10 Victoria Street, London SW1H 0NB

Prime Minister, 10 Downing Street, London SW1A 2AA

Sent by electronic mail solely

14 June 2021

Dear Prime Minister,

Innovation, as the method of taking concepts from inception to influence, has an essential affect on productiveness and long-term financial progress. Innovation coverage can play a key position in driving native financial progress and is a crucial half of the method to levelling up throughout the UK.

We are writing so as to add to our recommendation on the Innovation Strategy. This letter considers when and how analysis and innovation insurance policies is likely to be given a ‘place dimension’ to help extra equitable, sustainable, and inclusive improvement throughout the UK. We hope this may inform considering on the way to allow thriving analysis and innovation exercise in public, non-public, and voluntary sectors throughout the nation and the way to construct on native potential so that every one areas and nations of the UK profit from an R&D intensive economic system.

A consideration of place as half of analysis and innovation insurance policies might additionally tackle different nationwide targets. Achieving our purpose of turning into a science superpower means a major improve in analysis and innovation depth, which would require the event throughout the UK of better capability and functionality to carry out glorious analysis, improvement, and innovation exercise. [footnote 1] Achieving the Government’s purpose of growing productiveness and prosperity would require financial progress throughout the UK, [footnote 2] and a serious uplift in underperforming areas. [footnote 3]

It is essential, although, that actions taken to stage up low analysis and innovation depth areas shouldn’t diminish the success of the UK’s current excellent analysis establishments and knowledge-based economies.

When to think about place? Different interventions for completely different actions

The pipeline from discovery to influence is lengthy, usually nonlinear, happens throughout many locations or nations, and encompasses a variety of actions that require completely different skillsets. Policies to help analysis and innovation ought to distinguish between analysis for discovery and technology of preliminary concepts, which is a UK energy, and the method of growing, rising, and scaling up options into influence.

Given restricted funding, any funding in analysis can not and shouldn’t be unfold evenly throughout the nation. This can be costly and unsuccessful. Geographic focus of analysis – agglomeration – might be vital and is a attribute of analysis globally. [footnote 4]

However, the concepts generated in analysis clusters will be developed, scaled up, and manufactured in provide chains anyplace there may be the capability to grasp their worth and the entry to abilities, services, and finance.

There are extra alternatives for levelling up by insurance policies to help innovation exercise than by discovery analysis. Innovation help that’s supposed for levelling up will should be aligned to the place there may be native capability to translate invention into business exercise and native jobs.

Therefore, to increase the influence of current analysis clusters, Government ought to develop interventions which:

  • Focus on the place there may be an current {industry} base which, with help, could possibly adapt to take benefit of new technological alternatives. [footnote 5] Engaging enterprise and non-public funding, together with international direct funding, shall be essential.

  • Build nationwide and regional connections that permit concepts generated in analysis clusters to be shared, developed, scaled up, and manufactured in nationwide provide chains. This would require an energetic mapping of innovation provide chains.

  • Build partnerships that convey collectively and form nationwide functionality by linking locations with concentrated areas of energy (equivalent to giant research-intensive universities) with smaller, specialist establishments or extra vocationally funded universities with explicit analysis specialisms.

Factors for constructing profitable innovation clusters

Development and scale up of innovation shall be led by enterprise. We have recognized the next ‘success factors’ which allow the strengthening of native innovation ecosystems: [footnote 6] [footnote 7]

i. Strong native management

Levelling up requires vital funding in capability and functionality in native authorities [footnote 8] in order that they will facilitate regional innovation by having duty for designing, delivering, and funding native financial initiatives. [footnote 9] The goal must be to strengthen capability to:

A) establish and reply to completely different native capabilities and;

B) empower participation, engagement, and cooperation throughout a variety of actors (neighborhood, enterprise, academia, schooling and monetary). This might require reconsideration of governance buildings in order that native leaders have enough flexibility over how they use innovation funding alongside different help as half of their technique for improvement.

ii. Skilled workforce (for core competency and common enterprise follow) and skill to draw and retain these abilities

Policy ought to deal with provide and demand, notably when addressing the rising abilities mismatch. [footnote 10] We consider tax credit may very well be prolonged to incentivise companies to develop technical and skilled abilities for innovation. Evidence highlights the online optimistic influence of analysis and improvement tax credit on UK and worldwide funding; a various vary of nations have recognized their optimistic influence on company analysis and improvement funding. [footnote 11]
####iii. Strengthening innovation infrastructure provision

Evidence from worldwide comparators means that universities, [footnote 12] Catapults, public sector analysis institutions (PSREs), and different main nationwide services are essential to their native space’s innovation system. Universities present abilities and entice knowledge-intensive industries that promote agglomeration and specialism of their cities and close by areas. Major nationwide analysis infrastructure supplies nationwide advantages and will be the point of interest for native innovation clusters. Mechanisms to help this embody increasing enterprise zones and VAT exemptions on industry-used analysis services. The coverage of enterprise zones has positively affected the labour market, particularly for employment with low-wage employees. [footnote 13] Access to infrastructure and gear (by the Catapult community and opening college services extra extensively to non-public organisations) would even be extremely efficient.

iv. Access to finance

Long-term funding is required to reinforce current clusters. [footnote 14] The European Regional Development Fund and the Local Growth Fund have been essential sources of funding to advertise innovation exercise and partnerships amongst native companies. [footnote 15] Government ought to set up a Local Innovation Fund targeted particularly on constructing native innovation capability and networks. This will should be aligned to each different help for levelling up (equivalent to the brand new UK Shared Prosperity Fund) and different analysis and innovation help by UKRI. The method ought to give vital autonomy to native leaders and ought to prioritise what may have the largest influence on innovation capability reasonably than rewarding current excellence.

v. Collaborative tradition throughout enterprise, authorities, and analysis establishments

The UK’s analysis base is world-class, however the structural disconnect in its nationwide organisation of abilities, analysis, and innovation ecosystems prevents the progress of far-reaching innovation. This inhibits nationwide financial progress and prevents the advantages of UK analysis exercise reaching our communities. Public sector funding schemes can form the tradition for collaboration. The Strength in Places Fund is a mannequin to construct on which helps areas of the UK to construct on current strengths in analysis and innovation to ship advantages for their native economic system. All initiatives are collaborative and are led by consortiums that embody each analysis organisations and companies. A coherent method at an area stage must be supported by a nationwide technique which identifies objectives for levelling up and creates a menu of public sector help measures accessible to native leaders.

vi. Build on an space’s core competencies or rising strengths. This could also be native sources linked to a spot, native public abilities, or centred on native enterprise or academic establishments

Building native innovation capabilities entails decisions on the place to focus. A partnership technique constructing on the dynamics of agglomeration and comparative benefit must be knowledgeable by an evidenced-based method utilizing the BEIS/Nesta Spatial Innovation information device, [footnote 16] Science and Innovation Audits, [footnote 17] the Research Excellence Framework, and the primary iteration of the Knowledge Exchange Framework. [footnote 18] These information permits areas to evaluate property, establish strengths, construct on finest follow, and create new relationships which maximise these alternatives.

vii. Positive native impacts are reliant on native stage demand and absorptive capability

A neighborhood space can seize the utmost advantages (jobs and progress) to the native economic system from R&D exercise the place there may be capability to tug by concepts and invention into the market. The Sheffield superior manufacturing and engineering cluster illustrates the facility of improvement of innovation infrastructure (services and abilities) with a robust deal with native in addition to nationwide enterprise want.

Enhancing analysis and innovation exercise builds financial resilience however can solely be absolutely achieved with public engagement. MHCLG, BEIS, and different Government Departments ought to work with UKRI to develop initiatives for neighborhood engagement to incentivise innovation. Initiatives can embody regional Hackathons to assist communities clear up native challenges and inform native coverage making, [footnote 19] which has resulted in vital progress in worldwide digital well being communities. [footnote 20]

Together, these components kind a mix of help which allows business-led innovation and progress. We suggest Government strengthens help in these areas by exploring:

A) As half of boosting public sector help for utilized R&D and innovation, Innovation funders ought to embody mechanisms to construct native innovation capability and networks, constructing on what has been learnt from earlier programmes.

B) Support for native financial improvement ought to permit for funding infrastructure and functionality to tug by innovation into the native market and assist entice and retain companies to an space. This might embody improvement of specialist abilities within the native workforce or present particular infrastructure or bodily areas related to native enterprise wants.

C) Strengthen help for publicly funded institutes to open up their infrastructure, services and experience to help native enterprise collaboration and innovation.

D) Support initiatives for good native governance and decision-making, together with constructing capability for area people engagement on innovation.

E) Develop a nationwide technique aligning motion on analysis, innovation, and abilities to create an ecosystem of public sector help measures that allow native leaders to generate and diffuse new concepts throughout the economic system and to maximise their advantages.

Given innovation’s financial and societal advantages, Government ought to bear some of the danger of improvement to drive non-public funding. The Government has an obligation to help innovation as a result of of its distinctive place to help giant scale initiatives over long-term horizons, which non-public funds don’t usually help. While strong proof of influence at an area stage could also be exhausting to establish, Government funding in giant scale infrastructure and human capital improvement can considerably entice and help enterprise innovation that contributes to native progress.

We can be delighted to debate in additional element with you, or your Ministerial colleagues, how the rules and success components outlined on this letter may also help the Government amplify the contribution of analysis and innovation in its levelling up insurance policies. We are grateful to Council members for growing this recommendation, particularly, Professor Dame Nancy Rothwell (President and Vice-Chancellor, University of Manchester) for main this recommendation, with help from Dervilla Mitchell (Director, Arup), Professor Fiona Murray (Associate Dean for Innovation and Professor, Massachusetts Institute of Technology, School of Management), and Professor Julia Black (Strategic Director of Innovation and Professor of Law, London School of Economics and Political Science). We are additionally grateful to Andy Haldane, Rotha Johnston, and Juergen Maier of the Industrial Strategy Council for giving their time and experience.

This letter is copied to the Chancellor of the Exchequer; the Secretary of State for Business, Energy and Industrial Strategy; the Secretary of State for Education; the Secretary of State for Housing, Communities and Local Government; the Chief Secretary to the Treasury; the Minister of State for Universities; the Parliamentary Under Secretary for Science, Research and Innovation; the Minister for Regional Growth and Local Government; the Cabinet Secretary and the Permanent Secretaries of HM Treasury, the Department for Business, Energy and Industrial Strategy, the Department for Education, and the Ministry of Housing, Communities and Local Government.

Yours sincerely,

Sir Patrick Vallance

Lord Browne of Madingley


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