28 February 2020
What business wants from the UK's new R&D landscape
FELICITY BURCH: Businesses will have to do much of the heavy lifting if the UK is to meet its R&D ambitions
This piece is part of a comment series looking at some of the issues raised by The road to 2.4 per cent: Transforming Britain’s R&D performance, a report by former Universities Minister David Willetts and published by the Policy Institute.
Overcoming the UK’s generational challenge
Making the UK a “global science superpower” has emerged as one of the central priorities for the UK post-Brexit. Delivering this vision could have manifold benefits to society. R&D lies at the heart of social development and will be critical to address the major challenges we face as a society – from tackling antibiotic resistance to transitioning to a zero-carbon economy. But for the UK to win on the world stage, it is critical that concerted action is swiftly taken by this government to overcome longstanding underinvestment in R&D.
Investment in R&D is a generational challenge for the UK. Investment levels have remained static at around 1.7 per cent of GDP for the last 30 years, and in that time the UK has fallen from being one of the leading investors in the G7 to being near the bottom of the table.
In the context of this challenge and the government’s ambitions, David Willetts’ The road to 2.4 per cent report is a timely contribution to the policy debate. The report captures many of the structural challenges facing the UK’s innovation ecosystem and makes salient recommendations for how they can be addressed.
Businesses will have to do much of the heavy lifting if the UK is to meet its R&D ambitions, so it’s vital new policy ideas help businesses to do more. Among the proposals Willetts put forward in the report, there were three that particularly resonated with business priorities:
1. Extending the role of government in promoting innovation
The first area is government focus. Businesses and universities will often base their own investment plans on what government says it’s going to do, such as investing in specific technologies, markets or missions. In his report, David argues that the UK currently underplays the role of government in bearing risk in the development of new technologies. That’s why the CBI is calling for a long-term R&D investment framework from government, which would go a long way to encourage business R&D.
Government procurement can also be considered as part of this picture. The government is a powerful buyer in the UK economy; its actions can stimulate demand for new technologies, creating marketplaces that induce the development of innovative new products and services. Yet CBI surveys have shown that only 5 per cent of businesses agree that current public procurement processes in the UK incentivise innovation. Setting obligations on departments to promote innovation through their procurement channels, as Willetts proposes, could therefore be a good step towards creating a culture more open to risk that drives greater innovation through government procurement.
2. Rebalancing R&D funding
Secondly, public funding must give greater emphasis to the “D” in R&D. As Willetts points out, there is a significant gap between funding available for basic research and that for applied research. Other countries allocate a far higher proportion of public funding towards this closer-to-market R&D.
As the former Science Minister Chris Skidmore put it in a recent speech, this is not “an either-or question”. It’s not a question of cutting funding available to universities, which are a key national asset and integral part of the UK’s ecosystem. Rather, growing public funding to meet the 2.4 per cent challenge is an opportunity to increase the allocation of spending for applied R&D. That’s why, like Willetts, the CBI is calling for significant increases in Innovate UK funding streams, like the Smart grant.
3. Strengthening the UK’s ecosystem of applied research institutions
Finally, business shares Willetts’ ambition to grow support for applied research institutions, which can play a vital role in catapulting research into reality, and supporting business innovation.
This is why the CBI has called for the government to strengthen the existing Catapult network by developing a network of what we’ve called “Catapult Quarters”. These would build on existing Catapult centres (or other research and technology organisations), to create a network providing targeted benefits and support such as funding for collaborative R&D, business liaison services and special regulatory allowances.
Investing in an initiative like this would not only help to address some the challenges Willetts highlights in his report around the need to make the Catapults a more coherent network and easier for businesses to work within, but it would also offer a way for government to create a clearer international visibility for regional innovation capabilities.
With a strong international brand we think these Catapult Quarters could help attract more international R&D investment to the UK, “level up” innovative capability across different parts of the country and ultimately help tackle the generational challenge the UK has faced on R&D investment.
What is needed next is concerted policy action from government. The upcoming budget on 11 March is an opportunity for government to make a clear statement of intent on its ambition to make the UK a “global science superpower”. Three things businesses would welcome is the introduction of a long-term framework for public R&D funding, an uplift in funding for Innovate UK’s open programme and a commitment on the funding required for the UK to associate fully in Horizon Europe for 2020 to 2025
Felicity Burch is Director of Innovation and Digital at the CBI. To hear more about business perspectives on innovation and digital policy in the UK, see Felicity’s blog.
 CBI (2018) Partnering for prosperity - CBI/Browne Jacobson 2018 Public Procurement Survey