The Impacts of Government R&D Funding in the UK: Key Questions for Improving Investment Allocations

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Professor Simon Collinson was recently quoted in a House of Commons briefing on Research and Development (R&D) Funding policy.

Here, he provides further detail on the issues involved with using Government R&D investments as a tool to support balanced economic growth.  
Promoting R&D and innovation

The UKRI, as the main UK funding agency responsible for promoting R&D and innovation, spends an annual budget of over £8 billion across a wide portfolio of programmes and projects. This ranges from more blue-sky, exploratory or ‘upstream’ investments, to ‘downstream’ applied, or near-market investments. The former is the main focus of the seven Research Councils, such as the Economic and Social Research Council and the Medical Research Council, and the latter is the central function of Innovate UK. A breakdown of this allocation, across UKRI organisations, by region, and thematic area, is readily available. 

Addressing imbalances in funding allocations

Direct funding and the range of public-private collaborations funded by UKRI have started to seriously address various imbalances in past funding allocations. But on the basis of our understanding of the impact of funding allocations, there is much more to do. The targeting of investments needs to be more precise, backed by better evidence of the short and long-term impacts R&D investments can have on our economy and society. This includes: 

  1. Balancing regional allocations to enable local growth, nationwide. Progress has been made, but the dominance of places which have attracted the most in the past, London and the ‘Golden Triangle’ connecting London, Oxford and Cambridge, is still strong.  
  2. Using public sector R&D to leverage private sector R&D investment (particularly FDI, foreign direct investment), in specific places and thematic areas. This requires a better understanding of investment decision-making in businesses and some international benchmarking. 
  3. Coordinating with other public investments (particularly in skills) to influence changes in local industry structures, targeting new areas of growth, and focusing on the future potential of regions. Given global shifts in industry structures and changes in the relative competitive advantages of regions, interventions should stop reinforcing long-term patterns of growth, based on past strengths.  
  4. Bridging supply and demand, linking the supply-side of innovation, including university-based R&D, with the demand-side in firms, taking account of local variations in current supply-demand alignment. Some universities are very disconnected from the needs of their local areas.
  5. Helping reduce inequality, rather than increasing it. Avoiding the trade-off which leaves lower-income communities worse off when average productivity increases at a local level. This can happen when R&D investments attract R&D intensive firms and higher-skilled, higher-paid workers to a region, but displaces lower-income groups through increased (particularly housing) costs.  

WMREDI has provided multiple inputs into government policy on the need to rebalance the economy, focus on inclusive growth and develop better insights into the funding and policy tools to make this happen. The funding we receive for this kind of analysis comes from Research England and is gratefully acknowledged. 

This blog was written by Professor Simon Collinson, Director, City-REDI / WMREDI, University of Birmingham.

The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WMREDI or the University of Birmingham.

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