Part one of this blog examined the skills crisis and how the UK’s major political parties plan to respond.

Part two looks at what to expect on a range of other policy areas in the year ahead as the UK’s political parties prepare for the next general election. The general election, which is expected to take place in the second half of this year, calls for bold ideas to strengthen the UK’s economy and drive-up standards of living.

What will happen to UK industrial strategy?

Over the last decade, the Government has focussed efforts to improve economic growth through industrial strategy. However, few strategies, plans and frameworks have truly had the longevity required to drive genuine economic prioritisation. Theresa May’s 2017 Industrial Strategy was a sharp vision for the UK’s post-Brexit economy but was replaced by Boris Johnson’s Plan for Growth in 2021, then by a Growth Plan in 2022 under Liz Truss’s leadership, and a new Science and Technology (S&T) Framework under Rishi Sunak’s government in 2023. The strategies have much in common in terms of the economic strengths identified and ambitions they set. However, the frequency and rhetoric of change will have impacted their effectiveness.

Industrial strategy is important to the UK. The UK cannot be world-leading in every field, but there are opportunities for the UK to prioritise and build upon its significant strengths. Effective prioritisation could help the UK on many fronts, including promoting targeted private investment, innovation and technology adoption, improving the UK’s competitiveness, realising societal goals, and achieving strategic autonomy.

2024 should provide greater clarity on the future of UK industrial strategy. The S&T framework gives a clear signal of direction. The Labour Party published its plans for Industrial Strategy in 2023, including a commitment to reestablish an Industrial Strategy Council and place it on a statutory footing. The Labour Party manifesto, which is expected to be published in the coming weeks, may provide further detail on Labour’s economic growth strategy.

Will private research & development (R&D) activity and investment rise?

In recent years, the UK Government has committed more funding to research to realise its vision of a more innovative, R&D intensive economy. NCUB has consistently argued that a suite of additional and coordinated measures are needed to encourage growth in private R&D investment and activity, including measures to attract a greater share of global R&D investment and initiatives to support businesses to start, grow and scale. This is essential to rebalance the UK economy and drive growth. Several interventions have been made or are in progress, many announced at the end of last year and expanded upon in our blog. Initiatives include actions to drive up foreign direct investment following last year’s Harrington Review, moves to unlock greater investment in high-growth companies from pension funds, strategies for each of the five critical technologies identified in the S&T framework, and a range of fiscal and regulatory initiatives such as permanent full expensing, changes to R&D tax credits and new investment zones.

Last year, an adjustment to the Office of National Statistics’ methodology led to a significant change in the UK’s reported R&D investment figures. The latest adjusted data available is from 2021. We are expecting further updates and refinements to R&D expenditure data in the year ahead, which should help paint a more complete picture of the UK’s recent performance and whether it is on track to achieve the ambition set out in the UK S&T Framework for the UK to be perceived as a ‘top three nation in the world, and the leader in Europe for the strength of its science and technology system.’ Levels of investment should be commensurate with this goal and so understanding private R&D investment trends is critical.

How will the scale and shape of global research partnerships evolve?

A major development in 2023 was the UK’s decision to associate to the EU’s flagship Horizon research programme. 2024 started with the UK officially becoming an associate of the scheme. Horizon Europe association was positive news for the research community and there is significant momentum behind participation, with many universities keen to partner with businesses on bids. 2024 will reveal early engagement in the scheme and the opportunities that it offers to ambitious global partnerships.

At a time when association was uncertain, the Government published its plans for Pioneer “A UK Prospectus for Opportunities Beyond Horizon Europe.” There were some signals in 2023 that the Government may implement parts of Pioneer alongside association. The EU remains a close and important partner to the UK, but a new Government International Science and Technology Strategy published in March 2023 also emphasises the importance of expanded relationships with the USA, Asian Pacific, and other parts of the world.

What will happen to university-SME interactions?

Driving economic growth through greater research and innovation activity will require big, bold partnerships with global research partners and large multinational firms, but also greater R&D and innovation in SMEs. SMEs are a critical part of the UK economy, accounting for more than 99% of registered firms and 60% of total private sector employment in the country. However, the latest data from the Longitudinal Small Business Survey suggests that in 2022, the proportion of businesses engaged in growth-related behaviours, such as innovation, training, and external finance utilisation, was lower than in 2019, reflecting the lingering effects of the Covid-19 pandemic and other disruptions for SMEs.

Collaborations between universities and SMEs can foster a culture of creativity and innovation and contribute to the development of novel and groundbreaking ideas. Their collaborations with universities, research institutions, and larger enterprises lead to the generation of new ideas, curriculum development and knowledge exchange, thereby accelerating innovation and equipping students with the skills needed for employment. However, our analysis shows that over the last decade the frequency of interaction between universities and SMEs has seen limited growth. As we progress through 2024, we will be examining the latest data on SME interaction and will be working with universities and others to understand trends. A significant concern for many institutions is the loss of European Regional Development Funding (ERDF), which our report last year shows supported many forms SME interaction.

How will universities and policy makers respond to a challenging operating environment?

Universities are the foundation of the UK’s science and technology system, performing and producing research, creating the skilled workforce, and facilitating knowledge exchange between academia, industry, and civil society. The strength of our universities is a real UK advantage that is threatened by increasingly untenable interdependencies within and between the financial models for research and teaching. In 2023, UKRI (UK Research and Innovation) undertook and published valuable work to illustrate the scale of this issue in the context of research funding. Action is needed now by UKRI, with support from government, to act on the implications of this work. Additionally, complementary work is needed, across the UK, to explore similar and connected issues in teaching to create a holistic understanding of the challenges universities face and the actions needed to address them. Delivering the UK’s economic growth ambitions relies on a university system that not only survives but thrives.

NCUB in the year ahead

This two-part blog sets out some of the main themes that we could, or should, be debating in 2024. As a powerful and diverse network of business and university leaders, we will proactively shape and contribute to discussions with insight and practical recommendations. This is essential so we can collectively achieve enduring growth through research, innovation, and higher education.