• Ian Ritchie : Scottish Business Insider

Innovation needs more long-term support in the wider economy

THE ‘SCIENCE LOBBY’ is on the offensive. Sir Paul Nurse, the President of the Royal Society, speaking on behalf of the four major UK Academies - including the British Academy, Academy of Medical Sciences, and Royal Academy of Engineering - wants more money for science. He has called for an ‘innovation revolution’ driven by increased investment over the next 10 years, warning that without a stable funding framework Britain could be overtaken by overseas competitors.

I should be an enthusiastic supporter: I have served on a major UK research funding council and the Scottish Funding Council, and been co-chair of the Scottish Science Advisory Council (SSAC); I’m currently a Vice President of the Royal Society of Edinburgh, and Honorary Treasurer of the Royal Academy of Engineering. However I have to question the pressure to increase funding of academic science research.

There is no doubt that the UK is under investing in R&D and Innovation as a whole, ranking lowest out of 27 OECD countries. The UK’s total R&D expenditure has actually dropped from 2.2% of GDP in 1985 to its current dismal level of under 1.8%.

However, relatively, the academics have done well over the last two decades, recovering from the cuts wielded by Margaret Thatcher while she was Prime Minister - ironically the only major politician to have ever been a research scientist was the one who seemed to value it least. The proportion of GDP spent on Higher Education research has risen from under 0.4% in 1991 to almost 0.6% today, placing us ahead of France, Germany, Japan and the USA.

And there is no doubt that by the limited measures of academic researchers, the money has been well spent. By peer-reviewed and cited scientific papers, the UK performs better than all of them.

The problem in the UK is not with its academic research, which is world-class, but lies in the application of its innovation in the wider economy. While the UK was busy building up its financial sector, often chasing quick returns and avoiding long-term investment in R&D, the Germans have been steadily building and supporting their ‘Mittelstand’ companies, which represent some 99% of Germany’s businesses.

Mittelstand companies are SMEs with fewer than 500 employees, but they employ about 70% of private sector workers and contribute over 50% of Germany’s economic output.

In the UK, most SMEs are backed by external investors who are often focussed on an early trade sale exit to a multinational; but in Germany 85% of Mittelstand companies are owner/managed, taking a strategic long-term view of their investment and profitability, and mostly with a high level of innovation closely linked to university research. In contrast, when the SSAC asked high-tech Scottish SMEs about their academic links, most said it had been very difficult to build useful relationships with Universities.

The UK’s Technology Strategy Board and funding councils are now setting up industrially-led Innovation Centres to try and tackle this problem, and encourage them to work together better. It’s a good start, but there is so much more to be done.

So the science lobby is right – the UK is underinvesting in R&D and innovation, but the solution is not more academic research funding, but rather the restructuring of the UK economy towards encouraging innovative companies with strong links to our world-class academic research with a long-term agenda.

It’s really not rocket science.

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