The UK economy has experienced a “lost decade” of innovation, according to an independent research fund.
Investment in new products and ideas has fallen by £24bn since the recession hit in 2008 and has not recovered, the report by Nesta (National Endowment for Science, Technology and the Arts) found.
The charity said the study showed that businesses had a "crisis of confidence in the 2000s, prioritising cash and concrete over investment in innovation".
It also highlighted a "deep-rooted crisis" in innovation investment.
After rising steadily from 1990 to 2000, investment fell by 7% (£7.4bn) between 2008 and 2009, according to Nesta's Innovation Index, compiled following a survey of 1,200 businesses.
It then dropped a further 14% (£17bn) from 2009 to 2011.
Calling on the Government to take action, Geoff Mulgan, Nesta's chief executive, said: "Everyone agrees that innovation is the only route to long term growth.
"The concern is that today's report and Investment Index show that investment in the future didn't just fall during the immediate aftermath of the financial crisis, but also continued falling as the economy appeared to stabilise."
He added: "Other countries are making investment in innovation a top priority and the UK cannot afford not to do the same.
"Our data shows that British business prioritised cash and concrete over investment in future technologies and services, a potentially disastrous decision that now needs to be put right."
The report also highlighted the importance of manufacturing to innovation in the UK.
It said: "Representing 17% of GDP, manufacturing accounted for 77% of business investment in R&D and 23% of total business innovation investment."