Geopolitical tensions, changing trade alliances and fluctuating government policies are reshaping how global companies decide where to invest in research and development (R&D). Businesses were once focused on the biggest financial incentive or headline rate of support. Now, they are weighing up a broader question – where can R&D thrive with confidence and predictability?
Policy stability over short-term incentives
Businesses have learned that while attractive incentives or grants can stimulate investment, unpredictability can introduce new risks. Frequent reforms, shifting eligibility criteria and delayed disbursements can make even well-designed programmes harder to plan around.
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The UK’s experience in recent years reflects this. Brexit created new uncertainty for companies used to relying on EU funding, such as Horizon Europe – a key seven-year scientific research initiative aimed at addressing climate change and promoting the UN’s Sustainable Development Goals. Although the UK eventually joined Horizon Europe as an associated country last year, enabling it to participate in the programme on the same terms as researchers from EU Member States, the period of instability in between created anxiety among businesses considering investing in the UK.
The lesson is simple: stability is key to building confidence. Successful investment planning now depends on robust pre-application analysis, ongoing policy monitoring and a clear understanding of how potential rule changes might affect project delivery.
For most boardrooms, due diligence on political and regulatory continuity has become as important as assessing the technical merits of a site.
Lessons from the world’s most stable innovation hubs
Jurisdictions that combine transparent processes with predictable policies are steadily capturing a larger share of innovation-led foreign direct investment (FDI).
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By GlobalDataGermany, for instance, has seen sustained growth in manufacturing and applied research FDI thanks to its clear grant structures and long-standing industrial policy.
According to the Federal Statistical Office of Germany, expenditure on public and private R&D in 2023 was €132bn ($153.04bn), or approximately 3.1% of gross domestic product, reinforcing its commitment to innovation. The Netherlands continues to attract technology and life sciences companies through its simplified R&D tax credit and accessible regional innovation funds.
Meanwhile, Canada’s Scientific Research and Experimental Development programme remains one of the most stable and well-administered incentives globally. This consistency has supported a steady flow of multi-year investment into research-intensive operations.
These examples show how clarity and consistency can outweigh headline generosity. Businesses increasingly favour environments where grant criteria are predictable, timelines are respected and political direction is steady. In uncertain markets, reliability is now the differentiator.
Energy and infrastructure in site selection
Boardrooms are increasingly focused on resilience and operational security, with energy supply, logistics infrastructure and the credibility of net-zero commitments now critical factors.
Locations that combine stable energy pricing, transparent industrial transition plans and dependable funding are emerging as the preferred destinations for investments in advanced manufacturing and clean technology. Stable industrial and regulatory frameworks – like Germany’s predictable energy transition policies or Singapore’s long-term industrial master plans – assure businesses that major R&D initiatives can proceed without disruption.
In short, policy volatility now has a tangible impact on operational planning. Frequent shifts in government priorities, such as abrupt revisions to energy regulations, make it harder to forecast input costs or secure consistent funding, increasing the risks for projects. Predictability is now as important as financial incentives in site selection.
Anchoring innovation in the UK
Despite its challenges, the UK retains significant advantages for innovation. Tools such as Patent Box, targeted regional grants and dedicated net-zero funding schemes remain powerful levers to attract and retain R&D. Yet their effectiveness depends on consistency and accessibility. Businesses must be able to navigate the system with clarity and confidence to realise their potential value.
Eligibility criteria, application processes and decision timelines remain critical. Recent data from UK Research and Innovation shows competitive funding programme award rates frequently below 20% of applicants. While the figure varies significantly by sector and scheme, it highlights how applications are outpacing available funding. This underlines the need for precise preparation and understanding of programme requirements.
When projects are well aligned with government priorities, particularly in advanced manufacturing and low-carbon innovation, the UK delivers strong outcomes. Recent commitments include around £4.3bn ($5.3bn) of public investment to support advanced manufacturing over ten years. A practical example of the impact of funding in this sector is the UK Battery Industrialisation Centre, which was established through the Faraday Battery Challenge and provides national facilities that help companies scale and commercialise next-generation battery technologies. These examples illustrate how targeted support can deliver meaningful R&D capability onshore when applied consistently.
What matters most is credibility. Predictable funding and coherent policy direction can restore investor confidence and help anchor high-value innovation onshore.
The road ahead for location strategy
The landscape for global R&D investment is changing fast. The most successful jurisdictions are those aligning grant policy, industrial strategy and energy resilience to create clear and dependable investment environments.
For decision-makers, that means blending grant expertise with long-term horizon scanning. Understanding both the financial and policy dimensions of each potential site is essential to building projects that endure through political cycles. In a volatile global economy, location success no longer depends on the size of an incentive but on the strength of the system behind it. Stability, clarity and credible support frameworks will determine where innovation takes root in the decade ahead.
Karim Budabuss is director of grant advisory at ForrestBrown, an R&D tax specialist and innovation incentives consultancy.
