Don’t forget the arts when it comes to R&D spending
The UK’s creative economy is worth more than our life sciences, aerospace and automotive industries combined, says Hetan Shah
UK productivity growth has been woeful since the financial crash and the economy is about a fifth smaller than it would have been had the trend in productivity growth continued after 2007. The Chancellor has a week left before she unveils her Spending Review – the 3-year allocation of funding across government. One of her core missions will be to improve UK productivity to engender an upward spiral of growth and investment.
It is increasingly recognised that investment in research and development (R&D) can be a long term source of productivity through innovation. The expectation is that despite tight budgets, the Chancellor will maintain R&D investment. This is sensible, but given budgetary pressures, how can she get the most bang for her buck?
One area the UK is traditionally strong is in blue skies research, and investment here should be maintained. Whilst the ideas that come from such research may not seem to have any immediate applications, they can prove fertile in later years – for example theoretical developments in Bayesian statistics from the mid-20th Century which have underpinned today’s developments in artificial intelligence. The vehicles for much of this research – universities – are however under increasing pressure, and there is a need for policymakers to develop a sustainable financial model for them.
The strength of UK SHAPE
We need to optimise R&D for our actual economy, rather than the one we imagine we have. The UK is an 80 per cent services economy with strengths in finance, law, and a creative economy which accounts for around six per cent of the UK’s goods and services and is worth more than our life sciences, aerospace and automotive industries combined. The role and strength of UK social science, humanities and arts (‘SHAPE’) subjects can be underestimated. Between 2013-22, the UK produced the second greatest volume of SHAPE business co-authored publications in the world, only behind the US. Similarly, the UK is the second country in the world in terms of total patent citation size of its SHAPE publications with business co-authorship, only after the US. This all implies investing across a range of R&D disciplines to link to industrial strategy for a services economy.
Policymakers can focus too much on the invention side – the fun toys provided by cutting edge technology – and can underestimate the importance of wider support for the successful translation, commercialisation, adoption and diffusion of innovation. We can learn from other countries here. The Taiwanese Industrial Technology Research Institute has developed tools to ensure diffusion in sectors which traditionally had not picked up technological advancement. In Singapore, innovation policy does not only focus on R&D investment. It takes a pragmatic, whole systems view that includes attention to immigration and visas, legal services, education and infrastructure. If we don’t think in this wider way, we may not get the economic gains that we hope for from scientific advancement.
R&D is a long-term source of prosperity, and an area of UK competitive advantage. The Chancellor would be well advised to keep investing in it through the Spending Review, but to maximise the impact on UK productivity, innovation policy needs to link more strongly with industrial strategy for a services based economy.
Hetan Shah is chief executive of The British Academy