PM May sets out plan to boost government R&D spending

21 Nov 16

Prime minister Theresa May has announced that the government is to invest an extra £2bn in research and development by 2020.

May made the pledge in her first speech as prime minister to the CBI’s annual conference this morning. 

She said the investment would form a key plank in her commitment to an industrial strategy and would set Britain “on the path to becoming one of the best places for research and development in the world”.

Consequently, the government will launch an Industrial Strategy Challenge Fund to back priority technologies, while tax incentives for R&D would be reviewed and probably extended to “ensure British business remains at the cutting edge of scientific and technological discovery”.

The prime minister was under pressure to reassure the business community that the UK was an attractive environment for business and innovation in the wake of the vote to leave the European Union in June.

May also confirmed she would seek to ensure the UK has the lowest corporate tax rates in the G20 group of nations in order to remain competitive as Britain exits the European Union.

The announcements come before chancellor Philip Hammond’s Autumn Statement on Wednesday, which is anticipated to increase spending on infrastructure projects in a bid to boost the economy.  

May recognised that Britain faced numerous structural challenges. For example, she said, “while the UK ranks third in the OECD for the number of start-ups we create, we are only 13th for the number that go on to become scale-up businesses”.

To address this “historic weakness on commercialisation”, May announced the creation of a Patient Capital Review to examine how to break down the obstacles to getting long-term investment into innovative firms. The panel will be led by the Treasury and chaired by Sir Damon Buffini.

Also, May highlighted the way the US government drives innovation through its procurement processes. “There, strategic use of procurement not only spurs innovation in the public sector, it gives new firms a foot in the door.”

She confirmed that the Small Business Research Initiative would be reviewed by David Connell, a senior research fellow at the Centre for Business Research at the University of Cambridge, and chairman of Archipelago Technology Group.

Responding to the prime minister’s pledges, Ruth McKernan, chief of Innovate UK, said the new fund would put business-led innovation at the heart of the industrial strategy.

She said: “It will help deliver business growth for companies across the nations and regions, supporting the industries of tomorrow, boosting productivity in our existing areas of strength and help us realise commercial benefit from our world class research base.”

Innovate UK is the business-facing part of UK Research and Innovation.

During the speech, May reaffirmed her commitment to a country that “works for everyone”. However, she backtracked on a previous commitment to force firms to install workers or trade union representatives on management boards. 

Regarding Britain’s Brexit negotiations, May hinted at her support for a “transitional deal”, which would avoid a “cliff edge” shock as the country divorces from the trade terms and agreements of the EU. It is speculated that this could take the form of remaining in the single market for a set period, while a more detailed agreement is hammered out with EU member states.

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