Innovate UK, the United Kingdom’s national innovation agency, drives business-led innovation across all sectors, technologies, and regions. One question that frequently arises is: where exactly does Innovate UK spend its funding? Understanding the true location of innovation is critical for engaging local stakeholders, supporting regional development, and ensuring that government policies accurately reflect where innovation activity occurs.
At first glance, this might seem straightforward—funds are sent to registered company addresses—but the reality is far more complex. The so-called “headquartering effect” presents a significant challenge. This occurs when innovation activity is attributed to a company’s registered headquarters rather than the sites where actual work happens. Many businesses operate from multiple locations, and their registered addresses often differ from the locations where innovation is carried out.
Consider Rolls-Royce PLC. Its registered office is in the City of London, yet the majority of Innovate UK-funded activity occurs in Derby. Similarly, BT is registered in London, but much of the funded research and innovation takes place at its headquarters in Martlesham, near Ipswich. Without accounting for this discrepancy, data on innovation distribution can be misleading.
Accurately pinpointing where innovation happens is increasingly vital because government policies focus on geographic clusters and regional innovation systems. If funding data is skewed due to headquartering, it can distort the perceived spread of innovation activity and misinform policy decisions.
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Innovate UK’s Current Approach
To address this challenge, Innovate UK asks grant applicants to provide both their registered and work addresses. For reported data, work addresses are used where available, and manual corrections are made for the largest grants. These adjustments have a noticeable impact, revealing higher levels of funding outside the Greater South-East and lower levels in London than raw data initially suggested.
In the pursuit of continuous improvement, Innovate UK conducted a detailed investigation using the Office for National Statistics’ Secure Research Service. This study, outlined in the Accuracy of Headquartering Report, compared Innovate UK project data with the Business Structure Database (BSD). The BSD records the address where a company’s main activity takes place rather than its registered headquarters.
While no dataset is perfect, comparison with the UK Innovation Survey—which collects accurate locations for the companies it surveys—shows only minor differences in regional distribution. This suggests that using the main activity address or apportioning activity across multiple sites based on employment numbers provides a reliable picture of where innovation actually occurs.
Insights from the Investigation
When Innovate UK matched BSD figures with project data for grants under £4 million (the largest grants are corrected manually), the results confirmed that the headquartering effect is more pronounced for smaller grants. Nonetheless, current adjustments are moving in the right direction. This finding reflects the fact that many local units of London-based companies are, in reality, operating elsewhere in the country.
These insights carry important implications: headquartering effects are not limited to large grants, and all funding, regardless of size, may require careful adjustment. Accurate location data is essential for understanding regional innovation dynamics and ensuring that Innovate UK funding achieves its intended economic impact.
Lessons Learned and Recommendations
The Accuracy of Headquartering Report demonstrates that Innovate UK’s current approach is effective but not sufficient. While the study cannot pinpoint individual mislocated companies for granular corrections, it confirms that efforts to adjust for headquartering are moving in the right direction.
The most impactful improvement comes from encouraging applicants to provide the actual work addresses where innovation occurs. This simple step would significantly enhance the quality of data and provide a clearer picture of how innovation activity is distributed across the UK.
Moreover, by combining data from multiple sources—including the BSD, the UK Innovation Survey, and internal project data—Innovate UK can refine its methodology further. This multi-source approach allows for more accurate allocation of regional funding, improved reporting of economic benefits, and better insights into regional innovation clusters.
Why Accurate Location Data Matters
Accurate innovation location data is not just a matter of bookkeeping—it informs strategy. Policy makers rely on precise data to identify growth regions, invest in regional innovation hubs, and support local businesses. Misattributing innovation to headquarters in London, for instance, could create the false impression that the capital dominates all innovation, when in reality, groundbreaking projects may be occurring elsewhere.
By improving headquartering accuracy, Innovate UK strengthens its credibility, ensures fair representation of regions, and provides valuable insights for policy interventions. Over time, this contributes to a more equitable innovation ecosystem where funding reflects real economic activity.
Frequently Asked Questions
What is Innovate UK?
Innovate UK is the UK’s national innovation agency, supporting business-led innovation across all sectors and regions.
What is the headquartering effect?
The headquartering effect occurs when innovation activity is attributed to a company’s registered office rather than the location where the work actually happens.
Why is it important to track where innovation happens?
Accurate location data ensures fair regional funding, informs government policy, and highlights real economic activity and innovation clusters.
How does Innovate UK correct for headquartering?
Innovate UK collects both registered and work addresses from applicants, manually adjusts large grants, and cross-checks data with national datasets.
Do small grants also experience headquartering issues?
Yes, headquartering can affect smaller grants, and ongoing efforts aim to refine reporting for all funding levels.
How does Innovate UK verify the accuracy of location data?
By comparing grant data with the Business Structure Database and the UK Innovation Survey, Innovate UK ensures alignment with actual work locations.
How can applicants help improve reporting accuracy?
Providing the actual work address where innovation occurs is the most effective way for applicants to enhance data accuracy.
Conclusion
Accurately identifying where innovation happens is essential for effective funding, regional development, and informed policymaking. Innovate UK’s approach—collecting work addresses, manually correcting large grants, and cross-referencing with national datasets—has significantly improved the accuracy of its reporting.