The UK has an opportunity to shape the future of the UK economy in an investment led recovery that focuses on technology and science, says Mark Smith, Partner: Innovation Incentives, Ayming UK & Ireland.
Throughout history, scientific capabilities have always driven the success of an economy – whether that’s the Roman’s and their aqueducts or the USA and the internet. It’s what gives a nation a competitive edge.
The UK has long held a strong position in global innovation. And as technology progresses faster than ever, the UK has emphasised the need to breathe new life into these capabilities by upgrading our innovation mechanisms, including new regional ecosystems, a consultation into incentives and a new blue-sky agency.
For these to have the desired effect, there are several things innovation leaders must be mindful of as we enter this age of growing international scientific competition.
It’s no secret that the UK economy is unbalanced. Most European countries have several leading cities, but regions outside of London are far behind due to a comparative lack of investment. We need to change how our economy functions by creating jobs around people as opposed to having a London brain drain.
The new National Infrastructure Bank will boost local economies, but the government also needs to spur local innovation. The creation of the eight freeports will help create an ecosystem and encourage technological collaboration. However, these zones should have enhanced R&D reliefs to incentivise growing businesses to set up there, bringing highly skilled jobs with them.
Similarly, the UK’s cities are home to some of the best universities in the world, and the government should also support private investment into university research. These resources aren’t currently being capitalised on effectively. But given a framework, we can leverage those resources and make universities hubs for innovation.
R&D tax credits are the backbone of any national innovation strategy, and not just for domestic innovation. When businesses plan R&D activity they weigh up which location is best, and incentives schemes are a major factor.
To make the UK the most attractive place to innovate, we need to analyse all aspects of the incentive scheme to make it as attractive as possible. For example, there should not be a cap of £20,000 for SMEs R&D tax relief considering the vast majority of the UK businesses are SMEs.
The government is currently running a consultation period with the R&D community to influence their innovation strategy due out this summer, something we’ve been running workshops with them on. And while this is positive, there are still changes to be made from the last consultation, such as incorporating technology like cloud computing into costs eligible for R&D tax credits. The criteria, written 20 years ago before the world saw the first camera phone, are in drastic need of an update. In light of how critical technology is to the modern economy, we need to update the rules more regularly to include the latest developments.
In stark contrast to most funding bodies, the government’s new high-risk, high-reward innovation agency, the Advanced Research & Invention Agency (ARIA), will be run by scientists and structured like a business, with a director and prioritising speed of delivery.
Although ARIA will operate outside of UK Research & Innovation (UKRI) and the controls it is bound to, it must not operate in isolation. Successful innovation increasingly relies on partners, so the agency must pull on the UK’s innovation ecosystem, working closely with academic institutions and private enterprise.
However, they must be cautious not to become bogged down as it enlists strategic support. ARIA was created to counter the slow and bureaucratic nature of the other funding bodies in the UK. As such, collaborations must be selective and ARIA’s programme managers should maintain control to maintain that all-important agility. This will avoid having too many stakeholders overcomplicate and slow projects.
The green economy
The future is sustainable, and the government is unleashing a huge amount of cash to pivot the economy in this direction. For this, we must stimulate sustainable R&D activity, which the government recognises. But while we should explore cutting edge green technology, all businesses should be finding creative ways to, for example, reduce their energy consumption or improve waste disposal.
At present, most funding for sustainable innovation comes in the form of grants, which are often staggered and selective, and R&D incentives are the same for all projects. So, to really stimulate green innovation, we could have a supercharged rate for R&D projects that fit sustainable criteria.
Shaping the future
Overall, the UK has a prime opportunity to shape the future of the UK economy in an investment led recovery that focuses on technology and science, as opposed to fiscal tightening.
For this, the government’s various initiatives to become an innovation powerhouse are encouraging, and if we can execute these correctly, we will be in a very strong position to be a science superpower.
Mark Smith, Partner: Innovation Incentives, Ayming UK & Ireland