How can the government innovation strategy position the UK for success?

Written by Neil Ross on 30 June 2021 in Opinion
Opinion

The upcoming government plan should rethink the UK’s R&D system and use public procurement to support innovative companies, according to Neil Ross of techUK

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Following the disbanding of the Industrial Strategy Challenge Council, an innovation strategy, due to be launched in the summer, provides an opportunity to set out a refreshed strategic approach to enabling innovation and send strong signals into the UK market.

Innovation is vital; high levels of investment in research and development are associated with increased productivity and living standards. Crucially, having a store of innovative companies and cutting-edge research facilities can make a country more resilient in a crisis, as we have seen with the way the UK has been able to respond by leading in the race to develop a Covid-19 vaccine and treatments and leveraging our life science base.

To ensure that we further our leadership in cutting-edge sectors, such as life science and technology, what we need is an Innovation Strategy that achieves two things: build markets for innovation so that businesses are incentivised to invest in R&D; and create a framework to make strategic choices to support the continued research, development and evolution of cutting-edge technologies which could transform the UK economy and society.

Building markets for innovation:  

Enabling businesses to invest more in R&D fundamentally means businesses seeing clear returns on investment in innovation. This does not just come from tax incentives or match funding alone.
 
The existing risk-averse approach in procurement limits what government is able to do, meaning advancements in govtech are limited while we are also missing an opportunity to build markets for innovation in the UK
 
It means looking holistically and strategically at developing supply chains, enabling partnerships between academic institutions and businesses, and creating a regulatory system that makes the UK an attractive place to test out new products. Underpinning this also means ensuring we have the right skills and infrastructure demanded by businesses and the public sector. We must also guarantee the UK has access to international markets and strong safeguards for intellectual property.
 
Building markets for innovation also means rethinking what innovation means in the modern economy.
 
The UK’s tech sector is driven by services: 96% of tech sector output and 81% of exports is in services, techUK research has found.
 
These digital service providers are companies which apply their software and expertise to solve problems, enhance day-to-day business services, or develop new software-based solutions. This is undoubtedly innovation, but is currently poorly served by the current R&D system. R&D tax credits cannot currently be claimed against key enablers of innovation such as cloud computing, data and data analytics or even for capital investments such as factories and machinery. Both of these things need to be looked at.
 
There is also a key role for the public sector here to.
 
The UK’s current approach to public procurement is seen as a major missed opportunity by techUK members, particularly SMEs. The Vaccine Taskforce, Ventilator Challenge and wider response to the pandemic has shown how government procurement can create markets for innovation. The existing risk-averse approach in procurement limits what government is able to do, meaning advancements in govtech are limited while we are also missing an opportunity to build markets for innovation in the UK that would encourage more businesses to invest in R&D. The innovation strategy and the upcoming Procurement Bill offer an opportunity to change our approach. 
 
Making strategic choices: 
 
The innovation strategy also provides an opportunity to refresh the UK’s strategic approach to the technologies of the future.
 
The recently announced National Science and Technology Council should play an important steering role in identifying which key new innovations in the UK could have transformative effects on our economy and society. This includes technologies such as quantum computing, autonomous systems, artificial intelligence and open RAN where the UK already has a global edge.
 
However, the council will need to rely on the UK’s tech sector and scientific community to ensure that there is a clear understanding and utilisation of the capabilities within the UK. This will be a careful balance, and the UK should not pick winners, but should back winners instead. This means supporting wider business and research innovation so that a host of emerging technologies many of which cannot be imagined today are not missed out on because resources are being diverted into technologies picked by committee.
 
The innovation strategy offers an amazing opportunity to shift the dial on how the UK approaches innovation. If the strategy can achieve the two aims of building markets for innovation and building a framework of how the UK approaches strategic technologies, it will not only be a success, but mark a major change in how we see enabling innovation as central to our national prosperity. 
 
 
About the author

Neil Ross is head of policy at techUK

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