiry by Make UK highlighted that 94% of Patent Box usage comes from large companies. Chief Economist Fhaheen Khan told the committee that many manufacturing businesses capable of securing patents or other forms of intellectual property protection do not do so because the perceived costs outweigh the perceived benefits. This leaves businesses less able to protect innovation, attract investment and maximise the value of their research and development.

These findings align closely with concerns that we have repeatedly raised. Businesses with strong IP portfolios are often better placed to secure investment, expand internationally and achieve sustainable growth. Yet IP is often treated as a specialist legal issue rather than a strategic business asset.

The committee also highlights the need for more coherent support for high-growth businesses. We welcome its recommendation to establish a dedicated case-management service through the Office for Investment for the UK’s 14,300 High Growth Firms. Such a service would help ensure that promising businesses receive proactive support from public finance institutions, R&D tax reliefs and other government programmes throughout their growth journey.

Also important is the committee’s call for a White Paper setting out a long-term business support service modelled on international best practice, including the US Small Business Administration. Bringing together access to finance, export support, procurement opportunities, skills programmes, export finance and business advice would help address the fragmentation that many growing businesses currently face.

The committee’s emphasis on export support highlights another challenge that we raised with the committee: helping innovative businesses protect their inventions in overseas markets. Too many UK companies successfully develop new technologies but fail to secure patent protection in the countries where they ultimately hope to sell, license or manufacture them.

In oral evidence to the committee, CIPA Public Affairs Committee Chair, Matt Dixon, highlighted shortcomings in the support available to businesses navigating international patent systems, despite the importance of overseas patent protection to attracting investment and supporting export-led growth. He argued that, if the UK was serious about turning innovation into economic success, support for international IP strategies should sit alongside finance, trade and export advice as part of a modern scale-up ecosystem.

In evidence to both the House of Lords Science and Technology Committee’s inquiry into financing and scaling UK technology and to this inquiry, we pointed to problematic clauses in government procurement and funding contracts that have stifled growth. Such clauses provide government with extremely broad rights to all IP generated, including “free, perpetual licensing and sublicensing rights” and, in some cases, rights extending beyond what would normally be expected in commercial agreements. We pointed out that such clauses can: Reduce company valuations; make investors wary because government retains rights that may duplicate or dilute the company’s own rights; undermine competitive advantage;  cause particular harm to start-ups and scale-ups, and create barriers to export growth and future fundraising.

The report recognised the importance of public procurement as a driver of growth but noted that “Government ownership of intellectual property patents can restrict investment”. We were delighted to see our concerns about the onerous treatment of IP in government contracts reflected in such strong terms. We agree that procurement can be a growth tool, but only if IP terms are designed to support commercialisation.

The committee also highlighted the emerging role of IP-backed finance. We welcome its recognition that patents, data, software and brands are increasingly being used to support lending decisions. As we told the inquiry, IP-backed loans can help innovative businesses unlock capital by borrowing against intangible assets that traditional lenders have often overlooked. While initiatives such as those developed by NatWest and HSBC demonstrate growing recognition of the value of IP, the committee echoed our concern that the availability of such finance remains limited. Expanding access to IP-backed lending could help address a longstanding weakness in the UK’s investment landscape, particularly for innovative businesses whose principal assets are intangible rather than physical.

CIPA President Simon Wright said: “The UK’s innovators continue to generate world-class ideas. The challenge for policymakers is to ensure that those ideas can be financed and commercialised here in the UK.

“IP protection, access to finance, procurement opportunities and business support should not be viewed as separate policy areas, but as interconnected parts of the same innovation ecosystem. We are encouraged that the committee has recognised this challenge and is recommending a more strategic approach to growth.”