Innovation for a strong and sustainable recovery

In the recovery from COVID-19, innovation and diffusion will be key to addressing several structural challenges facing the UK economy. These include improving the UK’s longstanding poor productivity performance, addressing large-scale disparities across and within regions, and re-orientating the economy to reach net zero emissions of greenhouse gases by 2050.

This paper analyses patent data to identify areas where the UK has comparative advantage in innovation, and where the economic returns in the UK might be large, highlighting technologies that are relevant for two key societal challenges: achieving net-zero greenhouse gas emissions and dealing with the pandemic. The authors conclude with policy implications.

Summary recommendations

The Government’s ‘Ten Point Plan for a Green Industrial Revolution’ provides a clear signal for future investment and growth. This needs accelerating and complementing with consistent and long-term innovation and industrial policy to facilitate transition to sustainable business models, investments and related innovation.

To help achieve a step change in the scale of R&D investment and to direct innovation towards decarbonisation and other key societal challenges, UK policymakers should:

• Enhance incentives for investment in innovation, in particular in areas aligned with key societal missions such as net-zero.
• Develop locally appropriate innovation policy informed by analysis of innovative strength and the likely spatial impacts of support for R&D and diffusion.
• Re-emphasise and strengthen the UK’s Industrial Strategy, bringing innovation policy together with the broader, complementary policies required for a sustainable and inclusive recovery and providing clear and long-term direction to the private sector.
• Maintain international openness and competitiveness of the UK’s innovation system through close alignment and continued collaboration with the EU’s innovation system.

This paper is published as part of the Centre for Economic Performance’s COVID-19 Analysis Series.