Innovation Monitor: Policy Implications #EEFIM

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Yesterday we hosted a launch event for the EEF/NatWest Innovation Monitor 2014/15.

I also blogged about some of the recent trends in innovation activity (you can see that here).

Today, I will talk about the implications for policy, many of which were discussed at our launch event yesterday (see the twitter debate at #EEFIM).

We can't just assume economic growth will lead to a better innovation performance
Yesterday's blog showed that as the economy has returned to growth, this has actually put pressure on the amount of innovation manufacturers are able to do.
But the UK needs to up its game: we are not an innovation leader
At the moment, EU research classifies the UK as an “innovation follower” because – despite the strong performance of our science base, its outputs are not always commercialised here. The UK is not an “all-rounder”; we underperform when it comes to applied research and subsequently the number of companies bringing products and services to market. The EU's strongest performing countries perform strongly across the range of indicators.

The UK's innovation system has a number of strengths but the UK is not an “all-rounder”

Index, European Union Average = 100

Source: EU Innovation Scoreboard, 2014

So, the question then, is what can be done to boost the UK's innovation performance?

As we reported in last year's Innovation Monitor, UK innovation support is actually well-targeted to address the barriers that manufacturers face when they innovate.

What is more, there have been some positive changes to support over the course of the last year. (click on image to enlarge)

Innovation support is generally good. But given increased concerns about falling behind competitors – reported yesterday – and the fact that the UK more broadly does indeed underperform when it comes to innovation, if we want to accelerate the UK's performance, now is not the time to take the foot off the pedal. We have identified three key ways in which policy could be improved.

Support is on the right track, maintain stability

In the past innovation support has been subject to frequent changes which can create confusion and uncertainty. Recent developments are positive and should be maintained. This would improve the awareness and uptake of support.

Specifically: maintain the R&D tax credit, and keep TSB delivery at a national level.

Boost support for applied research, especially Catapult centres

Recent increases to the TSB's budget have been positive, but it remains the case that support for applied research is underweight and uncertain compared with basic research and the level of expenditure in other countries. All political parties should commit at the very least to maintaining the TSB's funding in real terms, at the level of its 2015/16 Spending Review allocation.

This is particularly important because – as this report has shown – a range of schemes is necessary to tackle the various barriers to innovation. It is important that each of the TSB's schemes is properly funded, and it is not clear that this is the case at the moment. In particular, the new network of Catapult centres could benefit from additional funding.

Longer term, innovation support needs to be more strategic

Given the number of challenges that science and innovation support could address, and the limited budget available to do this, there must be a clearer decision-making process in place. Clear and convincing evidence of the on-going value of funding for science and innovation would make it less vulnerable to changes in the political climate.

This would involve developing an overarching strategy for science and innovation, with funding sustained over parliamentary terms. It would require a regularly refreshed evidence base built on input from a wide range of stakeholders.

At yesterday's launch event we had some great discussion about some of the details around developing such a strategic approach to science and innovation funding. There were some valuable insights into the role that challenge-led innovation policy might play, and there was strong agreement about the importance of stability when it comes to policy in the area.

There has been much positive progress in innovation policy in the last few years.

The international metrics may show that the UK has some way to go to build our strength in applied research, but recent policy changes represent real steps to address this. There is no need for radical change, but what we do have must be strengthened, made more stable and more strategic. The UK has ambitious manufacturers and a strong science base; with the right policy framework in place, we have the potential to excel in every area from basic research right through to commercialisation.

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This person has now left EEF. Please contact us on 0808 168 1874 or email us at enquiries@eef.org.uk if you have any questions.

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