A report for the EU's Innovation Policy Unit, Pro Inno Europe, by the Manchester Institute of Innovation Research, says the austerity measures made by the coalition government could hurt innovation in the UK, especially in rural areas.
The report highlights the replacement of Regional Development Authorities (RDAs) with Local Economic Partnerships (LEPs), consortia of local authorities responsible for economic development.
"LEPs will be created around the major English cities and other ‘natural economic areas' which raises questions concerning the governance of more rurally located or geographically dispersed regional innovation activities," write the report's authors.
"The removal of the RDAs represented quite a dramatic shift in the innovation policy delivery infrastructure."
The report's findings echo cries from rural communities that they are being underserved by broadband rollout plans, despite the reasoning that fast broadband attracts high-growth digital businesses essential to economic recovery.
The UK's other major broadband access provider, Virgin Media, is also expanding its network. And companies such as Gigaclear in Hambleton, East Midlands, are connecting wealthy rural communities one by one.
But all say that there will still be ‘slow spots' and ‘not spots' where fast access is not provided.
The Manchester report is part of a wider EU report on innovation in Europe. The UK ranks equal fifth with Belgium in the EU's league table of innovation, behind Sweden, Denmark, Germany and Finland.
The UK has maintained its position among the 27 countries but has slipped slightly in its overall score.
The league table measures inputs, such as public and private R&D spending, higher education levels and human resources, as well as outputs, such as the number of patents filed and contributions to product and process design development.