UK innovation firms are planning to scale at home despite slower procurement and delayed customer spending, according to Barclays research. More than half, 56 per cent, expect their next major phase of growth to take place in the UK.
The findings point to strong investment plans alongside growing concern about how quickly companies can turn demand into revenue. Among 501 technology and innovation businesses surveyed, 71 per cent said they were upbeat about their prospects over the next year, while 97 per cent expected to increase spending on compute, cloud or data infrastructure.
Almost seven in 10 of those planning higher infrastructure spending expect to raise investment by at least 20 per cent. Nearly half of respondents believe the UK will strengthen its position most as a global innovation hub over the next decade, ahead of the US and China.
That confidence is being tested by slower buying decisions and longer waits for payment. Half of respondents said customers were pausing or delaying spending, while 54 per cent said procurement timelines had worsened over the past two years.
Another 52 per cent pointed to longer pilot schemes and proof-of-concept requirements. A further 28 per cent identified a lack of transparency in public sector procurement as a major obstacle, with poor visibility on contract timing and future pipelines making it harder for lenders to assess expected revenues.
The issue is especially relevant for businesses selling into government and defence markets, where procurement cycles are often long and security requirements can cause further delays. For scale-ups seeking debt finance, uncertain contract timing can restrict access to funding even when commercial demand appears strong.
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."
Shift in Demand
Barclays also published anonymised client data covering about 26,000 UK innovation businesses, showing a mixed picture across the sector. Cash inflows into innovation business accounts fell 4.9 per cent year on year, suggesting a broader cooling in income even as some subsectors expanded.
International activity was more resilient. Inbound international payments to innovation small and medium-sized enterprises rose 2.0 per cent, compared with a 1.8 per cent decline across all business banking SMEs, pointing to stronger overseas sales or inward investment among innovation-led companies.
Loan volumes edged up 0.9 per cent. When asked how they expected to finance growth over the next 12 months, 29 per cent said bank lending would be among the most important methods, behind private equity at 36 per cent and government grants at 33 per cent.
Performance differed sharply by subsector. Computer hardware businesses, including data centres, recorded a 7.1 per cent rise in cash inflows and a 14.9 per cent increase in international payments received. Data processing firms reported cash inflows up 5.0 per cent and overseas payments rising 2.8 per cent.
Science and engineering research and development firms moved in the opposite direction, with cash inflows down 9.5 per cent. Defence-focused businesses recorded a 13.1 per cent increase, indicating that spending is shifting towards security-related technologies.
Defence focus
The survey reflected that trend. More than half of firms said they were targeting defence and national security markets, while 62 per cent said they were adapting products and services to meet customer requirements in the sector.
Even so, 56 per cent said they faced rising legal, compliance and security barriers. Another 28 per cent said their technology could strengthen national security or defence within five years, and 90 per cent said the UK and its allies needed 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."
Barclays has a £22 billion Business Prosperity Fund available for lending and refinancing to eligible business banking and corporate banking clients. Innovation businesses can also seek specialist support through its innovation banking division.
The figures suggest the UK's innovation economy remains willing to invest, but revenue visibility is becoming a sharper dividing line between businesses that can secure funding and those that cannot. In sectors where public contracts shape demand, procurement reform may matter as much as investor appetite or bank credit.
Across the survey, the clearest signal was not retreating ambition but concern about timing. Firms still want to expand in the UK, but the speed at which contracts move from pilot to signed revenue is increasingly shaping whether that growth can be financed.