The call comes after new research showed that the UK Government spends just 0.49% of GDP on R&D. This figure is the lowest among the G8 and lower than many other countries. According to the CBI, for every £1 invested in R&D in the UK, France invests £1.40. It also highlighted that Finland spends more than 10 times the amount spent by the UK on innovation.
According to the latest EU Innovation performance fact sheet, while the UK is among a small number of countries whose innovation performance has increased since last year, it is a long way behind the leaders, Malta, Lithuania and Bulgaria. The rest of Europe, however, was outperformed by Switzerland who retained its position as the Innovation Leader in Europe.
As a whole, Europe is still behind South Korea, the United States and Japan but ahead of the BRIC countries – Brazil, Russia, India and China. On a positive note, the majority of the innovation areas measured by the EU show a positive increase over the period 2007-2014. The challenge looking forward will be to continue that.
What does the CBI want?
The CBI would like the UK Government to double the budget for Innovate UK with a long term target of reaching 3% of GDP spent on innovation. While criticising the UK Government for not investing more, the CBI does accept that its 3% figure is not going to come from the Government alone and instead will require a public/private partnership.
The CBI believes that the Government could do more by offering loans and equity funding alongside the existing programmes that are managed by Innovate UK. This makes a lot of sense. If you look at the major UK universities and Cambridge in particular, they have been very active in providing funding and access to premises on science parks to help technology start-ups. In exchange,the university gets to share in the profits.
For universities this approach is a good move. It enables professors to continue to bring in research money which, in turn, helps them secure tenure. It also helps keep good graduates around by enabling them to monetise the research they embarked upon during their degree. This approach has been credited with helping reduce the ‘brain drain’ to places like the US where research grants are much easier to come by.
The challenge for the UK Government will be in deciding where to invest the money. The technology sector is doing very well without Government money and the UK is one of Europe’s technology start-up hot spots. While much of the media focus on London, other technology hot spots include Manchester, Cambridge and also Birmingham.
In its submission to the UK Government the CBI calls out science as a key area for investment. The UK has a long history of supporting science and in some areas is seen as investing far more than many other European governments. The UK also benefits from a lot of inbound investment in R&D spend from major pharmaceutical and other medical research companies.
Despite these investments, there are large areas of science where the UK makes little investment. The question is will investment bring in private money to match that invested by the Government? The CBI makes no attempt to answer this in its document and associated press release.
Two areas that the UK Government and universities are investing in are cybersecurity and data scientists. There is a big demand for people with these skills with all reports, Government and industry, showing a significant shortage of skilled workers.
Investment in these areas is a long-term goal that will take time to pay off and while the Government has talked a lot about the need for skilled workers in these area and put some money aside, businesses are hoping that it will do substantially more as they face increasing problems from cyber attackers.
Science and technology not the only places for innovation investment
Science and technology are not the only places where the CBI believes there is room for investment. In a press release John Cridland, CBI Director-General said: “Our research shows that innovation investment has never been more important, given its effect on enhancing productivity.
“While our economy is doing well, we must not be complacent, as we cannot afford to rest on our laurels while our peers pace ahead.
“Instead we need to build on our research excellence by fuelling the UK’s innovation ecosystem with investment, fresh ideas and skills.
“With the UK’s research and development spending the lowest among the G8, we are falling ever further behind our international competitors and must take action so that we lead from the front.”
In addition to Cridland’s statement, the CBI has also listed six things in its Autumn Statement submission to the Treasury. These are:
- Set out a coherent framework so innovation boosts the capacity of the economy to produce more in the long term.
- Deliver a package on business rates reform that makes the regime, simpler, fairer and more competitive.
- Fix the funding ladder for medium-sized businesses to ensure they can grow and contribute more to the economy.
- Ring-fence revenue from the apprenticeships levy and introduce an independent ‘Levy Board’ to set the rate based on sound economic evidence.
- Avoid further restrictions on skilled migration, which would harm the UK’s ability to attract investment and compete globally.
- Continue cross-government efforts to promote exports.
Given recent announcements by the Government and comments around apprenticeships today, it is likely to be disappointed. For example, the move to let individual councils set and retain the income from business rates is unlikely to simplify the regime. In fact, it is likely to create more uncertainty for companies as councils look to use business rates to attract jobs to their own local economies and drive infrastructure projects.
The challenge of apprenticeships is something that will particularly vex the CBI. Yesterday’s news story carried by the BBC showed that there was a rise in poor quality apprenticeships. The Government has said that it intends to deal with this problem and by 2018, apprenticeships will be subject to a league table.
There are two questions that need to be dealt with here. The first is whether a league table will really improve the quality of apprenticeships that are currently available. The second is whether the government can really deliver the 3 million apprenticeships it has committed itself to should it raise the bar for apprenticeships.
The call for the Government to review its restriction on skilled migration is something that is also likely to be side stepped in the Autumn statement as we move closer to the referendum on EU membership. It is unlikely that any changes are likely to be made in this area until after the referendum when the UK will know exactly what it has managed to get in concessions from the EU over freedom of movement for jobs and benefits.
The six points raised by the CBI will resonate with companies of all sizes. Unfortunately, it is hard to see them getting more than just lip service from the Government in the Autumn Statement. There will be the inevitable announcement around apprenticeships but it remains to be seen how the Government will raise the quality and reach its own target of 3 million apprenticeships over the life of this parliament.
It would also have been interesting if the CBI had published a list of companies willing to co-invest with the government and the areas in which they were interested. That would have given the CBI an opportunity to lay out where it believes the money for innovation needs to be spent and where it sees public/private partnerships able to be built.