The chief executive of Innovate UK has said that moving the innovation agency into the Department for Business and Trade “very much makes sense”, in a significant public endorsement of plans that could reshape how public money for research and development is managed in the UK.

Indro Mukerjee, who has led Innovate UK since 2021, argued that the organisation’s remit to accelerate business-led innovation would be strengthened by closer alignment with the government department responsible for trade, regulation and industrial strategy. His comments, made during a recent industry interview, have added momentum to speculation that the agency will be transferred out of its current home within UK Research and Innovation (UKRI).

“We are a business-facing organisation. We exist to accelerate innovation and support businesses to grow,” Mukerjee said. “So being close to the business department, with its levers on trade, regulation and industrial strategy, is sensible. It very much makes sense.”

What is Innovate UK?

Innovate UK is the UK’s national innovation agency, responsible for providing funding, advice and networking opportunities to businesses of all sizes. It was established in 2007 as the Technology Strategy Board and rebranded in 2014. Since then, it has supported thousands of projects across sectors such as clean energy, advanced manufacturing, health tech, and digital infrastructure. The agency operates under the umbrella of UKRI, which also encompasses the seven research councils and Research England.

The agency’s budget has grown substantially over the past decade. In the current spending period, Innovate UK manages more than £1 billion annually, with additional funding from competitions and partnership programmes. It has played a central role in delivering government missions, including net zero targets, the levelling up agenda, and the push to become a science and technology superpower.

Why does the move to the Business Department make sense?

The proposed transfer reflects a broader government desire to align innovation funding with economic growth objectives. Under the current structure, Innovate UK sits within UKRI, which reports to the Department for Science, Innovation and Technology (DSIT). That arrangement has been effective for supporting the science base, but some policymakers have argued that it creates a disconnect between innovation support and front-line business policy.

The Department for Business and Trade (DBT) already oversees a wide range of business-facing programmes, including export support, foreign investment attraction, and the industrial strategy council. By placing Innovate UK within DBT, the government could better coordinate these tools to help innovative firms scale up both domestically and internationally.

Mukerjee highlighted these potential synergies in his remarks. “Businesses do not see the world in departmental silos. They see barriers and opportunities. If they can access innovation funding and support for exports through a more joined-up landscape, that has to be beneficial,” he said.

Historical context and previous reviews

The idea of moving Innovate UK out of UKRI is not new. In 2019, the then-government asked Sir Paul Nurse to review the research and innovation system. His report stressed the need for UKRI to maintain strong links with business but stopped short of recommending a transfer. More recently, the House of Commons Science and Technology Committee has examined the effectiveness of innovation support, with some members calling for clearer leadership and accountability.

In 2023, the government announced a new “innovation ecosystem” strategy that emphasised the role of Innovate UK in driving private sector R&D. However, concerns persisted about duplication between Innovate UK and various business support schemes run by other departments.

The potential move was reportedly discussed during the 2024 spending review, when officials considered whether the agency’s mission was better aligned with the business department. Mukerjee’s public support is likely to influence that conversation, as it signals internal buy-in from the leadership of the agency.

What would change for businesses?

If the transfer goes ahead, businesses might notice several changes. First, access to grants and loans would likely be more closely integrated with the wider business support ecosystem, including the Export Support Service and the Help to Grow management scheme.

Second, the evaluation criteria for funding competitions could shift to weight commercial outcomes more heavily. While Innovate UK already prioritises economic impact, a closer relationship with DBT could reinforce this focus and lead to more targeted calls in areas where the UK has clear trade strengths.

Third, there may be changes in how Innovate UK collaborates with the research councils. The agency frequently supports projects that involve universities and research institutions, often in partnership with the Engineering and Physical Sciences Research Council or the Biotechnology and Biological Sciences Research Council. That would continue, but reporting lines would change, and coordination might become more formalised.

Industry reaction

Industry bodies have broadly welcomed the idea, arguing that it could reduce fragmentation and make it easier for small businesses to navigate the support landscape. The Confederation of British Industry has previously called for a “one-stop shop” for innovation and business support, noting that firms often struggle to identify the right funding source or government contact.

The Manufacturing Technologies Association said that closer alignment with the business department would help manufacturers when they need to combine innovation grants with trade advice. Meanwhile, startups in the tech sector have expressed cautious optimism, though some worry that the move could slow down decision-making if Innovate UK becomes subject to longer policy approval processes.

Mukerjee acknowledged those concerns. “Change always brings some anxiety. The important thing is that we maintain the speed and flexibility that Innovate UK is known for. We will still be an arm’s-length body. The structure may change, but the mission does not,” he said.

Potential concerns and challenges

Not all voices are supportive. Some science leaders have warned that moving Innovate UK away from DSIT could weaken the link between innovation and the science base, which might damage the UK’s research-intensive sectors. Others have pointed out that business departments historically focus more on regulation and trade agreements than on high-risk, long-term research funding.

However, Mukerjee insisted that Innovate UK would not abandon its scientific roots. “We are not becoming a purely commercial body. We still need to invest across the innovation spectrum, including areas like deep tech where the risk is high but the payoff can be enormous. That will not change,” he said.

What’s next?

The government has not yet made a formal announcement about the future location of Innovate UK. As of now, the agency remains part of UKRI, which continues to operate across all regions of the UK. Mukerjee’s remarks, however, have raised expectations that a decision could be announced alongside the next round of industrial strategy initiatives.

The industrial strategy, due to be published in full later this year, is widely expected to place innovation at its centre. Officials are reviewing how to streamline business support, and the question of where Innovate UK sits is part of that broader picture.

In the meantime, Innovate UK continues to run its core programmes, including the Smart Grants competition, the Catapult network, and the Knowledge Transfer Partnerships. These programmes will remain unchanged in the near term, but their future structure depends on decisions made in Whitehall.

For businesses, the current situation is one of continuity with the promise of better alignment to come. Mukerjee’s public endorsement provides a clear signal that whichever department becomes the agency’s parent, the leadership at Innovate UK is ready to embrace the change. As he put it, “We want to be where the action is, helping UK businesses innovate, grow, and win in global markets.” That, he says, will be the ultimate measure of success.

Source: UKTN News