HOW UK IROS CAN BE A PART OF SHAPING THE COUNTRY’S GROWTH STORY
To develop an innovative idea and scale into a competitive business, entrepreneurs need capital; investors seek a vision, a way to market, credible execution, defined deliverables and risk-adjusted returns, all of which underpin long-term growth. When innovators succeed, they create growth and catalyse a broader market expansion, as seen in the US in recent years.
The UK itself has untapped potential in several high impact sectors. One enabler of innovation is the telecoms sector: for example, the government’s sale of the 5G spectrum was hailed as ‘the cornerstone of the UK’s digital economy’. However, scale and spectrum were key reasons for the UK’s Vodafone-Three merger submission to the Competition and Markets Authority.
Earlier this year Rachel Reeves, Chancellor of the Exchequer, stated in the UK’s Industrial strategy: ‘Jobs will be at the heart of our modern industrial strategy, supporting growth sectors to create high-quality, well-paid jobs across the country, backed by employment rights fit for a modern economy.’ However, sustainable growth and job creation rests on innovation (ideas, skills, knowledge), increased capital availability, lower barriers to entry (regulation) and consistent messaging to stakeholders.
Innovation in the UK
You might ask how much innovation is there in the UK and be surprised with companies such as Darktrace, Evonetix, LCM, Wazoku, Oxford PV and Mind Foundary. The route to private equity and debt is perhaps easier with few new IPO listings in the last three years. The hinderance has been the gap between the seller’s and investor’s valuation, the company size being too small for some US funds and increased administration and regulatory cost hurdles relative to other jurisdictions.
On the main market, since February 2022 defence and technology have been consistent investment themes for investors across the world which was re-confirmed in June 2025 by the UK Prime Minister, Sir Kier Starmer, when he said: ‘The UK must be ready for war’.
With that, defence as an investment theme has expanded into key sectors such as healthcare, civil aerospace, defence, technology, food production and energy underpinned by telecoms, mining, construction and support services.
Message to stakeholders can be improved
One of the biggest challenges for UK corporates is the governments messaging as we have seen with the commitment and push back on investment related to net zero. Innovative sectors growth is highly correlated to the increase in the change of total research and development (R&D) spend.
The projected UK government R&D investment of 0.55 percent of GDP in 2025/26 is far behind the US at 2.9 percent of GDP (2023) and Europe at 2.2 percent of GDP (2023). UK companies’ R&D spend in 2024 as a percentage of revenue is higher than the government’s but below their US and European peers’ five-year average, including in defence.
Another issue is the eight industrial sectors specified in the government’s industrial strategy paper are not aligned with sectors investors can associate. For example, defence is included under both advanced manufacturing and its own sector. Additionally, there is no way of comparing KPIs such as total UK R&D as a percentage of GDP, nor total R&D by sector. Only science, innovation and technology (which now includes the space sector) R&D is clarified.
To resolve this, the government could show the investment in a sector-theme matrix clarifying policy and funding intent, therefore encouraging industry focus.
Securing sustainable growth
Early signs suggest an improving pipeline following regulatory changes and a tentative market opening. This has led to US investors increasing their allocation to the UK attracted by improved growth potential.
However, the UK market has lost several notable listings to the US, including Ashtead and Indivior, Arm Holdings, Wise, Flutter, CRH and, in July 2025, AstraZeneca indicated they may follow. Only Raspberry Pi (July 2024) and Canal+ (December 2024) have come to market with varied performance.
Encouragingly, the current IPO pipeline is showing positive signs: Metlen (Greek, energy), Visma (Norwegian, software), CFC (UK, insurance), Shein (Chinese, fashion), Monzo (UK, financials), Waterstones (UK, retail), Canopius (UK, insurance), Shawbrook (UK, financials) and Newlat (Italy, consumer goods).
To strengthen the innovative company pipeline, several measures could support broader capital raising, IPO activity and the overall equity and debt markets, including:
- Greater allocation of pension fund assets to innovators: Encourage UK government pension funds to allocate a portion of their portfolios to both private and public innovative companies (similar to CalPERS in the US).
- Address challenges introduced by Mifid II: Promote high-quality, fundamental research for retail and institutional investors, enable a broader asset pool of investors given they are now too concentrated and support smaller businesses that lack the resources to effectively communicate with investors.
- Facilitate private company share trading: Enable consistent secondary trading of private company shares on platforms such as PISCES.
- Reduce time and administrative burden around capital raising, notably IPOs: Offer tax incentives (for example, expensing capital raising costs) to decrease barriers to entry and streamline the process before and after listing.
- Improve reporting practices: Ensure company reporting is more focused and aligned with strategic decision making and objectives (notably KPIs and ESG).
- Introduce investment incentives: Develop targeted incentives to attract and retain investors in innovative sectors.
- Remove listed share trading costs: Eliminate unnecessary costs associated with trading listed shares.
- Coordinate through a single innovation-focused investment entity: Use the British Business bank to align non-defence innovation investment efforts across investor focused sectors.
- Listing taskforce: While helpful, strategy and execution of long-term deliverables are required urgently.
The UK has world-class entrepreneurs, strong academic foundations and vibrant investor interest. However, capital alignment, strategic investment incentives, policy clarity and accessible and comparable KPIs are essential to unlock the next phase in the UK’s sustainable growth.
By prioritising coherent collaboration, innovation and fostering stronger relationships between research institutions, corporates, investors and government, the UK can position itself as a global leader in high-growth, high impact industries. Only then can IROs become part of shaping the UK’s growth story.
Matthew Hickman is the former head of investor relations at Virgin Media O2
