A third of UK SMEs back R&D for growth in 2025

A new report suggests that a third of the UK’s small and medium-sized enterprises (SMEs) are relying on research and development (R&D) to power their growth plans for 2025.

Despite difficult economic conditions, the “Geared for Growth 2025” study by alternative finance provider Growth Lending indicates that strategic investments in technology, talent and innovation could help many firms stay competitive.

According to the findings, 33% of SMEs see R&D as central to innovation and long-term success, while 40% anticipate revenue growth of between 5% and 10% over the coming year. Investment in advanced digital tools and processes is also a key priority, with 16% of respondents highlighting technology integration—such as AI, automation and cloud computing—as a significant driver of their expansion plans.

This focus on R&D extends beyond new products. Many firms are harnessing innovation to refine operations and respond to shifting market demands, ensuring they stay relevant in fast-changing sectors. However, challenges remain. With skilled labour in short supply, 12% of SMEs cite talent shortages as a major obstacle, and 16% place talent acquisition at the heart of their strategy to secure future growth.

Commenting on the research, Kimberley Martin, managing director at Growth Lending, said: “The challenges of the current economic environment persist for SMEs. With rising costs and talent shortages creating additional barriers to growth and innovation, businesses must focus on strategic investments to stay competitive.

“R&D is a critical growth driver, allowing businesses to innovate and adapt to shifting market demands. The difficulty is that traditional funding options don’t always meet the needs of high-growth businesses, with rigid criteria and long application processes restricting their eligibility. To bridge this gap, alternative lenders can offer the flexibility and understanding required to support ambitious SMEs, enabling them to overcome these barriers, invest in innovation, and build resilience throughout 2025.”

With technology and talent at the forefront of their plans, UK SMEs appear increasingly confident they can weather economic uncertainties. Whether looking to scale rapidly or simply stand apart from the crowd, many are relying on R&D and digital transformation to secure a competitive edge in the year ahead.

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A third of UK SMEs back R&D for growth in 2025