In March 2023 the Institute for Manufacturing, University of Cambridge published the UK Innovation Report with the aim of benchmarking the UK’s industrial and innovation performance in a global context.
This comprehensive report brings together a whole range of innovation and value-added indicators and should be a key reference in any discussion about innovation policy and industrial performance in the UK.
It certainly made for interesting reading on the current state of play as new ministerial structures are rolled out.
We have seen the creation of the Department for Science, Innovation and Technology (DSIT) to ensure the UK is “the most innovative economy in the world”. The first DSIT Science and Technology Framework was published in March 2023 and outlined the five critical technologies for strategic growth until 2030. There is a commitment of £250m to ‘technology missions’ in three of five: artificial intelligence, quantum technologies and engineering biology.
Here I’ve summarised some of their key findings that will make important reading for GovGrant ‘s clients and partners.
How much is the UK spending on R&D?
The ONS introduced a major revision to the methodology used to estimate R&D expenditure in the UK, in November 2022. The report estimated that UK expenditure on R&D as percentage of GDP for 2019 is up from 1.7% to 2.7%. This is a restating of the figures based on the new ONS definition with SME’s accounting for >95% of the increase.
This 2.7% figure surpasses the 2.4% GDP by 2027 which had been UK government’s objective. However, it still leaves the UK behind Germany, US and South Korea who invested between 3.2% and 4.6%.
The UK government’s expenditure on R&D in 2019 was half the OECD average of 0.24%.
Which UK industries are performing well on the global stage?
The UK is in 3rd place for spending in aerospace manufacturing in 2019, only behind US and France. The UK also ranks 3rd for business expenditure on aerospace R&D among OECD countries.
The UK’s food and beverage manufacturing sector was the 6th largest amongst OECD countries in 2019.
Generally, product innovation is a key focus, there are further opportunities to increase the adoption of digital and automation solutions, particularly among SMEs.
I’m not sure that the current R&D tax relief schemes incentivise this well, and the direction of travel of R&D tax relief policy looking even more restrictive for SMEs. Here at GovGrant, we challenge whether R&D tax relief could be better targeted to enable the adoption of digital solutions, particularly for SMEs. Perhaps this change may increase productivity across the board?
Across the UK regions and countries, financial and insurance activities, information and communication, manufacturing and construction have among the highest productivity levels.
The UK ranks 7th among OECD countries in patent applications for the group of technologies defined by the OECD as “environment-related technologies”. For more on this sector see our Plastics sector research report.
Who are the R&D stars in the UK?
Very few UK firms rank among the world’s top R&D investors and patent applicants.
In 2021, 95 of the world’s 2,500, top R&D-investing companies were headquartered in the UK, that’s fewer than 4%.
The top three R&D-investing firms headquartered in the UK in 2021 were AstraZeneca, GSK and HSBC. The fact that the UK is host to only 3 out of the top 100 R&D intensive businesses is bleak for the UK. The US and China attracted more than half of the top 100 between them.
In 2021, there were no UK-headquartered applicants among the top 100 patent applicants at the United States Patent and Trademark Office (USPTO) and only 1 among the top 100 patent applicants at the European Patent Office (EPO).
Is the UK nurturing the R&D talent pool?
When it comes to an innovative workforce the UK education system provides us with encouraging numbers of STEM graduates at 41% of total graduates), which is similar to the US.
However, the UK had a relatively low share of researchers working in the business sector in 2020 (42%). Compared to Korea (82%), Japan (75%), US (72%), France (63%) and Germany (60%). In the UK, STEM graduates are much more likely to stay in academia in some capacity, with 55% of UK researchers working in higher education. This is higher than other comparable countries. Contrastingly, the US has 72% of its researchers working in the business (private) sector. This suggests that a lot of our UK research efforts are geared toward achieving advances in fundamental science, rather than commercial innovation.
The UK has a strong track record for advancing fundamental science at an academic level, but UK plc struggles to capitalise on those advances at a commercial level.
