Written evidence submitted by the National Centre for Universities and Business (NCUB) (IGR0084)

NCUB response to the House of Commons Science, Innovation and Technology Committee inquiry on innovation, growth and the regions

Introduction to the National Centre for Universities and Business, and our reasons for responding

The National Centre for Universities and Business (NCUB) represents a collective voice of leaders across higher education and business and aims to tackle issues of shared interest. The NCUB is an independent and not-for-profit membership organisation that promotes, develops and supports university-business collaboration across the UK.

We warmly welcome the Committee’s inquiry into the role of innovation in supporting growth across all regions and nations of the UK. It is our view that the research, development and innovation (RDI) ecosystem is essential to driving the Government’s missions, particularly on economic growth. Our response highlights the importance of universities to regional growth, through working with businesses on collaborative research projects to training people with the skills needed to deliver on the aims of the Industrial Strategy.

We would welcome any additional opportunities in which NCUB can contribute evidence and insights to this inquiry in the coming months. We look forward to working with the Committee on this important topic.

How does the Government drive research and innovation in our regions?

There are significant regional variations in both public and private R&D spending

Successive governments have introduced policies that seek to address the issue of disparities in regional growth, which can be evidenced through different metrics. This includes productivity growth. According to the Office for National Statistics (ONS), London had the highest productivity level of any UK region in 2022. Output per hour worked in the capital was 26.2% higher than the UK average. Productivity levels in the South East were also above the UK’s average (10.8%), while all other regions and nations were below the UK level (see chart 1) (ONS, 2024).

Chart 1

Levels of research and development (R&D) spending also vary greatly based on the different regions. This had been recognised by the previous government, who sought to address the imbalance in public investment in R&D in their Levelling Up White Paper in 2022 through its ambition that “by 2030, domestic public investment in R&D outside of the Greater South East will increase by at least 40%, and over the Spending Review period [2022-23 to 2024-25] by at least one third.” Publicly available data is insufficient to determine whether progress has been made against this target.

ONS data on the levels of private sector R&D spending demonstrates significant regional concentration (ONS, 2024). The latest data on business expenditure on research and spending (BERD) showed a 3.1% real-terms decline between 2022 and 2023 across the UK. Most regions and devolved nations saw a drop in business R&D spending (see table 1). London (+12.4%), the West Midlands (+10.6%), and Northern Ireland (+7.2%) were the only regions or countries to report an increase.

Table 1

There remains a significant geographical concentration of business R&D spending in London, the South East, and East of England (see table 2). Combined, these three regions accounted for nearly three-fifths (58.4%) of total business R&D spending in 2023. This was up from 57.1% in 2022.

Table 2

Due to methodological changes from the ONS, we cannot make comparisons with years prior to 2022. Nevertheless, earlier research suggests that this concentration of R&D spending in London, the South East and East of England has persisted over time (House of Commons Library, 2023).

Addressing the disparities in regional R&D and innovation spending

These regional disparities in R&D and innovation (RDI) are important, as investment in RDI has been found to have a positive effect on productivity growth (Department for Business, Energy and Industrial Strategy, 2021) and a stimulus for broader economic growth (UKRI, 2022). NCUB analysis has shown the positive effect of public investment in R&D in stimulating private sector R&D spending (NCUB, 2024). We estimate that in the UK each £1 of public R&D stimulates between £0.60 to £1.10 of private R&D investment in the short term, and between £3.09 to £4.02 in the long term.

One avenue to addressing the disparities in regional R&D spending, particularly from the private sector, is to acknowledge the role that local actors can play to affect change. Studies have shown that, when making decisions on whether to invest in R&D, businesses look to work with universities to gain access to leading research and highly skilled staff (Royal Academy of Engineering).

Increasing the level of R&D investment across all regions of the UK should remain a priority, not just for governments (present and future), but all stakeholders.

The role of universities in place-based growth

Universities sit at the heart of regional innovation, and are key to delivering place-based growth. Universities dominate non-business R&D and channel significant government funding, making them the foundation of the UK’s science and technology landscape. They conduct vital research, develop skilled talent, and foster knowledge exchange, playing a particularly crucial role in driving innovation and growth for SMEs.

Universities are deeply embedded in their local areas. They collaborate with businesses to undertake research, providing expertise and access to vital infrastructure. Businesses, including SMEs, benefit from these collaborations, enhancing their competitiveness through knowledge exchange. This empowers them to compete on the global market, and in turn increases productivity (NCUB, 2024). Collaboration between businesses and universities is critical to local growth, and this collaboration takes place across the country with 260 higher education providers distributed around the UK (Universities UK, 2025).

Support for universities to impact place-based growth

Any policy initiatives that seek to increase regional innovation stand a far higher chance of success in delivery when they include universities at their core. The Connecting Capability Fund (CCF), administered by Research England, for example, was shown to have increased collaboration between universities in regions across England. It has helped to establish robust and long-lasting relationships between universities and industry partners, as demonstrated through the successes of the Northern Gritstone University Partnership,  Midlands Mindforge, and the Northern Accelerator (IP Pragmatics, 2020).

Another strong example of universities supporting the aims of place-based growth funding is through initiatives backed by the European Regional Development Fund (ERDF). NCUB analysis showed that ERDF funding was critical to supporting universities in their collaboration efforts, particularly with SMEs (NCUB, 2023). Universities were able to use ERDF funding to engage SMEs by providing business support, upskilling, and working together on innovation initiatives.

ERDF supported higher education institutions (HEIs) to develop both soft and physical infrastructures to enable R&D and innovation collaboration with businesses, helping to develop new technologies, products and services. HEIs were also able to use ERDF funding to develop their technology transfer capabilities – opening their research and wider capabilities for commercialisation and profitable use by businesses. ERDF supported university-led initiatives to provide people with the skills necessary to start and run businesses and develop approaches that drive societal as well as economic value.

Our analysis found that ERDF income was a catalyst for knowledge exchange (KE), with up to £7.53 of additional KE income being generated for every £1 received by universities in ERDF income.

Universities and other HEIs in Wales, the West Midlands, the North West and the South West received the largest shares of ERDF income, which also left these regions most exposed to its removal once the UK left the European Union (NCUB, 2023).

Indeed, the loss of ERDF and the lack of long-term equivalent funding may already be proving damaging. According to NCUB’s Collaboration Progress Monitor (CPM), the number of interactions between universities and businesses in the UK fell 5% between 2021/22 and 2022/23 (falling 3.5% for SMEs, and 8.8% for large companies). 

At the same time, the average value per interaction (across all businesses) rose to the highest level in nine years, suggesting a shift toward fewer, higher-value interactions.

The increase in value per interaction can be attributed to several factors and should not be seen as a positive shift per se. Universities are facing several financial headwinds, and the loss of funding schemes such as ERDF is pushing universities to focus engagement efforts on higher-value interactions. These are inherently with medium and large businesses, with less focus on expanding partnerships with micro and small companies. 

Efforts have been made to mitigate the loss of ERDF

The UK Shared Prosperity Fund (UKSPF) was established as a successor to the European Structural Investment Fund (ESIF) of which ERDF was a part. UKSPF income has been allocated to universities to support them in their engagement work with businesses and increase innovation. However, it has not matched the scale of ERDF income and its future is uncertain.

The Regional Innovation Fund (RIF) was established to support universities in England with lower levels of R&D investment in the 2023/24 financial year. It was allocated by Research England using a regional weighting, which factored in levels of public investment in R&D, the number of HEIF recipients in the region, and regeneration income.

The aim of the RIF was to target high performing universities in areas with lower levels of investment in R&D but with high performance in regeneration funding, and support universities to focus on business engagement and leading to economic growth. No announcements have been made as to any future application of this mechanism.

Universities also receive support via other channels on business collaboration, which are not place-based in their allocations

The aforementioned CCF has complimented the longstanding results of the Higher Education Innovation Fund (HEIF). The HEIF helps to unlock collaboration between universities and private, public and third sector organisations through building core knowledge exchange (KE) capacity in English universities.

HEIF supports a range of activities, including developing KE support for research exploitation, spin-outs and licensing, skills and human capital development, knowledge sharing and diffusion, enterprise training and entrepreneurship, community and public engagement, and the utilisation of a university’s physical assets (Research England, 2020).

HEIF has proven to offer a strong return on investment, with an estimated return of £8.30 per £1 of public sector funding (NCUB, 2021).

Given that the HEIF is for English institutions, it is important to note equivalents in the devolved regions. In Scotland, the University Innovation Fund – which has evolved into the Knowledge Exchange and Innovation Fund (KEIF) as of the 2024/25 academic year – is the Scottish Funding Council’s primary mechanism for supporting university KE and innovation activities. In Wales, the Research Wales Innovation Fund (RWIF) is a welcome reintroduction of direct public sector support for innovation and engagement.

We do not have data on the return on investment for the RWIF and KEIF, as has been calculated for HEIF. However, the encouraging data on the latter suggests that this model is effective at delivering a return for investment. NCUB analysis has also shown that HEIF funding has unlocked innovation activities, including placements for students at SMEs and translating research into practical devices and prototypes (NCUB, 2021).

As stated above, HEIF and its equivalents are not place-based in their allocations, which was a deliberate decision. By design, these programmes seek to provide universities with the flexibility and ownership they need to tailor available funding to their local needs.

What is critical is emboldening universities in their efforts to support growth in their areas

Universities are anchor institutions within their local areas, and they work with businesses to support growth. Universities’ capacity to drive economic growth was recognised in the Witty review in 2013, which recommended that universities be given a new ‘Third Mission’ alongside research and education. Incentives should be provided to encourage engagement in facilitating economic growth.

Efforts have been made on this front. The UK Research Partnership Investment Fund (UKRPIF) has supported universities with investment in their research capabilities, provided those projects are aligned to the UK Government’s R&D ambitions. The UKRPIF has also required universities to match the public sector investment from non-public sources, encouraging them to strike partnerships with other research organisations. The previous government’s Innovation Accelerators – announced as part of the Levelling Up White Paper – are supporting several R&D projects across three city regions, as part of a pilot. Universities in each of the three regions are key stakeholders.

Universities are also partners, or leaders, in the projects under the Strength in Places Fund (SIPF). The SIPF seeks to support collaborative projects in self-defined areas across the UK, where they build on existing strengths in research and innovation. Successful bids required a show of strong cooperation between research institutions, businesses and local government stakeholders.

In summary, there are a number of strong mechanisms used by government that support research and innovation in our regions, and these need to be maintained. But the loss of ERDF and no replacement is a concern. If the UK really wants to address regional imbalance it must go further by boosting public sector R&D spending and encouraging greater private sector investment outside the greater south east of England.

Barriers to establishing spinouts and innovative SMEs

Financial pressure on universities is preventing them from offering the same levels of support to academics who establish spin-outs. When academics launch a spin-out, they are typically leaving secure, permanent roles for much less certain endeavours. Universities have played important roles in helping founders with this (such as allowing them to work more flexibly/fluidly between their academic and business roles). However, NCUB engagement with universities has suggested that financial pressures are making it harder.

On the business side, there are well documented challenges with access to UK growth capital. NCUB’s engagement with businesses enforces this conclusion, and suggests that reforms, such as pension reforms, have not gone far enough to incentivise domestic investment. The Government should recognise that as well as the capital made available by dedicated investors, many R&D-active businesses are also increasingly investing in their own venture arms. There may be ways for Government policy to better incentivise this type of investment to further unlock capital.

Closer engagement between universities and businesses encourages the establishment of spinouts and innovative SMEs. A number of factors appear to have led to the recent consolidation of collaborations with universities mentioned above. NCUB analysis has showed that factors such as the availability and costs of finance, lack of qualified personnel, and the UK’s withdrawal from the European Union all constrain SME innovation.

Additionally, the short-term nature of the UK Shared Prosperity Fund (UKSPF) may have disincentivised businesses from engaging with it. These challenges reflect previous findings from NCUB research on SME-university engagement (NCUB, 2024).

NCUB analysis (2024) of HMRC data suggests that there has been a sharp fall in the number of R&D tax reliefs claimed by businesses (down 21% between fiscal years 2021/22 and 2022/23). The decline in reliefs claimed by SMEs was even larger (23%). This has been attributed in large part to the implementation of new compliance procedures. Inflation-adjusted R&D expenditure from business claims fell 2.4% as a result.

How does research and innovation in our regions drive growth and prosperity in those regions?

Effectiveness of regional innovation hubs and clusters

Universities sit at the heart of regional innovation hubs, and are deeply embedded in their local areas. They are anchor institutions for innovation activity, working with businesses to undertake research, provide expertise, and give companies access to necessary infrastructure. Businesses, including SMEs, benefit from these collaborations, enhancing their competitiveness through knowledge sharing. This empowers them to compete on the global market, and in turn increases productivity.

By working with businesses, universities are able to understand the skills that are needed in the local area (NCUB, 2024).

It is vital that the UK has a good understanding of its research strengths and weaknesses. The Government has started this work through the industrial strategy consultation. DSIT has in the past undertaken mapping exercises of clusters. This was useful, although it was arguably too granular to properly demonstrate where innovation policy for different sectors can be best deployed (NCUB, 2024).

The most up to date mapping exercise conducted by DSIT (2024) reveals that 78% of the 398 identified R&D collaborating clusters host a university within their boundaries. These clusters bring together groups of firms with strong evidence of collaboration and are often associated with emerging economic sectors, driving research and innovation activities. They also play a critical role in fostering early-stage entrepreneurship, with 36% of firms in these clusters identified as SMEs, seed-funded enterprises, or start-ups.

Clusters are most effective when universities are involved. They play a crucial role in training individuals with the necessary skills for specific sectors and collaborate with businesses to advance innovations. Agglomeration benefits from universities may be generated by infrastructure such as innovation parks (Rosenthal & Strange, 2020), as well as entrepreneurship from graduates (Kitagawa et al., 2022). Valero and Van Reenen (2019) also demonstrate a positive spillover effect from universities to their neighbouring regions. In the UK context, Velez et al. (2023) show that universities play a significant role in both rural and urban microclusters. This means that clusters located near universities act as attractive hubs that promote the agglomeration of industries. Additionally, staff and students at these institutions actively contribute to business offerings, and graduates are more likely to start businesses in the proximity of their universities.

University-business collaboration is a powerful engine for innovation, as demonstrated by thriving clusters across the UK:

• In Cambridge, Europe's largest technology hub, 5,000 knowledge-intensive companies, many with strong ties to the University of Cambridge, contribute significantly to the £23.1 billion generated through research and knowledge exchange (Russell Group, 2024).  
• The West Midlands Advanced Manufacturing cluster, with a business population of over 1,600 companies, benefits from close collaboration with the University of Warwick and the University of Birmingham.  These universities host research centres like the Automotive Composites Research Centre and the Manufacturing Technology Centre, driving innovation in manufacturing processes and technologies (CBI, 2024). 
• The Liverpool City Region's Life Sciences cluster, with over 1,030 businesses, thrives on contributions from its universities, including the University of Liverpool and Liverpool John Moores University. These institutions not only provide a skilled workforce but also emphasise real-world applications, aligning with the region's focus on innovation and industry collaboration (CBI, 2024). 
• Tees Valley's Space Energy cluster, with a business population of 62 companies, benefits from partnerships with Teesside University, which has played a crucial role in the development of small firms like StratoBooster. The university's focus on space-related research and technology aligns with the cluster's goals and contributes to its growth (CBI, 2024). 
• The West Yorkshire Combined Authority fosters a growing Net Zero cluster, fuelled by research and talent from the University of Leeds and other regional institutions. The cluster's business population of 1,358 companies benefits from the university's expertise in climate science, sustainability research, and green technologies (CBI, 2024). 

Universities help attract foreign direct investment into their regions

NCUB analysis of foreign direct investment (FDI) into UK R&D has demonstrated what makes an area or region attractive to overseas investors. The presence of universities contributes to explaining the location of international R&D. Collaborations with universities (rather than other private sector firms) protect intellectual property and limit spillovers due to the nature of these collaborations and the contracts that can be specified (NCUB, 2023)

NCUB supports local innovation policymaking, with local government playing a key role as a convenor of different stakeholders to drive delivery

Different parts of the UK have different strengths and weaknesses. Not every region is home to the same research and skills strengths as others, while infrastructure across different areas also varies greatly. To apply a one-size-fits-all innovation policy for the entire UK risks overlooking the respective needs of different regions and devolved nations. There is, of course, a strategic need for national coordination of regional growth policies, and the new industrial strategy should provide a mechanism to enable this. The new Local Growth Plans must align with the priorities set out in the nationwide Industrial Strategy. However, there is scope for more local input in regional innovation policy.

Mayors and other local government leaders should ensure engagement across whole areas, including with major stakeholders like universities and businesses. This would develop and maintain an expert understanding of local context, informed by high-quality data and other evidence. They should use these networks and evidence to support their work with Government, to develop and implement region-specific growth and innovation policies that respond to opportunities and factors specific to their places.

The caveat to this is that the roll-out of Mayoral Combined Authorities, which is presently being undertaken on a patchwork basis, does not lead to a level playing field. Each of the MCAs are developing their own Local Growth Plans, to show their areas would contribute to the industrial strategy growth aims. The risk is that there are devolved funding streams for innovation through MCAs, which would potentially put some areas ahead of the curve compared to others. It is estimated that only around 40% of the UK’s population is covered by an MCA (Bailey, D., Fai, F., & Tomlinson, P. R. (2024). Beyond levelling up: where next to revive lagging regions? Contemporary Social Science, 19(4), 375–383). The Government will need to make sure that any funding that can support local innovation policymaking is not limited to MCAs.

How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from?

Coordination between universities and businesses on commercialisation

Our responses to questions 1 and 2 have sought to highlight the important role universities play as anchor institutions for growth in their local areas. The presence of universities makes an area more attractive to businesses when thinking of where to invest in R&D. Universities act as catalysts for diffusion, supporting place-based growth policymaking.

Collaboration between universities and businesses has nevertheless been on a downward trajectory (NCUB, 2024). According to NCUB’s Collaboration Progress Monitor (CPM), the number of interactions between universities and businesses in the UK fell 5% between 2021/22 and 2022/23 (NCUB, 2024). University interactions with SMEs fell 3.5% in 2022/23, and 8.8% for large companies. The CPM is part of NCUB’s State of the Relationship report, which in 2024 also pointed to a mixed picture for commercialisation.

The total number of licences granted by universities to businesses dropped 12.8% between 2021/22 and 2022/23, to 22,458, while licensing income fell 8.2% across the same period.

On a devolved nation level, the drop in the volume of licences issued was concentrated in England (-13.9% between 2021/22 and 2022/23). Income derived from licences fell 6.5% in England in 2022/23 compared to the previous academic year.

For Scotland, the number of licences granted increased 1.3% between 2021/22 and 2022/23, but income generated fell by 16.6%. In Wales, the number of licences granted to businesses rose 8.2% year-on-year in 2022/23, and was accompanied by a 6.0% increase in licensing income.

Finally for Northern Ireland, which accounts for a fraction of total licences granted, there was a decline of 5.7% in 2022/23 (from 88 to 83). Licensing income dropped sharply too (-56.6%).

The number of patents granted across the UK fell 8.5% between 2021/22 and 2022/23, again driven by England (-12.0%). By contrast, Scotland (+9.2%), Northern Ireland (+7.1%) and Wales (+105.6%) all saw increases in the number of patents granted.

As a counter to these declines in patents and licensing, NCUB analysis showed that there was a record number of 1,571 academic spin-outs that successfully sustained themselves for a minimum of three years. This represents an 8.8% increase from 2021/22 and a remarkable 19.4% rise since the onset of the pandemic, spanning the period from 2018/19 to 2022/23 (NCUB, 2024).

Despite this mixed picture when considering commercialisation metrics based on licensing, patents and spin-out activity, NCUB analysis has shown that these are not the only ways businesses engage with universities on commercialisation. In our report, 'The Changing State of Business-University Interactions in the UK 2005 to 2021', based on a survey of more than 3,700 UK companies, the main form of interaction with universities for commercialisation was through using academic publications. This was followed by licensing, and then finally collaborations with spin-outs.

There has been significant focus on university spin-outs as a barometer of commercialisation, and a number of policy initiatives aimed at improving this metric The Independent Review of spin-outs, for example, has put forward practical and encouraging recommendations to make it easier for spin-outs to establish and scale-up. While these are positive interventions, this is not the only lens through which university-business collaboration on commercialisation should be viewed.

Businesses engage with universities on commercialisation in several ways, which are enabled by a robust university sector in the UK.

NCUB has access, through its university and business members, to many case studies covering best practice at various parts of the commercialisation journey. These cover the full range of priority areas in the evolving industrial strategy and feature a range of mechanisms suited to different technology readiness levels, sectors, and local contexts.

Examples include early-stage support to the commercialisation journey such as Nottingham University signing a memorandum of understanding with CPI to form a partnership that will speed up progress on the commercialisation of research on green chemicals. Such projects help CPI progress towards the production of sustainable aviation fuel. Further examples cover innovations further along the commercialisation journey, including university spinouts such as Oxford Biomaterials (OBM) and Spintex. These companies are working with biomaterials academics at Oxford University to commercialise innovations using and simulating spider silk. These are paving the way for applications as diverse as surgeons repairing nerve damage, and support to the textile industry to reduce its environmental impact.

In addition to specific examples, we have several case studies covering initiatives supporting commercialisation on a national or regional basis. These include multi-university collaborative initiatives, such as the Northern Accelerator, which is driving commercialisation in the North East. We would be delighted to curate and share further examples with the inquiry should that be useful.

Universities and businesses are combining to drive the Government’s missions

As set out in our response to Question 2, university-business collaboration is critical to delivering on the new Government’s economic missions. Our 2024 State of the Relationship report showcased several ways in which university-business collaboration is supporting the Government in its missions.

To kickstart economic growth, £4.5 million in funding has helped to establish three SME engagement hubs as part of the Hartree National Centre for Digital Innovation (HNCDI) programme. SMEs are being supported to adopt digital technologies, and take advantage of the expertise available from the Hartree Centre on areas such as supercomputing, data analytics, and artificial intelligence (AI).

Investment manager abrdn have also partnered with the University of Edinburgh to deliver innovation in the financial sector, while IBM and the Open University launched SkillsBuild Reignite in 2020 to support job seekers, entrepreneurs, and small businesses with access to free online learning. SkillsBuild Reignite is looking to support people in reskilling through live webinars and learning activities.

The Government has made clear that it wants to make Britain a clean energy superpower. EDF and the University of Strathclyde are working together on tidal stream energy, while a partnership between Cardiff University, the University of Manchester, BP, and Johnson Matthey is exploring transformation of carbon dioxide, waste and sustainable biomass into fuels and products. Heriot Watt University are collaborating with the Scotch Whisky Research Institute on using industry wastewater to create green hydrogen.

Loughborough University has established a series of partnerships with different bodies, including policymakers, on tackling crime through sport. Public safety is also being considered by a collaboration between four universities, which is looking at how views on safety in the public realm have changed and what policymakers can do to address this. Both these examples are helping the Government in its mission to ‘take back our streets’.

Universities and businesses are working together in several ways to break down barriers to opportunity. The Big Deal 2020 is a business and enterprise competition for 13-15 year olds from underrepresented groups, where they develop a unique and innovative product or social enterprise business plan. Adopting Together is a groundbreaking collaboration of the voluntary adoption agencies in Wales. St David’s Children Society and Barnardo’s Cymru are working in collaboration with Cardiff University, the Family Place, Adoption UK, and other organisations and businesses.

To build an NHS fit for the future, Cisco Country Digital Association is funding the Lister Alliance – a consortium of more than 30 organisations in England, including universities. The consortium of partners involved in this programme have engaged in knowledge transfer and expertise sharing, both organically and through facilitated activities. The intention is to accelerate the rate of innovation, co-design and eventual adoption of digital solutions across the NHS.

Relationship between investment in innovation and economic growth

Innovation drives productivity by introducing new products, services, and processes. The UK has seen a strong correlation between R&D intensity (investment relative to GDP) and long-term productivity growth (NCUB (2024). Autumn Budget 2024 and Spending Review: Representation by the National Centre for Universities and Business). The 2004-2008 productivity gains were significantly influenced by private and public R&D, particularly in sectors like Life Sciences, FinTech, and Advanced Manufacturing. Investment in innovation generates significant spillover effects across industries. For instance, advancements in AI have impacted manufacturing, healthcare, and financial services.

At a sub-national level, innovation investment helps tackle regional inequalities. For example, the R&D Place Strategy and Innovate UK’s regional hubs aim to distribute resources beyond the ‘Golden Triangle’ (London, Oxford, Cambridge). Targeted innovation funding has created high-tech clusters (e.g., Manchester for advanced materials, Belfast for cybersecurity) that attract inward investment and foster knowledge-intensive jobs. Regional innovation supports skill formation through university-business collaborations, as demonstrated by Catapult Centres (ERC (2023) Catapulting Firms into the Innovation System: Analysing Local Knowledge Spillovers from Catapult Centres). These linkages improve employability and local economic development.

Public investment in R&D is critical to growth. This funding supports fundamental research, building capacity, sharing risk and remedying market failures. It has a catalysing effect in sectors, “crowding in” private investment at transformative levels. Recent analysis by NCUB, using updated ONS data, reveals that the long-term financial impact of public R&D investment on private investment is even more substantial than previously thought (NCUB (2024). Unlocking growth: The impact of public R&D spending on private sector investment in the UK). Each £1 of public funding potentially generates between £3.09 and £4.02 in private R&D investment. The majority of this private investment is crowded in within the first three years of investment, highlighting how it creates impact.

Knowledge spillovers from R&D enhance productivity and create high-value jobs, with sectors like AI, FinTech, and Renewable Energy showing robust growth. Furthermore, public investment is essential for delivering the Government’s other missions for the UK. Research helps deliver the new technologies and processes that help achieve greater environmental sustainability, better health and infrastructure, and more efficient public services.

What metrics should be available to evaluate its effectiveness?

The UK fosters innovation through a diverse mix of policy instruments deployed at national and regional levels, including grants, tax incentives, regulatory frameworks, skills programmes, and initiatives promoting collaboration among businesses, research institutions, and the public sector. While much effort has focused on evaluating individual policies, it is increasingly clear that a holistic understanding of the entire policy portfolio is essential to maximise the UK’s innovative potential and economic competitiveness.

A systems-level perspective highlights the interdependence of policy measures. For instance, R&D tax credits may have limited impact without parallel investments in skills development, and university-industry collaborations require robust funding mechanisms to succeed. However, our understanding of how these instruments interact—whether complementing or conflicting with each other—remains limited. Regional disparities, mismatches between short- and long-term objectives, and gaps in the policy mix further complicate the effectiveness of the innovation ecosystem.

To address these challenges, a thorough evaluation of the policy mix at both national and local levels is essential. Developing a tailored mapping of the UK’s regions and nations is recommended, drawing on frameworks like the OECD’s Science, Technology, and Innovation Policy Compass and other recent evidence (Howoldt (2024) Characterising innovation policy mixes in innovation systems). This approach would help identify synergies, resolve conflicts, and ensure the policy mix is optimised to support innovation across the UK.             

How does the UK’s innovation ecosystem compare to those of other countries?

NCUB recognises international comparisons as a useful way to explore opportunities for improving the UK’s innovation ecosystem – but stresses care must be taken in interpreting comparative data, which is highly context-specific. At face-value, the UK innovation ecosystem performs very well internationally (ranked 5th globally in WIPO’s 2024 global innovation index) - but this strong innovation performance is not noticeably translating into strong economic performance, which demonstrates that such metrics must be considered with care.

Innovation systems are multifarious and interconnected with a wide range of socio-economic factors. Even at a categorical level it is difficult to consistently define an innovation ecosystem on a geographical basis – with geographical boundaries demonstrating fluidity and permeability and contributing factors operating simultaneously at various levels including locally, regionally, nationally and internationally.

Studies that sought to develop robust international comparisons for innovation have tended to focus on ‘national innovation systems’ rather than local ones. This makes sense from a policy-perspective, given that much support to innovation is managed at a national level. But it also risks masking important regional differences.

Initiatives for transferring good practice or learning on a regional level need to be carried out with care given the unique nature and context of a place, such as its history of development, sector mix, people, culture and university structures. Developing entrepreneurial cultures can take time and replicating processes that have been effective elsewhere may not always be possible in new settings.

Despite these caveats, the lessons that can be learned upon careful study can be highly informative. In 2022, NCUB, in collaboration with Research England, and partners from London Universities and the British Business Bank, sought to develop and use an ecosystem approach to compare the UK against European university-centred innovation ecosystems. The study was intended to inform research commercialisation and wider entrepreneurship in the UK. 

Building upon previous work, ten indicators on different aspects of ecosystem ‘performance’ and context were selected based on their feasibility, relevance, balance and comparability. These were:

Performance indicators:

         Research intensity

         University rankings

         Business school rankings

         Number of seed stage investments

         Value of seed stage investments

         Shared specialisms

Contextual indicators

         Number of students

         Number of staff

         Local population size

         Size of local economy (GVA)

These indicators were then compared internationally and ecosystems matched to better inform context-specific recommendations – which were developed through careful assessment of data and case-studies. Strong features of ecosystems that were common to a range of contexts included:

         Strong leadership within ecosystems and senior-level buy-in to commercialisation within universities (through roles such as Provost/Vice Chancellors for Enterprise within universities).

         Strong links to finance and funding options for early-stage technology companies – such as active investor networks and seed funds.

         Engagement strategies for developing strong university-business partnerships and better coordination of these partnerships within universities.

         The capacity of academics and students to learn from best practices in building an enterprise culture. Including How to use networks, successes and role models to attract and retain talent in an ecosystem and ensure its continued development, e.g. through successful entrepreneurs ‘giving back’ their expertise and networks to the next cohort.

         The ability to attract and retain talent – which is highly context specific, and linked to diverse issues such as the costs and location of housing, transport connectivity, and local funding opportunities.

NCUB continues to stress the importance of developing and applying context-specific, nuanced approaches to generating beneficial lessons from international comparisons. 

24 January 2025