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Industrial strategy: what we know so far

Monday will see the Secretary of State for Business, Energy and Industrial Strategy, Greg Clark, outline how the Government plans to tackle new and ongoing challenges facing the UK economy, and create opportunities for future generations. Four “Grand Challenges” are promised, ones that reflect global trends and promote industries in which the UK shows a “competitive edge”: artificial intelligence and the data economy, clean growth, healthy ageing, and the future of mobility.

The Chancellor’s Autumn Budget statement this week drew the broad strokes of a vision for an economy that is “fit for the future” and “driven by innovation”, with some glimpses of what we might expect to see on Monday. Here’s a rundown of the main innovation policy announcements, and how they’ve been received by key stakeholders.

Higher investment in R&D

The government has committed to a sizeable increase in spending on R&D to try and reach the target of 2.4 per cent of GDP by 2027. This level of spending would bring the UK in line with the OECD average - the UK currently lags behind its peers, spending only 1.7 per cent of GDP on R&D.

The higher spending commitment has been generally well-received: the EEF and the CBI both praise the government’s efforts to address the UK’s historic productivity problem by investing in innovation activities that will drive growth. However, there are still some questions over the numbers, and the way in which these funds are to be allocated.

Nesta has published some views on why it might be time to move the goalposts for R&D measurement to make sure this target really does incentivise the innovation the UK is best at.

Norman Lamb MP, Chair of the Commons Science and Technology Committee, questions the government’s calculations. The government has stated that R&D spend is set to rise to £12.5bn in 2021-22 through an extra £2.3bn committed for that year in this Budget. However, Lamb points out that existing projections already had R&D spending for that year at £12bn - so the increase may in fact be a much smaller one than they say.

Others are much more concerned about how the government will go about spending the money. The Executive Director of the Campaign for Science and Engineering, Sarah Main, points out that the challenge-led funding model is relatively untested.

This approach is gathering pace in the UK, as the Industrial Strategy Challenge Fund (ISCF) builds on its headline project - the Faraday Challenge for battery development - and enters its second phase this year. We heard earlier this month about the £68m commitment through the ISCF to supporting development of robotics and AI in extreme working environments - and the Industrial Strategy White Paper looks set to continue along these lines with its four “Grand Challenges”.

Cultivating skills

There were strong new measures proposed for education and skills too, as the Chancellor announced a National Retraining Scheme in partnership with the CBI and TUC. This scheme aims to tackle the UK’s skills shortages through a programme of adult learning and professional development. The scheme is worth £76m, with the first £36m going towards developing digital skills, and the remaining £40m invested in construction training programmes across the country.

Other developments include a commitment to strengthen Maths and Computer Science education through investment to increase the stock and skills of teachers in schools, and incentivising schools to enter students in Maths A-level with a £600 per student reward scheme.

Nesta supports the increased emphasis on these important subjects, and our work points to the importance of incorporating cognitive and social skills such as collaborative problem-solving into academic subject learning. Recent Nesta research shows that solving mathematical problems with others can reinforce knowledge and improve attainment - and the most recent Programme for International Student Assessment (PISA) conducted by the OECD has for the first time measured “collaborative problem-solving” as an important 21st century skill.

The Maths and Computer Science measures are causing some concern in the education community. The National Association of Head Teachers (NAHT) points out that, whilst important, Maths is already the most popular A-level subject, and that this measure might lead students to be entered for Maths at this level for the wrong reasons - and quite apart from anything else, say the NAHT and the National Governance Association (NGA), these changes do very little to alleviate the immense pressures on schools and colleges across the UK caused by severe cuts to school budgets.

On the other hand, the Association for UK Interactive Entertainment (UKIE) sees the increase in resources for Maths and Computer Science, along with the offer of AI fellowships higher up the education chain, as “wins” for the small businesses that make up the games sector and other parts of the creative industries.

To look forward to on Monday

The Budget brought a few announcements that showed real promise for a productive and responsible industrial strategy. For example, the government is developing its framework for regulating new technologies and their applications. The Chancellor announced a Regulators’ Pioneer Fund, to help regulators to use innovative methods for testing new products and services and getting them to market. This is an encouraging development towards a concept of regulation that is more anticipatory, as well as precautionary.

Further measures include a new Centre for Data Ethics and Innovation to support the development of safe, ethical and ground-breaking innovation in AI and data-driven technologies, and the establishment of a Geospatial Commission to open up the data held by public bodies.

We should also expect to see a great focus on local areas in the announcements on Monday, with detail on local industrial strategies to drive growth across the UK. Rachel Reeves MP, who chairs the Commons Business, Energy and Industrial Strategy committee, has recently criticised the Budget for its weakness on place. In particular, she cites a lack of diversity at UKRI, the body charged with implementing research funding across the UK: of the 13 non-executives on its board, only one lives outside the South East of England, where research funding and institutions have historically been concentrated.

The government is making moves in this area, announcing in the Budget a £1.7bn Transforming Cities Fund to improve local transport with enhanced connectivity and smarter mobility services and technology. Half of this funding will be allocated on a per capita basis to the six combined authorities with elected metro mayors (five of which represent regions outside the South East), with the other half open to competition.

Problems still to solve

The Autumn Budget and the much-anticipated industrial strategy promise a lot in terms of new pathways for growth and prosperity in the UK. However, there are strong and passionate voices still calling for, amongst other things, a better deal for young people, more concerted attention to social care, further devolution of powers to local authorities across the country, a greater role for the social sciences in addressing place-based inequalities, and a balance between basic and applied research that both academia and industry can be happy with - and seeing no answers from this government yet.

Author

Juliet Ollard

Juliet Ollard

Juliet Ollard

Research Assistant, Inclusive Innovation

Juliet is a Research Assistant working on a joint project between the Inclusive Innovation and Education teams.

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