Back on my topic of concerns about the UK economy this article looks something which I find highly problematic, that is the UK’s spending on research and development (R&D;), against world wide spend, and then measured against world wide innovation ‘league tables’.

In the theme of trying to get all these ‘backed up’ blog posts ‘out of the door’ I’ll be keeping this as succinct as possible, avoiding my usual Lovecraftian levels of verbiage, so please excuse the change of tempo.

The UK spends a great deal on R&D;, in fact it spends around 2.5% of GDP, about the same percentage it spends on the Military and Armed Forces, which for 2007 comes out at around £54 Billion.

In terms of R&D; spend and investment in the future, innovation and science, in $B, the UK ranks 4th after Germany, Japan and the USA. There is another way of measuring this investment, which is by % of GDP, which is a good comparator, but hides the vast amounts spent on innovation.

All well and good you might think, especially if that investment brings us in to the top four benefiting from that investment, but, well, there’s your problem, the UK doesn’t come in to the top four. It doesn’t even make the top ten.

In fact the UK comes in at fourteenth in terms of the “innovation index”. I think this is pretty rum as countries with a tenth of our spend on R&D; still do much better in terms of the Innovation league tables. Now ostensible you’d be right to ask what is the “innovation index” and what does it measure, unsurprisingly it is a measure of the adoption of new technology, and the interaction between the business and science sectors (it includes measures of investment into research institutions and protection of intellectual property rights).

The UK does slightly worse on the “technology readiness index”, coming joint fifteenth. This measures the ability of the economy to adopt new technologies (it includes measures of ICT usage, the regulatory framework with regard to ICT , and the availability of new technology to business).

Now you might say that this is not a fair comparison, in that R&D; is not analogous to Innovation nor the way it is calculated nor presented or that the UK’s investment in R&D; is exhibited in other areas, such as joint work abroad and investment overseas where the end ‘innovation’ benefit is generated and calculated. And you may well be right, but the numbers are pretty definitive and hard to avoid once you’ve unearthed them.

So what is the problem? The majority of people that I speak to about the subject seem rather reticent to view the issue from the top down, because of the magnitude of the problem and effectively addressing it at a ‘macro’ level. Instead the majority of those I spoke with preferred to look at influencing a variety of ‘levers’ and mechanisms that the government might have to improve the discrepancy.

However I’m really not sure this addresses the root cause, even if such a root cause could be, or had been, identified.

From my point of view the mechanism to get money from the Government (and EU who are also big investors into the UK’s R&D; funding, followed by business) is highly complex. The number of agencies that work in the sector is high, along with the mechanism itself (i.e. at the most basic level money is divided-up amongst the research councils and funding bodies, predominately by subject and topic area, before being divided up again amongst the universities, education and research establishments, who deliver those subjects).

Another issue may well be the difference in focus in the UK in terms of R&D; to much of the World, especially compared to the USA and major EU member nations. For instance 15% of US public civil R&D; spending is on development rather than basic or applied research, whilst it is only 2.3% in the UK. It’s likely that this better alignment with business means that the investment actually gets a better return on investment.

Possible inefficiencies and complexity of the system may only be one, albeit a major one, of the issues at hand, as is focus of R&D; effort and the closeness it has with business. The other popular opinion I hear is that Research Council funding needs to much better meet genuine business needs, which suggests that the relationships between universities and enterprise can continue to be improved upon significantly.

Other items that come up are (i) clarity of Government policy and associated packages, (ii) the relative size and funding of the Technology Strategy Board (TSB) and the need to scale up further, (iii) higher availability of business relevant skills and the need to continue to promote STEM skills, (iv) a focus on key technology ‘families’, (v) better engagment of the SME community with Universities and R&D; beyond Tax Credits and supporting and strengthening the Small Business Research Initiative (SBRI), and (vi) better engaging UK Business with 7th Framework Programme (FP7) perhaps by getting the UK to address the discrepancy between large businesses, SMEs and Universities where FP7 funds only up to 50% at enterprises, whilst universities and SMEs may receive 75%, possibly by ‘topping up’ funding to make it more accessible to these large companies. However I feel these seven items are minor in comparison to the three major issues above.

There seem to be a couple of threads running through these issues and I’d say that they are complexity of the funding eco-system possibly leading to inefficiency and one of R&D; investment alignment to business.

Whatever the root cause, be it one of those, or another, or more likely a mixture of some or all of these issues, ‘tweaking’ certain items without a fundamental understanding of the aforementioned root causes will likely continue to have a less dramatic effect then the UK rapidly getting anywhere near the no.4 spot in the international innovation league tables.