Can business-industry collaboration help us get back on the path to growth?

Britain is emerging from one of the most damaging economic crises in its history. In this bleak economic landscape, our world-renowned higher education system stands tall as a vital strategic asset. In the economy of the future, Britain will need to compete in new knowledge-intensive industries and our universities are a critical link in the chain of innovation and growth. As such they will be central to the goal of rebalancing our economy away from its reliance on financial and business services and towards sectors such as advanced manufacturing, renewables and the life sciences.

How universities play a critical role in renewing our economy

This week IPPR published A Critical Path– the final report of our Commission on the Future of Higher Education. The Commission sets out a comprehensive strategy for getting the higher education sector through the next spending review period in good health while proposing some big reforms so that universities can play a powerful role in renewing our economy and expanding opportunity as we enter the 2020s.

We know that university research is at the heart of innovative economies. However, the UK continues to invest a lower proportion of national wealth in research and development than most of our key competitors and too little of our university research feeds into innovation in the real economy. Attempts to strengthen the relationship between academia and business are spread too thinly and we lack critical mass in strategic industries.

Essential funding for research and innovation.

To sustain our world-class reputation for research the Commission argues that we should continue to ring-fence and sustain in cash terms the science and research budget over the next spending review period until 2017/18.

Because this implies a continued real-terms decline in funding, the Commission argues that once the structural deficit in the public finances has been eradicated we should commit to a 10-year strategy of raising public investment in research each year above inflation. If the science and research budget were to rise by 1 per cent above inflation each year over that period, it would grow from £4.6 billion a year in 2017/18 to £6 billion a year by 2027/28 (or £4.7 billion in today’s prices).

In terms of reform the report argues that we should in addition reallocate approximately £1 billion a year that is mainly spent inefficiently on R&D tax incentives to instead set up a national network of Applied Research and Innovation Centres focused on boosting applied research in the strategic industries of the future and on revitalising regions with below-average growth.

These would be developed on the basis of the existing investment in the ‘Catapult centres’ and would be focused on the same strategic sectors of the economy. However they would enjoy a major uplift in resource so that they can play as powerful a role in commercial innovation as the Fraunhoffers in Germany and the Japanese National Institute of Advanced Industrial Science and Technology.

The centres would enable businesses to share R&D costs, access skilled researchers and utilise expensive equipment, provide greater critical mass in research expertise and business capability and strategically focus R&D investment in the development of new technologies in areas where global markets are expanding and where the UK has excellent research and business capability.

This investment would represent a major raising of our game on business-industry collaboration, helping to rebalance our economy and get us back on the path to growth.

Rick Muir is Associate Director at IPPR. A Critical Path. Securing the Future of Higher Education in England is available for downloadhere