Investment in new business start-ups and dedicated support for the nation’s inventors and innovators are vital to improving the UK’s economic outlook and tackling the productivity crisis, according to a new report exploring and comparing levels of innovation across the economy.
The SME Entrepreneurship and Innovation report - published by Virgin Money UK plc in partnership with leading economic consultancy, The Centre for Economics and Business Research (Cebr) – reveals that London and the East of England are the most innovative regions of the UK.
Northern Ireland is identified as the worst performing area for innovation, with the North East second from bottom in the regional rankings.
The gap between southern and central England and the rest of the UK can be partly attributed to levels of investment in Research and Development (R&D). In the East of England, for example, high spending on R&D and strong levels of patenting activity - due mainly to the impact of the University of Cambridge - helped the region to second place overall, with London’s higher rate of business creation (more than twice that of any other region) ensuring the capital topped the index.
Despite several regions achieving low overall Index scores, the research found localised pockets of innovation and success. For example, since 2015 more patents were filed in Edinburgh and Aberdeen than in any other major UK city, while the University of Cardiff’s strong research credentials marked out the Welsh capital as a major driver of innovation.
A strong correlation was found between the regions’ overall scores and their productivity and employment levels. Among the six highest ranked regions in the Index (London, East of England, South East, South West, West Midlands, North West) the average output per hour worked was £33.88, compared to £29.50 among the six lowest ranked regions (Wales, East Midlands, Yorkshire and Humber, Scotland, North East and Northern Ireland).
If those in the bottom half of the Index achieved the same productivity levels of those in the top half, Cebr calculate there would be a £106 billion boost to UK GDP. Additionally, if the six lowest ranked regions had experienced the same rate of employment growth over the past three years as the six highest ranked, employment levels would be 272,000 higher across the UK.
Gavin Opperman, Group Business Director, Virgin Money UK plc said: “Innovation and entrepreneurship are key economic drivers and it is highly encouraging that many regions across the UK are strong performers in these areas. Despite some ongoing uncertainty in the economy, there are reasons to be optimistic and confident about the future.
“It is vital that the UK continues to innovate and grow to retain a competitive advantage. Entrepreneurs are crucial to this and we know that SMEs make up over 99 per cent of UK businesses, so we must support their creation and nurture their growth.
“Every region in the UK has a part to play and we can see from this research that there are areas that will benefit from dedicated support to boost innovation. Partnerships between the public and private sectors, university and business collaborations, and proactive investment into research and development are central to improving the country’s economic outlook and there needs to a concerted effort to promote this at every level.”
Pablo Shah, Senior Economist from Cebr, added: “This research reinforces just how important it is to close the gap between London, the south and central England and other UK regions. There are localised success stories throughout the country and areas where we can see pockets of innovation. However, given the gains that could be unlocked if other regions were to invest more heavily in process and product development, more needs to be done to encourage innovation in all sectors of the economy.”
POSTED IN: Deals