Influencing the Future of Innovation Encouraging Innovation for

Influencing the Future of Innovation Encouraging Innovation for a Better Future Rebecca Endean UKRI Strategy Director

UK Research and Innovation Rebecca Endean, UKRI Strategy Director 26 th November 2018

Mission UK Research and Innovation: benefiting everyone through knowledge, talent, and ideas.

The Numbers • UKRI has a combined budget of around £ 7 bn per year • 3, 900 research and business grants issued every year • 151 universities receiving research funding • 38 institutes, laboratories, units, campuses and innovation catapults

Overall spend on Research and Development in the UK Total R&D expenditure in the UK was £ 33 bn in 2016. The public sector funds over £ 9 bn of this (28% of total). UKRI covers the majority of public R&D funding, standing at £ 7 bn in 2018 but rising out to 2021/22. £ 33 bn Source: ONS GERD (2016), UKRI Strategic Prospectus The government has allocated £ 7 bn to the National Productivity Investment Fund (NPIF) over the period 2017/19 to 2021/22. UKRI has a key role in delivering this investment.

Foreign direct investment (FDI) is a strong driver of R&D in the UK Sources of UK BERD as a proportion of total BERD 1% increase in FDI is associated with a 0. 8% increase in national R&D expenditure and a 0. 4% increase in patenting activity. 25% 20% Non-UK sources account for about half of all business R&D within the UK – doubling from £ 5 bn to 15% £ 11 bn since 2005. United States Rest of the world Other EU Germany France 10% The UK held the third-highest quantity of inward FDI in the OECD in 2017 Japan 5% 0% 2006 2008 2010 2012 2014 2016 [1] The Effects of Foreign Direct Investment on R&D and Innovations: Panel Data Analysis for Developing Asian Countries, L. Erdal and İ Göçer, 2015 [2] UK business enterprise research and development, ONS, 2017 [3] FDI Stocks, OECD International Direct Investment Statistics, 2017 [4] The impact of Brexit on foreign investment in the UK, S. Dhingra et al, 2016

Working towards 2. 4% The Government has committed to reaching: • 2. 4% of GDP investment in R&D by 2027 • Reaching 3% in the longer term • Additional £ 7 bn by 2021/22 In 2015 UK’s expenditure on R&D represented 1. 7% of GDP – below the OECD average R&D intensity of 2. 4%.

A wide range of R&D competitor nations have targets • The popularity of R&D intensity targets increased in the late 1990 s and early 2000 s, reaching 42 countries with an active R&D target in 2011. Other countries pursued non-target based R&D strategies. • The vast majority of countries have experienced increasing R&D intensity since 2000 and the UK is towards the lower end of the spectrum in terms of the scale of increase achieved. Source: Carvalho (2017) Source: OECD MSTI database (Data extracted on 4 Nov 2018) 8

… although fourteen other countries have achieved an increase of the scale which the UK is aiming to achieve under 2. 4% • The 2. 4% target implies increasing the UK’s R&D intensity by 0. 7% points in 10 years. • 14 countries have achieved at least a 0. 7% points increase in R&D in recent years. • Much of the increase in each case came through business-funded R&D. • However, public investment has an important role to play, in leveraging additional private investment and ensuring the increase is sustainable. Source: OECD MSTI database (Data extracted on 4 Nov 2018) 9

Foundations to the Industrial Strategy

ISCF and the Grand Challenges AI & Data W 1 Robotics for a safer world (£ 93 m) W 2 Audience of the future (£ 33 m) W 2 Next generation services (Pioneer £ 20 m) W 2 Quantum technology (Pioneer £ 20 m) Ageing Society Clean Growth W 1 Medicines manufacturing (£ 188 m) W 2 Prospering from the energy revolution (£ 102. 5 m) W 2 Data to early diagnosis and precision medicine (£ 196 m) W 2 Transforming construction (£ 170 m) W 3 Commercialising Quantum technology (£ 70 m) W 3 Manufacturing Made Smarter (£ 121 m) W 2 Healthy Ageing (£ 98 m) W 2 Transforming food production (£ 90 m) Future of Mobility W 1 Faraday battery challenge (£ 246 m) W 3 Driving the electric future (£ 78 m)

Universities and innovation Estimates imply that doubling the number of universities per capita is associated with 4% higher future GDP per capita In 2016/17, universities led to the creation of 4452 companies, of which 4161 were started by graduates and 143 were spin-offs, designed around exploiting a new IP Collaborating with universities increases the probability that a firm will undertake new-to-the-market innovation by: • 22% for small firms, and • 21 % for medium and large firms. Companies in innovation networks (such as UKRI’s Knowledge Transfer Network) are 4. 5 times more likely to be innovative, and 3 times more likely to enter an R&D collaboration.

People - Achieving 2. 4% is as much about people as money Having the right skills in place will be crucial for the development of priority sectors Around 110, 000 researchers work in industry UK researcher employment by sector, 2016 (rounded to nearest thousand) Software development Telecommunications Chemicals and chemical products Machinery and equipment Misc. business activities; Technical testing & analysis Computer programming, information services Research and development services Aerospace Motor vehicles and parts Pharmaceuticals 0 1 2 3 4 5 6 7 8 9 10 Source : ONS, OECD

There are key shortages This is not just about researchers but also support staff like technicians, who account for almost a third of UK R&D personnel, and apprenticeships Half of businesses say there is a shortage of STEM graduates with highest annual shortages in engineering (20 k), manufacturing (15 k), computer science, and construction (12 k). 700, 000 STEM technicians may be required by 2024 to meet employer demand 5

Places • £ 115 m Strength in Places Fund • Supporting regional growth by identifying and supporting areas of emerging R&D strength • Growing the capacity of existing research excellence and high quality innovation across the country Innovate UK funding intensity per capita in different areas of the UK

Thank you @UKRI_CEO @UKRI_news www. UKRI. org

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