The UK is renowned for its excellence in science and technology. From groundbreaking research to innovative startups, we have long been a hub for discovery and progress.
But this is under threat. Significant challenges are threatening the ability of the UK to maintain its global leadership in science and technology.
A recent inquiry from the House of Lords Science and Technology Committee is digging into the reasons why the UK struggles to scale new companies and retain them. As part of its work, the Committee launched a call for evidence, to which NCUB responded. This blog delves into the key issues we raised in our submission. It considers the barriers to scaling UK science and technology, and what is needed to overcome them.
Collaboration supports scale-up but is facing many barriers
NCUB strongly emphasised the need for collaboration between our critical economic players. University-business collaboration is an effective tool for scaling up UK science and technology.
Universities deliver the discovery research that UK science and technology is founded on. Universities often also commercialise their own research. This includes through patents, licensing agreements, and the creation of spinout companies (NCUB, 2024). Through collaboration, foundational research is better translated into commercial uses, encouraging innovation within both existing and new fields.
However, both universities and businesses are facing significant headwinds, which are impacting their ability to work with one another.
From a business perspective, we have seen a concerning decline in private sector innovation in the UK over recent years. NCUB analysis shows that real-terms private investment into R&D fell 6% between 2021 and 2023, amounting to £3.4 billion (NCUB, 2024). We are concerned this may be an indication that the Government is not sufficiently creating the conditions for companies to invest in R&D, which will have knock-on effects for innovation and growth. Additionally, the Department for Business and Trade’s Innovation Survey 2023 showed that the number of ‘innovation-active’ companies has fallen from 45% in 2018-2020, to 36% in 2020-22 (Department for Business and Trade, 2024).
Access to finance is another important factor. In the UK, firms have long faced hurdles in accessing sufficient finances to scale up, as evidenced by the Scale Up Institute’s work. Our own business R&D taskforce – chaired by Sir John Manzoni – has identified persistent issues over SMEs accessing external funding for R&D (this work will be released in the coming months, so stay tuned).
The UK has also long suffered from skills shortages, with more than half of UK firms seeing a gap in their workforce last year (British Chambers of Commerce and Open University, 2024). A report from the University of Birmingham found that the cost to economic output of digital skills shortages will potentially jump from £4.4 billion per year in 2024 to £28.0 billion in 2030. The shortage in digital skills could also see up to 385,000 full time equivalent jobs lost by 2030 (Ma, Kollydas, Lyons, & Green, 2024).
More hardline policies targeting international students and immigration are exacerbating skills challenges. These factors are coming together to create a ‘skills crisis’ at a national level, which ultimately threatens UK businesses’ ability to recruit the talent they need to scale their companies.
Finally, universities are under significant financial pressure in the current environment. There have been seemingly weekly reports of British universities announcing contingency or redundancy plans in recent months, and the Government’s increase in tuition fees last year – though welcome – was a sticking plaster on an otherwise structural issue with how the UK funds its main driver of foundational research. There can be no growth or scale-up without these roots.
So, what can be done?
We wanted to ensure that our response put forward recommendations for the Committee’s consideration that can help address these challenges and support the UK to scale more companies right here.
For a start, we feel the Government needs to throw its weight behind university-business collaboration. It can do this by providing increased Higher Education Innovation Funding (HEIF), to further support the university sector in its business engagement activities and offset the loss of European Structural Investment Funding (ESIF).
Going further, we also want to see the Government address the structural financial problems facing higher education. Universities form the backbone of UK research excellence and are supporting the pipeline of future talent for UK science and technology. We’ve been told that long-term plans for higher education will be set out in the summer, but the lack of information in the interim is hurting confidence in the UK university sector and hindering universities from effective decision making. The Government should be acting quicker on this issue.
Businesses need to be able to access the resources they need to scale up. This can be achieved through a simplification of the R&D ecosystem to make it easier for innovative companies to navigate.
To support access to finance, the Government is making positive steps through the Mansion House reforms to pension funds. It should be bold in these efforts and use all of its powers to make finance readily available to companies who wish to scale up here in the UK. This goes for private investors too.
Finally, we also called on the Government to ensure UK innovators have access to the talent that can support their efforts to grow. This could be through continued support for industry-academia mobility, a topic NCUB has produced thorough reports on in recent years. It can also be achieved by ensuring routes remain open for international talent to come to the UK to study and work.
These are important issues and won’t be sorted overnight. Political uncertainty in recent years has also played a significant role in private sector investment intentions, and – to the Government’s credit – the new industrial strategy and 10-year R&D budgets represent more of the long-term policy stability business craves.
We look forward to following the Committee’s work on these topics.
Policy Lead – Research & Innovation
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