Investing in innovation will be crucial as the UK looks to rebuild its economy after COVID-19.

But innovation policy should not simply return to business as usual.

The UK’s achievements in cultivating and supporting innovation over the past decade have failed to coincide with broadly felt prosperity. In late 2019, the UK had some of the highest levels of economic inequality in the developed world, along with some of the highest levels of regional inequality. When it came to innovation performance, some parts of the UK were among the most productive regions in Europe, while others had been overtaken by regions that were formerly part of communist East Germany.

While the pandemic will make these issues more pressing, the UK government’s commitment to increase public spending on research and development (R&D) gives an opportunity to rethink. We argue that to support recovery, innovation policies must focus on creating a more balanced, resilient economy whose benefits are widely shared.

In practice this means:

1. Creating innovation policies that serve the whole economy, not just ‘frontier’ sectors. The current Industrial Strategy focuses on a narrow range of sectors, which according to one study, employ just one per cent of the UK workforce. Yet small productivity improvements in sectors that employ large numbers of people could have a big effect on overall productivity and, crucially, on the wellbeing and livelihoods of many people across the UK. More investment is needed to help innovation to diffuse across the economy and to support innovation in sectors that are not normally thought of as being at the ‘technological frontier’, like social care and retail.
2. A far greater focus on building innovation capacity across the country. Public spending on R&D is heavily skewed towards London, Oxford and Cambridge, which receive 52 per cent of investment despite having 37 per cent of the population. Innovation policies should shift from a place-blind to a place-sensitive approach. The UK’s nations, cities and regions need resources and capacity to build and develop their own innovation priorities. Institutions like UK Research and Innovation must take on new responsibilities for geographical rebalancing.
3. A more proactive approach to guiding innovation in the public interest. Market forces alone do not always produce innovations that create societal value and sometimes produce innovations that are harmful. The government should develop institutional infrastructure for more proactive, democratic governance of innovation, enabling the UK’s innovation system to fully embrace a mission-led approach to R&D and to take advantage of new, anticipatory approaches to regulation.