Nesta, the innovation foundation, has published a report today that demonstrates how innovation policy in the wake of COVID-19 could rebuild left-behind regions and drive up living standards for the millions of key workers who have done so much for the UK during the pandemic. The report also explains how we can ensure public funding goes towards the challenges the public cares most about.

In early March, the UK government announced that it would more than double public spending on research and development (R&D). Nesta’s report, Innovation after Lockdown, argues that for that extra funding to be felt, it needs to be directed towards addressing the UK’s stark and worsening regional inequalities and building the productivity and resilience of key parts of the economy. This should include vital but struggling sectors like social care. A new approach will enable the UK to avoid repeating the legacy of the 2008 financial crisis, which saw richer areas and sectors recover far faster and more fully than poorer ones.

As well as a strong moral case for supporting people and places that have been worst hit by the pandemic, the report finds that policies to spread innovation and its benefits more widely will lead to an economy that is stronger and better placed to weather future shocks. Fostering innovation and raising productivity in foundational sectors, like housing, education, health and social care, could help them better adapt to unforeseen disruptions. Given that such sectors account for around 40 per cent of the workforce, this could have a significant positive impact on the UK economy – and on the living standards of millions of key workers.

In order to help build a more balanced and resilient innovation led economy in the wake of Covid-19, Nesta argues that policymakers need to make several practical changes to how innovation is nurtured, funded and regulated.

In practice this means:

1. A new settlement for frontline workers and sectors, funding innovation to improve pay and resilience in those parts of the economy, such as care, retail and hospitality, that have been hardest hit in the struggle against COVID-19. The current Industrial Strategy focuses on a narrow range of sectors, such as robotics, AI and space technology, 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, including devolving a significant proportion of public R&D funding to the nations, regions and cities of the UK as part of new Deals for Innovation-Led Recovery. Public spending on R&D is heavily skewed towards London, Oxford and Cambridge, which receive 52% of investment despite having 37% 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.
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 have negative consequences for particular groups of people. 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.

Madeleine Gabriel, Head of Inclusive Innovation at Nesta said, “The UK’s innovation system is an enormous asset and has the potential to foster more general economic and societal resilience in the face of future disruptions. But this potential is squandered as long as it remains undirected and confined to a handful of sectors and parts of the country. The COVID-19 pandemic has further exposed the fragility of many of our economic and social structures. Now, more than ever, we need a more inclusive approach to innovation.”

-ENDS-

For more information contact Juliet Grant in Nesta’s press office on 020 7438 2668 or 07866 949047, [email protected] or [email protected]

Nesta_Press [email protected]

Notes to editors:

About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society. We've spent over 20 years working out the best ways to make change happen through research and experimenting, and we've applied that to our work in innovation policy, health, education, government innovation and the creative economy and arts. Nesta is based in the UK and supported by a financial endowment. We work with partners around the globe to bring bold ideas to life to change the world for good.