UK innovation firms plan to scale at home despite procurement delays slowing routes to revenue
UK technology and innovation businesses are accelerating infrastructure investment and scaling efforts, but slower routes to revenue are beginning to emerge, according to new Barclays Business Prosperity Index research1 among 501 UK tech and innovation firms.
UK growth ambition is strong but procurement bottlenecks emerge
Business leader confidence in the UK innovation economy is high. Seven in 10 (71%) are upbeat about their business prospects over the next year, with over half (56%) planning their next major phase of growth in the UK.
This ambition is translating into significant planned investment, with the vast majority (97%) expecting to increase spending on compute, cloud or data infrastructure over the next year, and almost seven in 10 (69%) anticipating increasing investment by at least 20%.
Looking further ahead, nearly half (49%) expect the UK to strengthen its position most as a global innovation hub over the next decade, although others believe the US (20%) or China (11%) will strengthen their position more.
Despite this confidence, half (50%) report customers pausing or delaying spending leading to less predictable routes to revenue. More than half (54%) say procurement timelines have worsened over the past two years, with a similar number (52%) pointing to longer pilots and proof-of-concept requirements.
A lack of transparency in public sector procurement (28%) is cited as a key challenge, with limited visibility over contract timing and pipeline making it harder for financial services providers to lend against future revenues.
Helena Sans, head of innovation banking at Barclays UK Corporate Bank, said: “It’s encouraging that UK innovation businesses remain ambitious to scale within their home market. The UK has strong foundations to support that growth, from world-class research and talent to deep sector and investor ecosystems, with a clear opportunity to help more firms grow and retain value in the UK.
“But as firms move from early growth to scale, access to finance is increasingly linked to visibility of future revenues. Where procurement timelines are unclear and pipeline visibility is limited, it becomes harder to lend against that future income, making greater transparency, particularly in public sector pipelines, critical to unlocking growth.”
Defence demand rises
As pressures build, demand is shifting across the innovation economy.
Barclays’ anonymised client data from around 26,000 UK innovation businesses, comparing Q1 2026 to Q1 2025, shows how performance is diverging across the sector.
- Cash inflows into innovation business accounts declined by 4.9% year-on-year
- However, inbound international payments to innovation Business Banking SMEs rose 2.0% in contrast to a 1.8% decline across all Business Banking SMEs. This suggests an uplift in inward investment and international sales for innovation SMEs.
- Loan volumes increased 0.9% with almost three in 10 (29%) saying bank lending will be one of the most important methods for financing growth over the next 12 months, behind private equity (36%) and government grants (33%).
Within Barclays Business Banking, SME technology firms are showing resilience. Computer hardware businesses, including data centres, saw a 7.1% rise in cash inflows and a 14.9% increase in international payments received. Data processing firms also recorded steady growth, with cash inflows up 5.0% and overseas payments rising 2.8%.
Elsewhere, the picture is more mixed. Across SMEs and large corporates, Science and Engineering R&D firms saw cash inflows fall by 9.5%, while defence-focused businesses recorded a 13.1% increase, highlighting how demand is shifting towards security-linked innovation.
This shift is reflected more widely across the innovation economy. Defence and national security markets are becoming a core growth pathway, with 57% of firms saying they are targeting the sector and 62% adapting products and services to meet customer requirements despite facing increasing compliance and security requirements (56%.
A further one in three (28%) believe their technology could strengthen national security or defence capability within five years, while 90% say the UK and its allies must build stronger space capability to remain globally competitive over the next decade.
Mark Northen, head of innovation banking at Barclays Business Banking said: “Many firms are taking a cautious approach to borrowing as they navigate slower routes to revenue and visibility barriers. At the same time, sectors such as defence infrastructure and computer hardware are showing strong growth potential. Ensuring businesses can access the right funding and expertise will be key to sustaining this momentum.
“Our focus at Barclays is to bring founders, investors, corporates and policymakers together to focus on what comes next and on how the UK can translate innovation into real-world impact. We’re working closely with innovative businesses right across the UK to provide access to expertise and networks to build the ideal ecosystem to accelerate their growth from early-stage innovation through to global scale.”
Backing UK innovation to scale
To support businesses to invest for growth, the £22bn Barclays Business Prosperity Fund is available to provide lending and refinancing to eligible Business Banking and UK Corporate Banking clients across the UK.
The Fund forms part of Barclays’ wider commitment to supporting UK businesses to invest, scale and navigate changing economic conditions.
Technology and innovation businesses can also access dedicated support through Barclays Innovation Banking, which provides specialist expertise and financing across the full growth journey, from early-stage development through to scale and IPO.
Ones to Watch – The AI 100
As businesses increase investment in AI to drive productivity and resilience, attention is also turning to where the UK’s next wave of innovation and growth will come from.
Barclays Eagle Labs has recently launched The Ones to Watch: AI 100 Report, a major new report spotlighting 100 of the UK’s AI driven scaleups shaping the future, as part of a broader effort to map and support emerging sources of technology-led growth.