When the government released its productivity plan in July, it set out an ambition to make the UK the best place in Europe to innovate. Today we publish our Innovation Support Report Card, a look into how manufacturers think the UK measures up against competitor nations.
Manufacturers' verdict on innovation support? Improved, but could do better.
Manufacturers see some real positive aspects in UK innovation support – such as the world class science base, and competitive R&D tax incentives – however, as it stands they think that support could do better in terms of helping them access all of the resources they need. The most successful innovative economies have strengths across a breadth of areas and this should be the ultimate aim for the UK.
So how do we measure up?
Top of the class on tax incentives:
One aspect of the innovation support landscape that does get manufacturers’ seal of approval is the Government’s tax treatment of Research and Development (R&D). Over six in ten manufacturers (62%) have taken up the R&D tax credit, making it the most widely used innovation support scheme amongst manufacturers. It is also the most highly rated of the support on offer, with 38% of manufacturers saying that the UK is as good as its competitors for the R&D tax incentives it offers, while over one in ten (12%) rate the UK as a world leader.
However, other areas of innovation support do not get such a vote of confidence.
Could do better in other areas:
Six in ten manufacturers (60%) say the UK could do better on business access to scientific research, while 58% say the UK lags behind on support for external innovation partnerships and even in ten manufacturers (69%) say that the UK could do better when it comes to government support for commercialising new technology. While they highlight a number of recent improvements – such as the introduction of Catapult centres – further progress must be made. Without it, the UK looks set to remain an innovation follower, unable to reap the rewards of successfully bringing research to market.
Concerns are focused on quantity, not quality
Although manufacturers say there is room for improvement, the underlying concern is about quantity rather than quality. Over 90% of manufacturers who have used support – from growing a network of contacts to enabling them to innovate more quickly – say that it fully or partially met their needs. Of those who haven’t used support, only one in ten (11%) say that none of the support available addresses the challenges faced by their company.
The breadth of support is right, the issue is that there is not enough of it
– and this is reflected in the fact that manufacturers do not have one priority for a boost to expenditure, they have several. While 19% say that an increase in Government support to help bridge the gap between research lab and market would have the biggest impact on their company’s level of innovation, 26% would prioritise additional access to external experts. These are matched by those who say that improvements to the tax treatment of R&D would have the biggest impact on their company’s level of innovation (26%).
Building an innovation ecosystem
“I have noticed that government support has got better, and I wouldn’t change much, but if they started pulling out now it would be a big disappointment. We need to focus on building an exciting future.” – Innovation Monitor 2015/16 respondent
International evidence shows that the most successful innovative nations are not successful because they excel in one area, but because they excel in many areas. They have systems that are well designed to help ideas make it through from conception to market, often with many iterations in between. Innovation does not happen in a straight line and policy should enable multiple interactions between businesses, universities and other innovators.
While there is much to learn from other nations, it is also true that a good innovation ecosystem cannot just be “copied and pasted” from somewhere else. For manufacturers, the best innovation policy goes with the grain of how they already work. Manufacturers see room for improvement in a number of areas, but there are no areas of UK support that they feel need a fundamental overhaul. For manufacturers, making the UK the best place in Europe to innovate means providing stability for the overall support landscape, a boost to support in key areas where there is oversubscription or scope for growth, and a long-term partnership approach with government to help address major challenges.
The three key things manufacturers want from innovation support:
Manufacturers want a commitment to long term funding for science and innovation.
Manufacturers want to know schemes that help them innovate will last.
Manufacturers want government to act as a partner when it comes to investing in innovation.
What does this mean in practice? A to do list for this parliament:
A real terms increase in funding for science and innovation by the end of the parliament combined with certainty about the trajectory of spending.
- An increase in funding for Innovate UK, maintaining the breadth of support schemes.
- A commitment to the principle of funding Catapult centres on a ‘one third, one third, one third’ basis.
An increase in the value of the large companies’ R&D tax credit to ensure its competitiveness is not eroded by reductions in corporation tax.
- An industrial approach where government maintains a dialogue with industry and makes sustained strategic investments where necessary.