Autumn Statement: Can £2bn solve UK’s innovation crisis?

The £2 billion boost in R&D has been warmly welcomed by the business community, but innovation is more about thinking differently than just research alone.

At the Conservative Party Conference last month, Chancellor of the Exchequer, Philip Hammond stressed that the future of post-Brexit Britain will be a glorious: “a Britain moving forward with a strong economy supporting strong public services.”

Part of Britain’s productivity transformation will come, of course, from innovation, he said.

Innovation has become synonymous with high-tech, IP-rich start-ups in recent years, and as these businesses contend with larger organisations in traditional sectors, competitiveness is increasingly measured by the potential to innovate.

The challenge is that traditional approach to innovation across the world is broken. An American study revealed that only 5 per cent of R&D staff feel highly motivated to innovate. In certain sectors, like the consumer goods market, more than 85 per cent of new products fail and an overwhelming 90 per cent of companies consider they are too slow in launching new products and services.

Increasing public innovation investment is largely recognised as the solution to Britain’s productivity puzzle. Because of its spillover benefits, economists stress the case for the government to invest in it alongside businesses.

According to PM Theresa May’s speech at CBI’s annual conference earlier this week, research and development (R&D) is a key focus for the post-Brexit government; with an extra £2 billion a year in government investment in R&D.

As it stands, the UK has a very strong academic research base, which receives about £5 billion in public funding. What we currently lack is business R&D funding. Innovate UK’s budget is clear example of this, estimated at half a billion pounds a year.

This boost in R&D has been warmly welcomed by the business community, but innovation is more about thinking differently than just research alone.

The biggest business take-away over the last decade is arguably that innovation is the ultimate antidote to complacency. Tech behemoths from Blackberry to Kodak have been reduced to a shadow of their former selves, while unicorns and other high-value companies steal the spotlight. In many cases, the Ubers and Airbnbs of the world aren’t reinventing the wheel, or creating entirely new markets. They have cottoned-on to what works in our post-recessionary economy.

Staying lean in their start-up phase, these ‘disruptors’ have stolen market share from traditional heavyweights by investing in robust, scalable technology based on collaboration through open APIs and a no-nonsense, constantly evolving customer journey.

Start-ups in the on-demand and gig economies are the collaborative by-products of one company’s drive to think differently. Calling a cab, seeing a GP, and finding a place to stay is now as easy as a tap-and-swipe. These app-based businesses are supplying to meet demand, connecting people who need a service with those who can provide it. The butcher, baker and candlestick-maker of days gone by did exactly that. What makes these start-ups stand out is the way in which they reach their customers. The ubiquity of the smartphone helps these businesses respond immediately and scale in the most cost-effective way imaginable.

But how many redundant apps are out there now, riding on the coat tails of the app economy? The ‘Uber for X‘ or ‘Airbnb for Y‘ phenomenon has taken over the start-up community, and while these businesses are largely ‘tech companies,’ how much technological innovation is actually involved in launching these cookie-cutter apps?

How many of these apps actually address a real societal need?

Is there really an app for people who need pressing services beyond hailing a taxi or finding a holiday? Does the runaway teenager have an app that can connect her to a temporary shelter for the night? Does the elderly patient have access to care services at the tap of a screen? Does the foreign worker who lost their papers have an app to get them home safely?

The risk remains staying relevant and standing out in an increasingly saturated market. Perhaps R&D can stimulate social entrepreneurship to cut through the noise.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.