Reforms lie ahead for Innovate UK, as the government rethinks its approach to innovation financing.
You could almost hear the collective sigh of relief within the UK’s science and innovation community. With a new Conservative government bent on reducing the deficit through making further cuts to unprotected public sector budgets, it had widely been expected that the Comprehensive Spending Review process that has taken place over the summer would result in substantial cuts to research funding across the board. This week’s Autumn Statement was therefore less brutal than anticipated, largely due to more optimistic projections by the OBR about the future health of the British economy.
In the event, the operational budget of the Department for Business, Innovation and Skills will only be cut by 17 per cent, rather than the 25 to 40 per cent that had previously been floated. The science budget has been protected in real terms, and Innovate UK’s flat cash settlement will likely remain intact. However, this does not mean that all will be business as usual. Within this settlement, Innovate UK has been asked to convert £165 million of its grants into loans or other new financial products by 2019/20. And while it will retain a separate funding stream and its clear focus on business, the government also plans to look at ways to integrate it into a new umbrella organisation, Research UK (which is due to be set up to better coordinate the work of the Research Councils).
The details of all of these proposals remain vague. So far, commentators have been generally dubious about the proposal to merge Innovate UK into another institutional structure, with Mariana Mazzucato suggesting that it will lead to a real cut in its budget. The introduction of a wider range of financial support instruments is being treated with cautious interest, although business organisations - including the CBI and FSB - have expressed concerns that it might stifle innovation, particularly within smaller firms.
Innovate UK has been in limbo for a while, so at the very least, this week’s announcements have provided some clarity about the direction of future travel. The challenge for the government and Innovate UK in the months and year ahead will be to ensure that they do not get so bogged down in negotiations about specific funding instruments and governance structures that they lose sight of the bigger picture - namely, how to make Innovate UK as effectively experimental as possible in its mission to support business innovation in areas where the market is less willing to take risks.
Over the last year, Nesta has been looking at innovation agencies around the world, collecting interesting examples of best practice in terms of strategy and organisational design from both established and newer organisations. We’ll be publishing a report early in the new year that sets out what we have learned. In the meantime, here are a few teasers from our case studies that we hope will provide some inspiration and food for thought.
These are just a few of the agencies we have been looking at in depth in this project. In future blogs, we’ll be looking in more detail at how the experience of other innovation agencies - many of which are facing similar changes in strategy and budget as a result of austerity conditions - can usefully inform the reorganisation set to take place at Innovate UK.