The head of Innovate UK has publicly endorsed the idea of moving the innovation agency into the Department for Business and Trade (DBT), saying that such a shift would better connect public research spending with the real-world needs of companies. In comments that will be welcomed by ministers who have been quietly reviewing the body’s place in Whitehall, Indro Mukerjee said joining the business department “very much makes sense” as the Government seeks to strengthen the UK’s commercial competitiveness.

Innovate UK is the UK’s national innovation agency, responsible for helping businesses grow through research and development. It was originally set up as the Technology Strategy Board in 2007 and rebranded in 2014. Today, it sits within UK Research and Innovation (UKRI), the umbrella body that also oversees the seven research councils and Research England. UKRI itself is accountable to the Department for Science, Innovation and Technology (DSIT), which was created in February 2023 after the old Department for Business, Energy and Industrial Strategy was dismantled.

The precise location of Innovate UK has been the subject of internal debate ever since. While DSIT gives the agency a strong link to the Government’s science superpower mission, many in the business community argue that innovation support belongs closer to trade and industry policy. That argument has grown louder as the Government pushes for higher productivity, net zero investments and economic growth.

“Very much makes sense”

In an interview about the future of the UK’s innovation landscape, Mukerjee said moving Innovate UK into DBT would be a logical step. “The whole point of Innovate UK is to support businesses to innovate, scale up and compete in global markets. If you ask where that objective is best represented in Whitehall, it is very much in the Department for Business and Trade,” he said.

He emphasised that innovation is not an end in itself. “We are not an academic research body. We are an economic growth agency. Our success is ultimately measured by how many new businesses are created, how many jobs are supported, and how much private investment is leveraged. The business department shares those goals directly.”

Innovate UK provides funding, practical support and a network of experts to help businesses investigate and develop new ideas. Its flagship programmes include the Smart Grants scheme, which offers thousands of pounds to projects with high-risk, high-reward potential, and the catapult centres, which bridge the gap between research and commercial application. The agency also runs sector-specific initiatives such as the Energy Catalyst and the Biomedical Catalyst.

A history of shifting priorities

Innovate UK has been moved before, and the debate over where it should sit is almost as old as the agency itself. When it was established as the Technology Strategy Board, it operated at arm’s length from government and was jointly overseen by the Department for Innovation, Universities and Skills and the then Department for Business, Enterprise and Regulatory Reform. In 2014, it was renamed Innovate UK by the coalition government and placed under the strategic direction of UKRI.

Some science leaders argue that moving Innovate UK to DBT would risk undermining the close relationship it has built with the research base through UKRI. They point to successful initiatives that combine university research with commercial challenge, such as the industrial strategy challenge fund, which has been delivered through UKRI and Innovate UK. Others, however, contend that Innovate UK has always been more business-facing than the rest of UKRI and that its current location within DSIT creates unnecessary layers of bureaucracy.

Indro Mukerjee: a familiar face to business

Mukerjee became chief executive of Innovate UK in May 2021, replacing the interim CEO. Before taking the role, he had built a career in the semiconductor and engineering industries, including senior positions at Arm and Altera, and as CEO of Chil Semiconductor. His appointment was seen as a signal that Innovate UK would place greater emphasis on helping deep-tech companies scale beyond the startup phase.

Under his leadership, Innovate UK has launched several new initiatives designed to address some of the long-standing challenges facing British businesses. The scale-up accelerator, for example, works with companies that have passed the seed stage and are seeking to expand internationally. Innovate UK also led the creation of a £200 million partnership with the National Wealth Fund aimed at driving private investment into climate technology and advanced manufacturing.

A track record of business support

Since its creation, Innovate UK has committed roughly £7 billion to over 11,000 organisations. It claims every £1 of government investment in innovation leverages £2.30 of additional private investment. In 2023-24, the agency supported projects worth more than £1.2 billion, with a focus on net zero, health and wellbeing, national security, and economic growth.

What DBT would gain

Industry representatives have broadly welcomed the idea, with many noting that the Department for Business and Trade already leads on industrial strategy, export promotion and inward investment. If Innovate UK moved into that department, it could be more directly connected to the Government’s trade negotiations, supply chain resilience work and manufacturing programmes.

One senior tech lobbyist said the change could help ensure innovation funding is not viewed as a separate academic exercise. “Every other major economy links innovation funding to industrial strategy,” they said. “Germany’s Fraunhofer institutes work hand-in-glove with industry, and the Netherlands’ RVO agency sits inside the economic affairs ministry. If the UK wants to compete, Innovate UK needs to be in the same conversation as business approvals.”

Mukerjee also pointed to the global context. He noted that France, Canada and Singapore have all integrated innovation support with business or economic development agencies, allowing them to react faster to market shifts and corporate demand. “We are not asking for a special deal; we are asking for the same sort of alignment that works elsewhere,” he said.

Potential risks and concerns

However, the move is not without its critics. Some research organisations worry that shifting Innovate UK away from UKRI would fragment the research landscape, making it harder to fund projects that span the full spectrum from blue-skies research to commercialisation. They fear a move to DBT could bias funding towards near-to-market projects and away from science-driven breakthroughs.

Responding to those concerns, Mukerjee insisted that Innovate UK’s mission over the past decade has increasingly focused on innovation-led growth. He pointed to the agency’s work during the pandemic, when it helped fund the rapid development of ventilators, diagnostics and vaccines. He said this showed how quickly the innovation system can move when it is aligned with clear economic and social missions.

He also suggested that the relationship with UKRI could be maintained through delivery agreements and joint programming, even if governance moved. “There are lots of ways to put a boundary around an organisation. What matters is that innovation spending is tied to the Government’s overall growth strategy,” he said.

What happens next?

The Government has yet to make a formal announcement about the future of Innovate UK. Whitehall sources say that officials in the Cabinet Office have been weighing options for several months, and that the Treasury is sympathetic to the idea of strengthening the business department’s role in innovation. No final decision has been made, but Mukerjee’s public intervention is likely to intensify the debate.

Any move would require a statutory instrument to transfer responsibility for Innovate UK from DSIT to DBT. Such a step could be taken as part of a broader machinery-of-government change or as a standalone measure. In the longer term, the Government might also consider giving Innovate UK a wider remit with greater control over its own budget, although that would raise questions about accountability.

Mukerjee said he is not fretting about the outcome. “Regardless of where we sit, we will continue to do everything we can to help companies innovate. But I happen to believe that sitting alongside colleagues who deal with businesses every day would make us stronger. This is not about empire building or turf; it is about what works best for the economy.”

His comments are likely to feature in the next spending review, where the future of innovation funding will be a key issue. The March Budget is expected to set out new priorities for science and technology, and the place of Innovate UK within that framework will be watched closely.

Source: UKTN News