From Ideas to Growth

Main points

• Technological development, which occurs through the discovery and adoption of innovations, is one of the key drivers of long-term productivity growth. In the process of creating commercially viable innovations, Research and Development (R&D) is one fundamental pillar, as it has a direct effect on innovators’ productivity, and it can also enhance the transfer of technology throughout the economy. However, R&D activities are highly costly, risky and volatile, and tend to be concentrated in very few firms and locations. This has raised concerns about the uneven distribution of innovation and economic gains across the UK, with potential to widen inequalities in terms of productivity and economic growth.
• The UK Government is committed to levelling up the whole country. For R&D, this will mean ensuring that no region is left behind in terms of business engagement in R&D, public support to universities and firms’ innovative activities, upskilling and increasing productivity, in order to propel truly inclusive growth. R&D investment in the UK can be critical to increase productivity and prosperity through the adoption of new products and services, and the creation of higher-wage jobs. This also has the potential to tackle very important challenges in terms of environmental, health and wellbeing outcomes, and improve overall living standards across the UK. This process requires a detailed understanding of what are the main drivers of innovation, of the role of both private and public investment in R&D, and of the implications of an uneven distribution of innovation. More evidence is thus needed on how different innovations can translate into better productivity and inclusive growth outcomes, and crucially on how knowledge propagates, to design policies that can secure wider economic and social benefits for many.
• Innovation and productivity growth are at the heart of economic policy in the UK. This is becoming clear from their prominent role in the 2021 Plan for Growth, which sets out the importance of innovation to UK prosperity, and highlights the importance of the regional balance of R&D and innovation activity. The UK 2020 Research and Development Roadmap established a Government commitment to increase R&D investment to 2.4% of GDP by 2027, and increase public funding for R&D to £22 billion per year by 2024/25. R&D will become even more critical for the post-COVID economic and social recovery, as shown by the success of the vaccine “moonshot project” and by the launch of the “high-risk high-reward” research-funding agency ARIA, with the objective of building a greener and more resilient UK economy, based on technological development and innovation.
• UK firms, which are in a continuous battle to improve their levels of productivity and compete in an increasingly fierce global market, need to build on the UK’s comparative advantage in science and innovation. The UK has the opportunity to become a science superpower, building on strong partnerships between universities and businesses, which can support a “Global Britain” vision, in particular in highgrowth sectors such as aerospace, the creative industries, financial services, and in emerging industries such as AI and fintech.

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