Traditionally, research, development and training are among the first things to go in hard times. Squeezed by falling sales, businesses look to consolidate by relying on mature technology.
This pays in the short term but provides little hope of competing with new technologies, often developed overseas, when good times return. And government investment in basic research, which translates only indirectly into cash in the long term, is another soft touch.
Why does this matter? Because if we really are serious about a more diverse, energy-efficient and low-carbon economic recovery then we must stop expediently cutting back the wrong shoots when we look to make savings.
And even where the investment means continued borrowing in the short term, we need to recognise that there is nothing wrong with that if it transforms the economy and provides the future jobs so desperately needed.
The history of UK R&D is littered with poor decisions on spending and cuts. Take for example the loss of wave energy research in the 1980s that put us back more than two decades. Or the ditching of energy efficiency research amid the dash-for-gas.
Scroll forward to today and the coalition government’s emergency budget announced cuts in support for electric vehicle research. It also annoyed nuclear advocates by reneging on an £80m loan to Sheffield Forgemasters for developing capacity to build new reactors.
The upshot of all these poor decisions is that we are more dependent than ever on the banking sector as industry leaks overseas. Despite this, the department for business, innovation and skills reports that one of the few R&D areas to grow significantly in 2008, along with pharmaceuticals and software, was, you guessed it, the banking sector!
And it’s not as if we were doing that well in the boom either. The UK ranked only 19th in terms of the proportion of GDP spent on R&D even in 2004. Germany was spending almost twice that proportion, and now has the carbon efficient technologies to show for it. Meanwhile, UK direct government spending on energy R&D has been flat-lining until recently, and overall R&D fell again in 2007 – before the recession even began.
Another big concern for low-carbon innovators is the Coalition government’s decision to abolish Regional Development Agencies, now confirmed. The populist view is that these are bureaucratic, undemocratic quangos, despite reasonably favourable assessments from the National Audit Office.
But while far from perfect, many work well in promoting low carbon innovation at regional level, including in economic areas crucial to the previous government’s Low Carbon Transition Plan.
They act as a kind of one-stop-shop, bringing together experience from government agencies, universities and businesses – especially small but rapidly growing clusters of specialised businesses that are likely to fuel future growth.
For example, South West RDA, which faces the chop, provides core funding and support for RegenSW which promotes the Wave Hub project. And in the high-carbon intensity industrial regions of Yorkshire, Yorkshire Forward is facilitating the future development of a regional carbon capture and storage network and piloting carbon trading for the Carbon Reduction Commitment. Even much vaunted support for electric vehicles by One North East faces an uncertain future after 2011.
A whole raft of innovation advisory services are funded by or at least through the RDA network. It is far from clear how many of these activities could function at still more local level without duplication and loss of strategic overview.
And there is certainly a regional problem for RDAs and the devolved administrations to tackle – 94% of business R&D investment goes to England, nearly half to the Eastern and South Eastern regions. The government has said it will continue support in some form for R&D in the regions, but uncertainty and funding cuts sends the wrong message to investors.
It may be there are other ways of boosting innovation, and these should be pursued too. But it seems pointless to rip up regional networks of programmes and contacts that exist and could be improved, just when we need the means of achieving a low-carbon economy – and the new jobs to mop up the coming public sector shakeout.