Businesses spent £23.7 billion on research and development (R&D) in 2017, according to the latest data from the Office for National Statistics (ONS).
This was an increase of £1.1bn, or 4.9%, compared to statistics for 2016.
Pharmaceuticals had the highest level of R&D spending of all product groups, at £4.3bn.
Meanwhile, software development grew at the highest rate, by 34.7% from 2016 to 2017.
Felicity Burch, innovation director at the Confederation of British Industry, said:
"Business investment in R&D has hit the highest point on record, showing UK firms' thirst to be world leaders in the products and innovations of the future.
"But this spend has not been enough to make a dent in real progress towards the goal of investing 3% of GDP in R&D."
The 2017 Conservative Manifesto included a target of increasing R&D investment to 2.4% of GDP by 2027, with a longer-term goal of 3%.
However, the ONS says UK gross domestic expenditure on R&D represented only 1.67% of GDP in 2016.
"As Brexit looms, it is imperative that the Government sets out an international strategy with clear commitments to maintain the close relationship the UK has with Europe on science and innovation."
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