The UK Innovation Report 2021

Benchmarking the UK’s industrial and innovation performance in a global context

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Introduction and Overview

Introduction and Overview

The UK faces significant challenges as it seeks to return to sustained and inclusive growth following the deepest economic recession since the Second World War. There is a pressing need to support a swift economic and social recovery from the impacts of COVID-19. Moreover, fundamental challenges present before the pandemic are likely to dictate the shape of the UK economy for years to come: increasing international competition; erosion of market share in key industries; hollowing out of supply chains; the need to reduce carbon emissions; and regional imbalances.

Innovation is critical to tackling these challenges. While the UK’s expenditure on innovation has historically been lower than some of its closest competitor countries, the government has committed to boosting investment in R&D to 2.4% of GDP by 2027 and to increasing public funding for R&D to £22 billion per year by 2024–25.

The UK is internationally recognised for its leadership in research and the excellence of its scientific institutions. However, securing economic and social benefits from research requires further efforts to deploy new technologies and solutions towards commercial success and practical application. Innovation needs to be leveraged to continue to improve productivity, shift into higher value activities, rejuvenate existing industries and build the foundations for the new industries of tomorrow.

In common with other advanced economies, there has been a marked shift in the structure of the UK economy away from manufacturing towards services. Contrary to common perceptions, however, these new service activities are not always high value adding or innovative. It is therefore critical to analyse innovation trends in the context of broader economic developments.

To help advance the debate in this area, this report provides a review of the UK’s industrial and innovation performance in a global context, drawing upon the latest available international indicators. A distinctive feature of this report is that it brings together, in a single place, innovation and value added indicators typically found in disparate sources and presented independently. Rather than producing a voluminous report, the intention is to present a concise selection of the most important indicators, in a format that is easily accessible to a wider audience.

Key policy questions addressed

Theme 1: Structure of the UK Economy
  • How has the structure of the UK economy changed in the last few years?
  • Are these changes affecting economic performance?
  • How does this compare with other countries?
Theme 2: Investment in Innovation
  • Are the UK government and the private sector spending enough on R&D?
  • How does this compare with the level of investment in other countries?
  • How big is the gap to achieving the 2.4% R&D expenditure target?
Theme 3: Industrial Performance
  • Are the UK’s key industries becoming more or less competitive internationally?
  • How are UK industries performing in terms of productivity, value added and employment?
  • Are key industries in the UK investing enough in R&D compared to their international competitors?
Theme 4: Science and Engineering Workforce
  • Is the UK producing enough scientists and engineers?
  • Is the UK government investing enough in technical and vocational education?
  • How does this compare with other countries?

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