R&D Investment in our city-region: Local potential for future inclusive growth

University of Birmingham/City-REDI

Universities, firms and local authorities need to work more effectively together to attract more R&D funding to support regional growth.

Local investment in research and development (R&D) does not just create jobs for scientists and engineers, it boosts employment across manufacturing and services sectors, attracts other kinds of inward investment and can create innovation clusters that improve regional economic growth.

The West Midlands attracts a significant amount of private sector R&D investment, about £398 per capita according to one study (Jones and Forth, 2020), well above the UK average. But it only receives £83 per head in public R&D funding as one of the regions with the largest shortfall. Londoners receive around £300 per capita in public R&D funding and the ‘golden triangle’ encompassing London, Oxford and Cambridge accounts for 46% of all public and charitable spending on R&D, 31% of business R&D and 21% of the population. If the UK government really committed to ‘levelling up’ the allocation of public R&D funding, the West Midlands region would stand to get more additional funding than any other region, almost £1billion more. But this is unlikely to happen.

Increasing the region’s share of R&D investment, from public and private sources, depends more on the collective action of local stakeholders and our ability to showcase the region’s excellent growth potential. Universities are central, because they receive a large slice of public funding to conduct R&D, some of which supports collaborations and co-investments with local firms to bring new ideas and technologies to market. But universities are also a source of skilled graduates, a key component of innovation and economic growth.

A recent study conducted by City-REDI with the West Midlands Combined Authority (WMCA) maps the inflows of various kinds of public R&D investment into the region, focusing on the UKRI as the main national funding agency for university research.

The analysis found that, although overall public funding was low compared to other regions, the West Midlands does relatively better at securing some kinds of funding, notably Innovate UK and Catapult finance, than other regions (11% of the national pot over 5 years to 2020). Perhaps more significantly the region tends to attract funding in a relatively narrow range of areas, notably ‘manufacturing, materials and mobility’. The Manufacturing Technology Centre (MTC) at Ansty, Warwick Manufacturing Group (WMG) and similar large-scale facilities partly account for this.

This pattern of funding is both a cause and effect of the strong regional legacy as a manufacturing powerhouse. Assets, capabilities and expertise in local firms, large and small, and in universities, underpin this strength. But there is a danger that the region’s strong reputation in this relatively narrow specialism, underlying the West Midlands’ ‘identity’ nationally and internationally, hides other R&D strengths which also have the potential to boost growth in recovery.

We have seen a jump in funding for ‘clean growth and infrastructure’ in the past two years and the region has a strong track record for sustainable energy innovation and some aspects of AI and data analytics, creative industries and the life sciences. We have clusters of innovative assets and expertise which could be the source of new areas of growth, attracting new investment and broadening the industrial demography of the regional economy. But we need to showcase these additional strengths and provide a coherent vision about the region as a prime location for these new areas of growth, alongside historical strengths.

Finally, as well as improving competitiveness and productivity, growth has to be more sustainable and inclusive. R&D funding in and with universities can also target these outcomes. Reduced C02 emissions in line with net-zero targets, can be achieved through new sustainable materials and housing insulation, recycling and energy conservation innovations. Improved healthcare, which reduces NHS costs but also improves the quality of life for those with long-term illnesses, through new technologies, procedures and processes, is also driven by innovation underpinned by R&D funding.

Dedicating R&D funding to these kinds of outcomes and matching investments in new technologies with the development of skills and expertise amongst lower-income communities will create a more even distribution of the benefits of growth across society, less inequality and more opportunities for all.

Professor Simon Collinson
University of Birmingham/City-REDI