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2020 has emphasised that industrial innovation is vital to Britain’s future

Published on December 10th 2020

The COVID-19 pandemic has brought renewed attention to the importance of manufacturing. In order to ‘emerge stronger’ from the crisis, the UK must now act more strategically and harness industrial innovation to serve ambitious agendas for the economy and the environment.

Crises often reveal underlying truths – about countries, about economies, about governments.

The challenges of COVID-19 have been no different. The pandemic response, especially in the initial wave, depended heavily on the capacity to provide the necessary equipment to health services while the global supply chains that underpin modern industries were seizing up.

As we highlighted in our evidence given to the House of Commons in May, some governments, particularly in Asia, were able to successfully draw upon their underlying strengths in manufacturing. In the UK, the Ventilator Challenge was a notable example of quick-footed response that brought the country’s manufacturing skills and capacity to bear. But already, the demands of the post-COVID world look set to demand wider and more strategic responses.

As we move into 2021, the early success of vaccines holds the promise of putting the initial phase of the COVID-19 crisis behind us. Thoughts are turning to how the UK and other countries can ‘emerge stronger’, improving the resilience of the economy and kickstarting a ‘Green Industrial Revolution’ to hit net zero targets.

Industrial innovation will be an essential part of these plans. Our review of government responses around the world to support industrial recovery and growth, produced for the Department for Business, Energy and Industrial Strategy, shows a growing recognition across countries of the critical contribution of manufacturing and industry to both crisis response and long-term economic resilience.

This has been a long time coming, especially in the UK, where there has often been a simplistic narrative that manufacturing was no longer a relevant part of the economy. The COVID-19 crisis, and the breakdown of global supply chains, has exposed this line of thinking, and more ambitious government plans to support a strong manufacturing sector are now required.

To succeed in this, the ability to think and act strategically matters. Manufacturing cannot simply be the ‘flavour of the month’ in Whitehall. The success of the UK manufacturing sector depends on the ability of government to work with the private sector on sustained plans for growth over the next decade.

Our review of the five priority policy areas for manufacturing shows how interlinked they are with the government’s other long-term goals.

National resilience depends on a healthy manufacturing sector with the knowledge base and capacity to respond in crises – whether addressing the spike in demand for critical medical goods or ensuring the continuous provision of food.

There is also increasing interest in the idea that increasing the share of manufacturing in GDP can be a way to strengthen long-term economic resilience. In countries like South Korea, Australia and Singapore, there is recognition that manufacturing has offered ‘pockets of resilience’ that have bolstered economies through the COVID-19 downturn, and which will be critical to long-term recovery.

Equally, government plans to move more quickly on the UK’s net zero targets require a manufacturing sector that is able to transform. Manufacturing accounts directly for around 15 per cent of the UK’s greenhouse gas emissions – new technologies and processes in the sector are thus key to a more sustainable economy. And industrial expertise to scale up the new green technology that will shape the homes and business of the future is just as important.

Other economic targets rely on manufacturing as well. To boost innovation, the government wants to increase R&D expenditure to 2.4% of GDP. This is impossible to achieve without the manufacturing sector, which is responsible for two-thirds of business R&D spending in Britain.

To boost competitiveness, the deployment of digital technologies in manufacturing will be as critical as lean production was in the 1990s. Digitalisation contributes to continuity, flexibility and productivity in industrial operations, and countries such as the United States and France are already deploying government initiatives to support technological leadership and sovereignty.

But it is not enough to just think strategically; clear and sustained government action to pursue these options is essential.

That’s why we’re working on the implementation side as well. In early 2021, in conjunction with the Centre for Science, Technology and Innovation Policy (CSTI), we will release the first UK Innovation Report, which brings together, for the first time in a single place, innovation and value-added indicators that can benchmark the UK’s performance and put it in a global context.

We’re also working with CSTI to investigate how policy research units provide evidence to policymakers, and how the UK research and innovation policy system can improve how such research and analysis is provided to public officials.

In addition, we’re working with Innovate UK on two major initiatives. Our study of international research and innovation collaboration in the advanced manufacturing and materials sector will give deeper insights into domains where collaboration has the potential to unlock significant and strategic value capture opportunities for Britain.

And we’re working to inform the establishment of two Digital Manufacturing Innovation Hubs to connect with, and generate value from, existing capabilities in the UK – to jointly innovate, test and demonstrate the manufacturing technologies of the future.

The COVID-19 response has opened eyes in Britain to the important part manufacturing must play in the economy of the future, and how critical the sector is to national interests. Countries around the world that recognise this are already deploying major new initiatives to strengthen the industrial sector. The UK must seize these opportunities to join them.

Find out more about the launch of the UK Innovation Report, and register your interest here:

Launch Event

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