The 3 March budget will be chancellor Rishi Sunak’s fifth major statement in just over a year in the job. Having taken unprecedented steps to shelter businesses and jobs from the impact of Covid-19, and with a plan to exit lockdown in place, the chancellor’s attention must turn to the long-term recovery and its direction.
Beyond the pandemic, the government faces two seismic challenges. The first is how to adapt and remain competitive in a rapidly changing world. The second is the crisis of climate change.
Each requires the same collaborative, systemic approaches used to meet Covid-19. Decisions need to be coordinated across levels of government and parts of the UK, as well as across the remits of departments and budgets.
The goal, in short, must be national coordination rather than individual interventions. That should include an innovation strategy that combines spending decisions, industrial policy and the government’s plan for growth.
Despite the UK’s many world-class universities, investment in research and development as a proportion of GDP remains well below the average for members of the Organisation for Economic Co-operation and Development and 40 per cent less compared with some of its European neighbours.
Had we invested at the OECD average for the last 10 years, research, development and innovation would have received an additional £44 billion.
The government is planning to rectify this, having set a target for R&D spending to reach 2.4 per cent of GDP by 2027. To achieve this, annual public funding for research will need to reach £22bn over the next four years. The promise of £800 million for the newly christened Advanced Research and Invention Agency and the three-year settlement for research in the 2020 spending review are steps in the right direction.
However, to hit the target, businesses will need to spend £17.5bn more per year on R&D than they do today. The government can do more to help businesses across the UK see the value of R&D and translate discoveries into commercial solutions.
Increasing their R&D will be critical if UK companies are to achieve resilience and growth in a changing world with difficult trading conditions, while boosting productivity, generating high-value jobs, becoming greener and driving advances in technology, medicine and energy.
With this in mind, an R&D-led recovery needs much more than funding alone.
In the zone
At the end of last year, the National Centre for Universities and Business (NCUB) formed a taskforce of senior leaders from industry and academia to advise on how the government’s ambitions for a more R&D-led economy could be met.
The taskforce called for a joined-up, business-focused strategy for innovation. A combined offer from government that includes trade, education, health and fiscal policy would appeal to businesses and motivate them to invest in research and innovation.
Such an offer should seek to untangle the jumble of tax incentives, regulation and funding pots to make them easier for businesses, at home and abroad, to access.
A strategy can help prioritise investment. Government spending and policy decisions should aim to focus public and commercial attention on areas where the UK could be world leading, rather than spreading resource too thinly.
Identifying and prioritising these strengths goes hand in hand with spreading the benefits of innovation across the UK. That’s why the NCUB taskforce called for the creation of Innovation Collaboration Zones.
These zones would leverage all the factors that, from evidence worldwide, we know underpin business R&D and innovation investment, such as incentives, deregulation of land use and access to expertise. They would also support research at all stages from lab to market, and attract a critical mass of talent, ideas, academics, businesses and competitors.
Zones should be in places where there is already research activity, aimed at spreading their economic impacts beyond London and the south-east.
All these activities—developing a combined offer to encourage business innovation, prioritising areas to become world leading, and establishing Innovation Collaboration Zones—reach across government departments, funding schemes and initiatives.
The NCUB is calling on the government to use Wednesday’s budget to lay the foundations for a long-term, holistic approach to tackling the great challenges of our time, underpinned by an innovation strategy.
Read the article, first published by Research Professional News here.