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New strategy sets out UK’s ambition for innovation

28 Jul 2021

James Tooze takes a deep dive into the Innovation Strategy.

The Government’s Innovation Strategy was first trailed in the publication of ‘Build Back Better’ at the time of the Budget in March. This new strategy attempts to outline how the government intends to make the UK a ‘global hub for innovation’ by 2035. The full Innovation Strategy can be found here, but we will attempt to pull out some themes from the publication.

The strategy begins by outlining some of the ways by which the UK’s innovation ecosystem should, and could, be improved. These include incentivizing private R&D investment, increased rates of technology adoption and filling critical skills gaps. The first of these points has remained an aim of the government for a long time, recognizing the role that the private sector has in reaching the UK’s ambitions of spending 2.4% of GDP on R&D. The strategy rightly acknowledges that private investment in R&D is lower than many of the UK’s competitor countries, but public investment is much lower too. The graph below shows a rough trend of some of the more research-intensive nations and with the exception of Japan, there is a direct correlation between level of public and private R&D investment.

This shows just how crucial it is that the UK Government continues to increase public investment in R&D, and particularly in supporting the UK’s world-class research base which plays the most significant role in attracting inward investment and international companies to the UK. One of the best ways the Government can incentivize private investment is by setting out a long term plan for the promised increase in public expenditure on R&D to £22bn by 2024/25. This would give business the confidence they need to make investment decisions by showing the world that the UK is serious about R&D.

New roles and increased responsibility for Innovate UK

Innovate UK, described in the strategy as ‘the governments innovation agency’, has been given a significant role to support the delivery of the Innovation Strategy. Firstly, Innovate UK will develop an online ‘Innovation Hub’, aiming to simplify the funding offer available to innovative businesses in the UK. The complex landscape of business support is made more complicated by separate websites that are not connected together and means that there is no one place that businesses can find a comprehensive overview of the support they might be able to access. The introduction of an Innovation Hub is a really welcome step and something that CaSE has been consistently calling for over the last four years. In collaboration with the British Business Bank, Innovate UK has also been tasked with investigating how businesses interact with the public support landscape to help improve the access to support for businesses, both by supporting companies to develop their ability to access further public funding and move towards more private investment and reducing the bureaucracy attached to public funding schemes. Innovate UK will also include adoption and diffusion of new, cutting-edge technologies within the organisation’s central objectives and it will be interesting to see how Innovate UK develops these changes alongside continuing its popular and long-standing innovation support programmes.

Embracing new opportunities to unleash innovation

Alongside the role that the government plays in investing directly into research and innovation, there are a range of policy levers that the government holds which can stimulate and support innovation. The UK has the third largest pensions market in the world and investing only a small fraction of the £670bn of the pensions market in innovative businesses could have a huge impact on the availability of finance for these businesses. To this end, the strategy states that across government and in conjunction with the regulators, there are efforts being made to facilitate greater investment from these funds.

Alongside finding increasing avenues of support for innovation, public procurement can support the route to market for innovative ideas whilst also delivering improvements in policy outcomes and vaule for money for UK taxpayers. Public procurement accounts for roughly a third of all public expenditure, and alongside recognition of good practice within the Small Business Research Initiative, the government has clearly identified that more can be done to drive innovation and through procurement providing innovative businesses with a foothold in the market. The strategy is somewhat scarce on detail about how steps might be taken to truly enhance the public procurement offer but do offer hope that this becomes an area of priority for the Government over the coming months and years.

Providing a regulatory environment that can encourage innovation to thrive is another way in which the government has identified that more can be done. While ensuring that safety remains a top priority, CaSE has spoken at length about the role that new approaches to regulation, including embedding the innovation principle alongside the precautionary principle, can support innovation. As set out in the strategy, the government will seek to commission the Regulatory Horizons Council which will look at how to support innovation through regulation, alongside publishing an action plan on standards for the fourth industrial revolution.

Anything else?

Two other key pillars of the strategy are people and places. The section on people and skills is broadly focused on enabling a better understanding of where skills gaps exist, or may exist in future, with the Gatsby Foundation and UKRI playing a key role in identifying these gaps. The strategy also gives the first indications of the role that the new Office for Talent will play, which includes doing more to attract innovators to the UK and coordinating pro-active recruitment of people within sectors deemed to be of ‘critical priority’. There are also proposals for potential new visa routes, including a ‘High Potential Individual route’, a ‘scale-up route’ and an ‘Innovator Route’, as the government attempts to undo some of the difficulties caused by its new immigration system.

The section of the strategy on place is unsurprisingly centered around ‘levelling-up’, but besides providing details of the already announced second wave of Strength in Places funding, the strategy is lacking in deliverables and appears to tail the R&D Place strategy which is expected later this year. It was confirmed, however, that the government will be commissioning Sir Paul Nurse to look across the UK to understand the full landscape of research-intensive organisations to highlight the strengths and comparative weaknesses and make recommendations on how to nurture these strengths and tackle the weaknesses.