On universities and economic growth

I wrote this short piece for the online magazine The Conversation as a comment on the government’s response to the Witty Review on universities and economic growth. It was published there as Budget 2014: cash for research set against an overall story of long-term decline; as the new title suggests it was edited to give more prominence to the new science-related announcements in the Budget. Here’s the original version.

Current UK innovation policy has taken on a medieval cast; no sooner do we have “Catapult Centres” for translational research established, than there is a call for “Arrow Projects”. This is the headline recommendation of a report to government by Sir Andrew Witty on the role of universities in driving economic growth. The tip of the arrow, in Witty’s metaphor, is world-class research from our leading universities – behind this tip we should mobilise research institutes and private sector partners to develop new technologies that would drive new economic growth, involving British companies, big and small, in new supply chains.

Last week saw a government response to this report, which warmly welcomed its recommendations, while making few actual new commitments to support them. But last week also saw the publication of the latest set of national research and development statistics. Total R&D expenditure – in the private sector, in government laboratories and in the universities – has fallen in both cash and real terms, and in proportion to the size of our economy is now substantially lower than both established economic rivals such as France, Germany, the USA and Japan and emerging economic powers such as Korea and China.

Our continuing economic problems, with stagnating productivity and a continuing inability to produce enough tradable goods to pay our way in the world, suggest that we should worry about how effective our innovation system is for translating science into economic growth. But this is hardly a new problem. Does the Witty Review represent the kind of radical new approach that might help us solve this persistent problem, or are there more deep-seated issues that require a more fundamental rethink?

The “arrow” metaphor puts the role of basic research at the forefront – the Witty Review follows in a long tradition of UK science and innovation policy in assuming that translating strong basic research into economic growth is a matter of improving the connectivity between research and industry – particularly innovative SMEs – , encouraging universities to make the most of their IP through spin-outs, and ensuring a continuous output of skilled people.

That’s all worthwhile, but it’s all about the supply side of the innovation system, and the message from last week’s R&D figures should be that this is not enough. Most of the UK’s R&D takes place in the private sector, which saw in 2012 another 2% decline. In the sector in which Sir Andrew Witty’s own company, GSK, operates – pharmaceuticals – R&D fell by 15%.

The relative decline in business R&D in the UK is a long-term phenomenon. It began in the 1980’s. It is a phenomenon that is unique to the UK; in major developed economies like USA, Japan, France and Germany, and in fast industrialising countries like China and Korea, business R&D intensity has been rising and has surpassed the UK. R&D is not the only source of private sector innovation, but it is important as a measure of the degree to which business is organizing itself to create valuable new products and processes through technological innovation. The decline in private sector R&D intensity in the UK is a signal that the problems with our innovation system cannot solely be addressed by supply-side measures – the problem is on the demand side.

The origins of the UK’s declining capacity to deliver commercially valuable technological innovation are deep-rooted, and have been analysed in more depth in my own paper “The UK’s innovation deficit and how to repair it”. The causes include an economy marred by persistent short-termism, excessive financialisation, and an emphasis on deal-making rather than business building.

There are some welcome signs that some of these problems are being recognized in government, and if the response to the Witty Review doesn’t commit to very much new, it does underline positive signs in the way thinking is evolving in government. After a long period in which the industrial policy of successive governments was not to have an industrial policy, we are once again seeing sector strategies being developed and some technologies being identified as priorities. We see more prominence for the Technology Strategy Board, and the development of Catapult Centres as physical hubs for translational research. Fields like graphene, cell technology, and quantum information technologies have been singled out as areas in which world-leading research supported by our research councils should be purposefully translated into new products and new businesses. New announcements, in this year’s budget, of new Catapult Centres in two of these areas continue this direction.

The budget announcements have a high political profile, but they are small interventions against a big picture of continuing overall decline. This is the issue that faces us now; whether the scale of the remedies matches the scale of our problems, or indeed the scale of the opportunities that new technologies could offer. Our chronic and continuing underperformance in R&D – particularly at the strategic and business supported end – suggests not yet.

One Response to “On universities and economic growth”

  1. The Keystone Garter says:

    I’m gradually forming a lobby position of what should be subsidized.
    A sensor network that looks for certain WMD implements, especially designer pathogens and AI, will have better luck looking for the precursor technologies and components. Things like PCR machines and optical computers.
    There will be a lot of red herrings. To aid the sensor network and the police/military/courts, future technologies should be constructed to be easily transparent and to “Prove” they don’t contain, for example, a sophisticated 2050 lab-on-a-chip.
    The communications technologies are one aspect; maybe fibre-optic companies would be the most efficient subsidy and ethical investment strategy.
    Appliances and computers of the future will be made with embedded wires or nanoparticles, or of materials of an appropriate diaelectric constant or conductivity, or with a system of tiny mirrors etc, so something like an RFID tag can be scanned, perhaps by a nearby vehicle or “artificial bird”:
    The best way to ensure economic growth is to prevent regressive events, even if “market forces” says otherwise.