Theresa May on industrial strategy, R&D tax credits and £2bn

A brief digest of the Prime Minister’s speech announcing increased R&D investment and looking ahead to the Autumn Statement.

Update: You can read CaSE’s response to the 2016 Autumn Statement here.

In her speech yesterday, the Prime Minister spoke of Brexit as an opportunity “to shape a new future for our nation: the chance to build a stronger, fairer country.”

She stated that “for business, it means doing more to spread those benefits around the country, playing by the same rules as everyone else when it comes to tax and behaviour, and investing in Britain for the long-term.”

May looked ahead to the Chancellor delivering the Government’s Autumn Statement tomorrow saying “he will lay out an agenda that is ambitious for business and ambitious for Britain.” 

Turning to the industrial strategy, May said it would be a “strategy that will back Britain’s strategic strengths and tackle our underlying weaknesses.“

UK’s Strengths 

• an open, competitive, trading economy
• compete with the best in autos, aerospace and advanced engineering
• breaking new ground in life sciences and new fields like robotics, artificial intelligence, and quantum computing
• leaders in global professional services from architecture to accountancy from law to consulting
• world beating universities and the highest research productivity of the top research nations
• a vibrant creative industry, producing an extraordinary level of talent recognised and respected the world over
• leaders in global finance – not just banking, but investment management and insurance too

UK’s Weaknesses

• business and government investment [in R&D] remains lower than our competitors
• economic success is still too unbalanced and focused on London and the South-East 
• not strong enough in STEM subjects, and our technical education isn’t good enough
• productivity is still too low
• fast-growing firms can’t get the patient long-term capital investment they require

Ambition

The Government’s ambition for the industrial strategy is to:

• address long-term structural challenges (weaknesses set out above)
• create the conditions where winners can emerge and grow
• back those winners all the way to encourage them to invest in the long-term future of Britain
• deliver jobs and economic growth to every community and corner of the country

Timeline

May also confirmed that the “Government will publish a Green Paper on the industrial strategy before the end of the year to seek your views before issuing a White Paper early in the new year” 

First steps

Ahead of the consultation May also set out some first steps. On immigration May said “We are ambitious for Britain to become the global go-to place for scientists, innovators and tech investors. We will continue to welcome the brightest and the best – but can only do so by bringing immigration down to sustainable levels overall so we maintain public faith in the system.” There have been signals from government in speeches, in response to parliamentary questions and in debates that we should expect a consultation on non-eu migration, including student and work routes ‘soon’. But we are not now expecting it to be outlined along with the autumn statement and may be later than anticipated. Having only just completed a substantial review of Tier 2 work routes in January of this year and with no evidence of public concern around student and skilled work routes, not to mention the vast to-do list the Home Office already has in front of it as a result of Brexit, we hope that reviewing of non-eu work and student routes is reconsidered.

May then made the widely trailed announcement of “Real terms increases in government investment in R&D – investing an extra £2 billion a year by the end of this Parliament to help put post-Brexit Britain at the cutting edge of science and tech.” 

As part of the funding increase, an “Industrial Strategy Challenge Fund will direct some of that [£2bn] investment to scientific research and the development of a number of priority technologies in particular, helping to address Britain’s historic weakness on commercialisation and turning our world-leading research into long-term success.”

The Prime Minister then went on to outline three reviews:

Review of R&D tax credits

Patient Capital Review – led by the Treasury – that will examine how we can break down the obstacles to getting long-term investment into innovative firms. The review will be supported by a panel of experts, and I am pleased to announce that Sir Damon Buffini has agreed to chair that panel.

Small Business Research Initiative Review to look at how we can increase its impact and give more innovators their first break led by Cambridge entrepreneur David Connell to report back next year (2017)

The announcement was widely reported in the mainstream press and media, including comment from CaSE. See CaSE in the media for all our media mentions.

CaSE press release

Financial Times (22/11): Industry welcomes £2bn R&D windfall but queries effect on output

Times Higher Education (21/11): Theresa May announces £2 billion boost for UK research

The Engineer (21/11): Where winners can emerge and grow

Chemistry World (21/11): Prime minister’s vision for innovative UK welcomed

Nature (21/11): Cautious welcome for UK’s vague £2 billion research pledge

BBC News at One (21/11): CaSE Director Dr Sarah Main interviewed on Prime Minister’s announcement of new R&D investment

BBC News (21/11): PM signals £2bn a year science funding increase

BBC News (21/11): Is this the PM’s ‘white heat’ of technology moment?

BBC Nottingham (21/11): CaSE Deputy Director Naomi Weir interviewed on Prime Minister’s announcement of new R&D investment

We hope that tomorrow’s Autumn Statement may provide a bit more clarity on the new funding announcement, in particular confirming whether it will all be in the form of new direct funding and how it will be distributed.

We look forward to hearing more detail and will be asking members for input as we seek to feed into government thinking on industrial strategy, migration and other reviews.