A Targeted Approach to UK Growth

The UK needs an integrated and coherent Industrial Strategy that reflects the key growth challenges it faces over the next decade.

Current thinking has been dominated by a macro-economic‘laissez-faire’ approach focused on R&D spend as a % of GDP coupled with the provision of tax incentives to encourage private sector investment. What is clearly required is a radical new approach based on a more precise
understanding of how science and technology-enabled innovation is actually
commercialised.

Focus on Market Spaces

The UK should focus on selected market spaces where it can compete globally rather than thinking in terms of traditional industry sectors. An explicit 'green' focus should be adopted to align the industrial
strategy with sustainability goals.

This new approach depends on understanding and targeting six market spaces where changes in market structures offer a unique competitive opportunity for the UK: Lifesciences & Healthcare, Agri-food, Transport & Logistics, Energy Systems, Computing & Electronic Devices, and Media & Entertainment. All six market spaces are characterised by complex changing market spaces, with new value chains and significant implications for UK National Security. This will also require us to tackle the challenges associated with cross-border system boundaries.

Focus on Translation

The UK has outstanding research strengths in all these areas but is failing to realise the full economic benefit from this investment in science and technology, which depends on crossing three distinct hurdles or chasms along the commercialisation journey:

• Chasm I: Prototype creation  
• Chasm II: Translation of prototype to commercial product
• Chasm III: Scale-up of product
  

‘Interventions’ such as incubators, accelerators and scale-up programmes need to address the full commercialisation journey, covering all three Chasms, but the highest failure rates occur at Chasm II
where innovative prototypes are translated into commercially viable products. Tackling the Chasms requires interventions to address a wide range of growth drivers (or Vectors) not just technology and funding: crossing Chasm II in particular requires an integrated approach based on addressing all 12 Vectors identified by the Triple Chasm Model as being key to growth.

We have an opportunity to compete more effectively on the global stage by designing interventions targeted at Chasm II. Delivering these interventions will also require us to understand and apply external, internal and trade-off vectors, which allow us to not only balance ‘technology push vs market pull’, but understand the critical roles played by other vectors, including regulation and intellectual property management. Moreover, this approach is equally applicable to established companies wanting to bring new products and services to market.

Resource Allocation

The success of the industrial strategy depends on the active role of the UK Treasury in allocating funding for long-term investment. The national perspective should focus on building regional clusters and leveraging devolved government models. The international perspective should consider where the UK is best equipped to play in the value chain.

Action Plan

Changes to the decision-making machinery in Government are needed for effective delivery of this Industrial Strategy across all three layers: Policy formulation & deployment; resource allocation; and
execution management.
An integrated statutory Industrial Strategy Council is needed to advise on policy, to monitor government departmental initiatives, and provide long-term credibility.

An action plan for the first 1000 days of the Industrial Strategy is proposed, with specific tasks and timelines including the following:

• Innovate UK should be separated from UKRI and re-formulated as the Commercialisation Agency
• UKRI should continue to focus on the creation of new science and technology enabled innovations
• The Catapults need to be re-shaped to better tackle Chasm II
• British Business Bank should be empowered to crowd-in private investment more effectively
• ARIA (Advanced Research and Invention Agency) serves no strategic purpose and should be closed and the funds re-assigned to the (new) Commercialisation Agency.
  

Tracking impact is crucial, and a unit should be set up by the Treasury to measure the impact of policy elements and feed data to the Industrial Strategy Council, so that it can recommend timely course corrections by the appropriate government departments.