The UK Government has pledged to go “further and faster” on economic growth, but how successful will the plans be in reality? Benjamin Craig, Associate Director of R&D Incentives at Ayming UK, discusses why the Chancellor’s growth agenda must be matched with a clear and long-term innovation strategy
Blink, and you missed it. In a major blow to the UK Government, the Bank of England has slashed its forecast for economic growth in half, adding that the Chancellor’s latest plans for growth will, in fact, add nothing to gross domestic product.
This comes at an awkward time for the new Labour Government, which has relentlessly tried to position itself as the Party of growth. In a recent speech at Siemens Healthineers in Oxfordshire, the Chancellor said the word 51 times. The message is clear, but what’s stopping rhetoric from turning into reality?
At face value, many of the Chancellor’s recently announced measures are smart and sensible. The widely anticipated pension fund reforms, for example, will allow the Government to invest trapped surplus funds into businesses and infrastructure, unlocking an estimated £80 billion worth of investment.
Reforms like this are welcome and can help create a more dynamic economy. However, unlocking capital is only the first step. The real question is how investment will be deployed and whether the Government plans to support growth and innovation in the long run.
Small and medium-sized enterprises (SMEs) are the lifeblood of the UK economy, but many are struggling to absorb the impact of greater tax burdens like the National Insurance hike. According to the latest Begbies Traynor Red Flag Alert, the proportion of UK companies facing critical financial distress has climbed by 50% since October. Similarly, Ayming’s own research found that most SMEs now prioritise survival over innovation – a worrying trend for the future of our economy.
For reforms to be impactful, we need a long-term strategy to drive sustainable innovation and growth.
Invest in skills and high-growth industries
A crucial aspect of the UK Government’s success is its ability to channel funds into areas that can enhance productivity. The problem that many businesses face, however, is the difficulty of finding workers with the necessary technical expertise to drive innovation and operational efficiency. Investing in STEM education and vocational training now will ensure a steady pipeline of talent in the coming years, equipping businesses with the skills needed to continually thrive in a rapidly evolving economic landscape.
Beyond skills development, we must strategically invest in high-growth industries where the UK has a strong competitive advantage. The country cannot lead in every sector, nor should it waste resources trying. Instead, the Government must focus on industries where our universities, research institutions, and businesses already excel, such as high-value manufacturing, green technology, and health and wellbeing. Investing in these areas where we have world-class capabilities will be key to boosting job creation, enhancing our global competitiveness, and driving the Chancellor’s much-desired economic growth.
Creating an environment conducive to innovation that targets the economy
Investment alone isn’t enough to kickstart growth; it’s about creating an environment conducive to innovation that targets the right areas of our economy. A clear focus on innovation will enable businesses to produce goods and services more efficiently, achieve greater output, and become more profitable.
An innovative business environment also has the effect of attracting more foreign inward investment, skilled staff, and entrepreneurs, helping to fuel growth and competitiveness in the long run. This means engaging directly with SMEs to help them better access R&D funding, tap into skills and talent, and adapt to rapid changes in technology.
Growth must become more than a buzzword. Measures like the Chancellor’s pension fund reforms could be a game-changer for the UK economy—if executed collaboratively with businesses to truly understand their pain points and what they need to scale. After years of economic uncertainty, this is a unique opportunity for the Government to reassess its approach to innovation.
