Industrial strategy should develop National Innovation Assets network to boost innovation, says engineering profession

Government should promote and support the use of existing infrastructure as test beds for new technology, according to a new report on industrial strategy, published jointly by the UK engineering profession. The report proposes developing a UK-wide network of ‘national innovation assets’ to provide real-world environments for testing innovations, as well as acting as focal points for workers to develop specialist skills and helping to inform the development of regulation for new technologies. They could also be used to promote the UK’s credentials as an innovation-driven nation and encourage investment from both domestic and overseas companies.

Such an approach would formalise and provide government support for a practice that is already happening informally, such as the Transport Systems Catapult’s successful trial in Milton Keynes of their LUTZ Pathfinder pods – unmanned vehicles ferrying people around the business district. Running such schemes across the country could help produce a more balanced and effective innovation landscape, says the report, and would help to extend the geographical reach of innovation activities beyond the current centres of excellence.

Engineering an economy that works for all forms the engineering profession's collective response to the government's green paper on industrial strategy. The report represents a collaboration of all 38 professional engineering organisations, led by the Royal Academy of Engineering, and has benefited from an unprecedented level of engagement by the engineering community. The report team collected information both through an online survey with almost 1,300 respondents and a series of 10 workshops, gathering evidence in the devolved nations and English regions as well as focusing on skills, innovation and specific sectors of industry.

The report makes recommendations for how the government’s industrial strategy can enable the UK to capture value from its world class research base. The report recommends a target of 3% of GDP for combined public and private investment in research and development and calls on government and the private sector to develop a roadmap towards achieving this goal.

The report also argues that government needs to demonstrate a greater willingness to accept the risk of failure, or perceptions of it, in its innovation support, including in how it manages the Industrial Strategy Challenge Fund. The research demonstrated that there is a strong appetite among the engineering community for government to focus the Fund, and the wider uplift in R&D funding, on big societal challenges alongside economic growth opportunities. The Fund should also be used to enable industrial competitors to collaborate with one another towards common goals, for example to address shared environmental challenges. Such pre-competitive collaborations often require public funds to de-risk the venture and the report notes that EU research and innovation programmes are currently significant funders of this type of activity.

The report suggests that potential changes to State Aid restrictions when the UK leaves the EU provide an opportunity to review how levers to stimulate innovation, such as R&D tax credits and procurement policy, can be enhanced, and argues that the levy of VAT on shared research facilities with industry should be addressed in light of Brexit. More generally, government should strengthen its efforts to leverage public procurement to advance economic and social objectives by radically rebooting the Small Business Research Initiative and providing greater transparency on procurement spend with SMEs. Clearer signposting of existing support for SMEs is also urgently needed.

Early interactions between regulators and innovators are highlighted by the report as essential to ensure that regulation does not impede innovation unnecessarily or unintentionally. It also recommends that regulators should be encouraged to explain how risks for innovative technologies are being managed to allay public concerns.

The report further highlights the growing importance of digital and data skills for innovation and calls for the creation of a network of Chief Data Officers in cities and regions, linked to counterparts in global centres of excellence, to drive a new wave of data-enabled innovation in public services across the UK.

Professor Dame Ann Dowling OM DBE FREng FRS, President of the Royal Academy of Engineering, says:

“Collaborative research and development between industry and academia delivers real benefits to the UK, driving growth and productivity improvements for firms and high-quality, use-inspired research outputs. We also know that access to talent also has a direct influence on businesses’ decisions about investment in R&D. Catalysing connections between businesses of all sizes, academics and investors is critical to improving the successful commercialisation of ideas.

“There is a compelling case for continued investment in our research base as a means of fuelling future prosperity, but we must also focus on supporting the innovation process if we are to reap the full benefit from the research.”