In an economic emergency, increased R&D spending is a bold vote of confidence in Britain’s innovators

14 Dec 2020

It is a fortnight since the Chancellor announced the Spending Review for the year ahead. At a time of national crisis and in the teeth of an “economic emergency”, there are tough choices to be made.

Unemployment is anticipated to peak at 7.4%, the economy will be at least 3% smaller by 2025 than before the pandemic – the aftermath of Covid-19 and the hardship it has produced will be felt for many years to come. 

The government has chosen to pursue a large-scale programme of increased infrastructure and R&D investment to resurrect the economy, generate the jobs to replace those lost, re-balance the regional disparities that are so entrenched in the UK, and deliver its net zero ambitions and ‘Green Industrial Revolution’ by 2050.

The R&D and infrastructure ambitions are very welcome, especially when public finances are under such pressure. We must now translate ambition into action. Given the urgent economic situation, we must not waste a day in kick-starting the growth and resilience of start-ups and SMEs with well targeted funding to drive future innovation and job-creation. 

Traditional government R&D grant funding tends to freeze these untested small but high-potential businesses out of programmes in favour of large well-established, well-connected incumbents. The £15bn of R&D and infrastructure spending is a sizable investment of public money. The government (and no doubt the public) will want to make sure that money goes far and benefits as many of Britain’s innovative businesses as possible. I believe that the government can achieve these aims by directing £200 million across five years to fund challenge prizes that deliver the game-changing innovation that the National Infrastructure Strategy is demanding. 

Challenge prizes provide seed funding and support to a broad and diverse cohort of innovators, and pay out a large reward, only after a solution is proven to work, no matter which company or where they are located in the country. This de-risks investment in start-ups and small businesses, and unlocks access to a swathe of innovators that the UK currently does not fully benefit from. 

Noticeably absent from the Spending Review was the previous commitment in the spring Budget to increase annual R&D spending to £22bn a year by 2024/25. After the worst economic contraction in three centuries, it’s perfectly understandable that this will be subject to review.

I firmly believe that sustained bold investment in British R&D and innovation will help us regain our footing and encourage the government to stay the course and stick to their plans.

Challenge prizes could be harnessed by the UK in space to launch an orbital solar power plant, to find new treatments for rare diseases using genomic data and accurately and effectively track urban air pollution. They can be used to reduce the emissions of our vital maritime sector and advance the development of negative emissions technology to remove the excess greenhouse gasses that are wrecking the climate.

A programme of well-funded, high-impact challenge prizes has huge potential for the growth of the UK space, maritime and genomic medicine sector, as well as delivering the massive innovation leaps necessary for achieving the government’s Net Zero mission.

Nesta Challenges published the Great Innovation Challenge in July 2020, exploring the capacity of recent high-profile international challenge prizes to tap into a rich seam of innovators that are too often overlooked by traditional R&D funding mechanisms. Since then it has been developing a series of prize briefs with partners in the British innovation sector, highlighting opportunities for prizes to deliver game-changing innovations to solve the challenges of the decades ahead, including:

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