The British government should learn from the US in order to back technology businesses and investment in innovation following a drop-off in such spending during the recession, Nesta has said.
Nesta, the innovation foundation, told PE that the UK government could learn from the example of the US Defense Advanced Research Projects Agency (Darpa). It should use a “sliver” of the £200 billion public procurement budget to invest in innovative businesses and technologies.
Nesta produced a report in July arguing that Britain had endured a “lost decade” of innovation.
Stian Westlake, executive director at Nesta, said: “Government should use a sliver of its procurement budget to back innovative businesses and technologies, like the US does with Darpa and the National Institutes of Health.”
Westlake added that we should “take advantage of the turmoil” in the banking sector to establish an industrial bank with an understanding of new technologies to provide capital for their growth.
Surprisingly, the Nesta July research found that investment in innovation had stagnated all the way through the last decade – even during the boom years. During the recession, it had dropped off even further, by £24 billion.
Despite this, Nesta said, innovation's importance was underlined by the fact that it delivered 60% of economic growth between 2000 and 2008.
Tough economic times should not deter innovation, Westlake added. “Many of the world's most important innovations emerged in tough economic times. The Depression saw technologies like electricity, aviation and automobiles become mainstream – so much so that economists have calculated that productivity grew in the 1930s more than in any other decade in history.
“Innovation can work best when the outlook looks worst.”
Winnie Dehaney-Foster, project manager of the Institution of Engineering and Technology's innovation awards, said that entries to the programme had spiralled upwards during the recession. “We saw a really big jump in entries to our awards from 2008. We've had more than 300 entries every year. Last year, we received more than 400 for the first time, and 75% of those were from the UK.
“There are a lot of good innovations coming through from smaller companies, from research and from academia.”
The news came as smaller manufacturers reported an upbeat assessment of their prospects, contrary to recent data from Markit/CIPS. More than half the respondents to the latest Manufacturing Advisory Service national barometer survey said they had seen orders grow in the last six months, with 53% expecting this trend to continue for the rest of the year.
A third of the companies surveyed said they were looking to create jobs, while 55% said they were expecting the size of their workforce to stay the same. And 71% said they were looking to boost turnover through exporting in the next 18 months.