The Birmingham City-Region Needs Investment to Drive Innovation

Electroplating (Wright and Elkington, 1840), the first plastics (Parkes, 1856), weather map (Galton, 1861), and pneumatic tyre (Dunlop, 1888) and a wide range of automotive technologies, the first portable vacuum cleaners, the car horn, Cluedo, music sampling and the earliest cameras were all invented here. Universities were behind many of these creations. The microwave oven was developed following the invention of the first microwave power oscillators at the University of Birmingham during the Second World War.

 But who has benefitted from all of this creativity? Equally important, which places have benefitted? Where have the fruits of this inventiveness been reinvested for the economic, cultural and social well-being of local people? These questions reveal some of our weaknesses, as a region and as a nation. We are not as good as we should be at innovation, simply defined as ‘the commercialisation of new ideas’ or the creation of value and wealth from new inventions. Too often the rewards of innovation are reaped elsewhere, in other UK or global city-regions.

 One indication of this is our low level of productivity. The UK lags behind other advanced nations and productivity levels in the West Midlands are about 89% of the national average. This is one clear indicator of low levels of innovation relative to other parts of the UK and international competitor regions. There are also signs that we are getting worse, along with the rest of the country.

 This presents us with two related challenges. First, we need to innovate better, rather than just being good at invention. Do more ‘D’ to complement the ‘R’ in R&D. Second, we need to improve our ability to capture the wealth created from innovation to reinvest in ourselves; to lock more of the value into the region. Currently, too many of the latent commercial opportunities that result from our inventiveness are developed and exploited by others, elsewhere.

 The local industrial strategy aims to tackle both challenges and firms, universities and regional policymakers all have a key role to play. Innovation is driven by firm-level investment in skills, new equipment and new processes. Current political and economic uncertainties are constraining this investment at a time when business leaders need to aggressively develop new competitive advantages. They need to be agile and adaptable to changes in the cost base and the UK domestic market and to develop export capabilities to reduce dependence on this market. Innovation underpins all of these strategic opportunities.

 Firm-level competitiveness also depends on strong regional infrastructure, including transport, housing and digital as well as cultural amenities to attract skilled workers. Local government organisations, including the Combined Authority and Local Enterprise Partnerships need to focus more precisely on the kinds of investments that will create the most significant step-changes in the innovative capabilities of firms in the region, but also reap rewards for the region. In parallel, innovation in public services has the potential to reduce costs and improve the well-being of those dependent on these services.

 Finally, we need to develop better mechanisms for translating good ideas in our universities (the ‘R’) into successful commercial businesses (the ‘D’). We have a number of outstanding science, technology and engineering clusters, including hotspots in life sciences, low-carbon energy, automotive technologies, rail transportation and advanced materials. We need a wider range of innovation pipelines to exploit this scientific creativity, generating new products, services and processes that will improve competitiveness. This will result in more productive, high-value, high-salary jobs and attract more firms and more talent to the region to drive a local growth cycle for the benefit of everyone. But, innovation in the region, for the region, depends on us having the confidence as a region, to invest in growth.

In the UK Innovation Survey firms are defined as innovation active if they have engaged in any of the following: introduced a ‘new or significantly improved product (good or service) or process’ or developing ‘new and significantly improved forms of organisation, business structures or practices, and marketing concepts or strategies’. If they have also invested in ‘internal research and development, training, acquisition of external knowledge or machinery and equipment linked to innovation activities’ they are defined as a ‘broader innovator’. In the latest survey (2017, covering the period 2014-16) 50% of UK businesses were innovation active, with a larger proportion of large firms (63%) than small firms (49%) meeting these criteria. This compares with 53% in the previous survey, with small firms in particular responsible for the decline. https://www.gov.uk/government/statistics/uk-innovation-survey-2017-headline-findings