A new report says that many UK regions including the North of England have been missing out on £4bn a year in public investment into R&D compared with the rest of the country.
Co-authored by Richard Jones, Professor of Materials Physics and Innovation Policy at The University of Manchester and published by innovation foundation Nesta, the study argues that the UK’s regional imbalances in economic performance are exacerbated by regional imbalances in R&D spending.
The Missing £4 Billion: Making R&D work for the whole of the UK says there are two economies in the UK. While much of London, South East England and the East of England has a highly productive, prosperous knowledge-based economy, in the Midlands, North of England, much of South West England and Wales and Northern Ireland, the economy lags behind our competitors in Northern Europe.
Levelling up
The report says investment is needed now more than ever, not just following the immediate economic crisis caused by the pandemic, but also because of long-term problems within the UK economy, pointing to a decade of stagnation of productivity growth, which has led to stagnant wages and weak government finances, and persistent regional imbalances.
It adds: “If the government was to spend at the same intensity in the rest of the country as it does in the wider South East of England, it would spend £4bn more. This imbalance wastes an opportunity to use public spending to ‘level up’ areas with weaker economies and achieve economic convergence.”
It says that while the UK’s research base has many strengths, some truly world leading, three main shortcomings currently inhibit it from playing its full role in economic growth. Firstly it is too small for the size of the country. Secondly it is relatively weak in translational research and industrial R&D. And thirdly it is too geographically concentrated in already prosperous parts of the country.
Increased R&D spend
The report says the UK government’s goal of increasing R&D intensity to 2.4 per cent of GDP, combined with the widely observed 2:1 ratio of private to public funding for total R&D, implies that UK public sector funding will increase from 0.55 per cent of GDP today to at least 0.75 per cent of GDP.
It adds that this substantial increase in total spending gives us as a rare opportunity to change how R&D funding is assigned without creating any losers, and that there should be a substantial regional devolution of innovation funding to remedy the regional imbalance in government R&D spending.
Recommendations
Among a number of recommendations the report says 25 per cent of the uplift in public R&D funding should, in principle, be devolved to nations, regions and cities. To achieve this, English cities and regions that can demonstrate the capacity to allocate R&D funding wisely should receive devolved funding through innovation deals.
It also recommends that cities and regions should consider using their devolved funding to establish translational research centres which work with local economies to support national missions. New institutions should also be set up in a way that creates new poles for innovation and productivity growth, attracting new private sector investment as well as supporting the existing business base. Government departments should also take more account of the regional distribution of their R&D spending – for example, through the National Institute of Health Research – and be more responsive to the research agendas and needs of the UK’s regions and nations outside London and the South East.