With the UK economy being in a state of constant fluctuation, today’s article explores the government’s potential plans around post-COVID-19 investment and R&D spending.
In mid-March, just before COVID shook the world, the Conservative government’s budget plans pledged to increase public funding for the R&D sector by 15% in the next fiscal year – its largest year-on-year increase ever. Boris Johnson’s government promised to more than double the current R&D spend over the next three years, reaching £22 billion by the 2024-2025 financial year.
They have continued this commitment to the sector. Although the target, £22 billion, has changed to £18 billion, promising to drive for a target of 2.4% of GDP being invested in R&D across combined public and private sector spending, stating that:
‘Investment in research and development (R&D) is a key driver of innovation and productivity growth. We are boosting funding to create the conditions for a new wave of economic growth and prosperity across our country.’
Where will we see this investment?
The investment includes a guarantee to match EU R&D funding, as well as a commitment to investment in a range of technologies, as well as funding a new national Space strategy. As well as helping to develop innovations necessary for the government to meet the climate change target to reach Net Zero by 2050.
EU R&D is currently funded by UK taxpayer-funded EU budget contributions. The government insists that this £18 billion package will be replaced post-Brexit, as well as changing up the landscape in private sector R&D investment.
To incentivise private R&D, the government will introduce the ‘Challenge Led Innovation Procurement’ fund, which will provide capital to innovative private firms. Much like the US government’s ARPA programme and the way American R&D has thus benefitted, this scheme implies that the government will be a driver of innovation through procurement. They will also launch an extension of the innovation loads pilot, improving access to finance for SMEs.
Is this a sizable increase in R&D investment?
Although there is consensus across the political Left and Right to increase UK investment in R&D, this Tory government has pledged to lift R&D investment as a matter of GDP from its current statistic of 1.7% of GDP to 2.4% of GDP by 2027, which has fallen from 2% during the 80s.
The BBC reported that industrial R&D currently accounts for two-thirds of the country’s non-defence research spend, with much of the remaining third coming from the government. The new levels of funding are unprecedented over the past few decades, and may allow the UK to compete with the US, Germany, and South Korea at turning ‘its world-class science into world-class goods and services that create jobs and benefit the economy.’
As the Royal Society explores, however, the only way to increase overall R&D investment is to foster R&D innovation throughout the various sectors – universities, businesses and public services – convincingly enough to warrant global investment and persuade (and incentivise) companies to locate their R&D facilities here.
Will this significant Conservative Budget commitment to R&D investment allow the UK to lead the field and innovate to meet the challenges of the future? We are yet to see.