Britain’s new innovation czar will have to dig deep to tackle the country’s backlog of patents
Royal Dutch Shell President Sir Andrew Mackenzie has been appointed to sit at the top of UK Research and Innovation, the government body responsible for keeping the country at the forefront of innovation.
In this context, he will have to focus on the enormous challenges facing the UK economy in terms of innovation. These have been magnified by covid-19 and need to be dealt with quickly as the nation charts its course outside the EU.
In fact, there is no shortage of innovation in the UK. One only has to look at the central role he played in the search for a vaccine against the coronavirus to see it. But there is a worrying disparity between such activity and the number of patents filed compared to other countries, as well as a misunderstanding of the potential value of intellectual property, which means that many companies are missing out on it. lucrative growth.
The UK has a sustained history of underperforming business investment in all types of assets, which is reflected in its long-standing productivity gap. As the growth of intangibles has outpaced the growth of physical assets and investments in intellectual property have shown greater resilience to the pandemic according to GovGrant’s independent research, corporate investments in intangible assets – such as R&D and intellectual property – underperform their international counterparts.
In fact, the UK spends just 1.7% of GDP on R&D, compared to 3.3% for Switzerland and 4.3% for South Korea, according to CBI research commissioned by GovGrant. This means that UK companies are less likely to commercialize their ideas than their global counterparts, in part due to a lack of funding and political support.
Intellectual property assets, meanwhile, accounted for between 40% and 50% of all business investment in the United States, Switzerland and the Netherlands in 2019, compared to 36% in the United Kingdom. Switzerland has quadrupled its investment in IP assets over the past 20 years until 2018, while in the UK – which started this period at a lower level – it has only doubled.
To overcome this underinvestment, it is important to understand what obstacles UK businesses face when it comes to commercializing intellectual property.
Independent Innovation Barometers highly rate the UK. the Global innovation index places it in the top 10, for example, thanks to high-level academic research. But the country is falling short when it comes to commercializing ideas, which is in part due to the lack of support in the early stages of the R&D process in the UK compared to its peers.
Although the UK has the Patent Box system which offers a reduction in corporate tax on profits from patented inventions in the UK, critics say it simply rewards existing innovations rather than encouraging them to new.
It is perhaps not surprising, then, that GovGrant’s research found that the concentration of patents in the UK was the lowest of the eight comparator countries except Singapore. The UK has just 18 patent filings per billion dollars of GDP, compared to 113 for South Korea, 78 for Switzerland and 59 for China.
In addition to the questionable lack of the necessary government support to remedy this, UK businesses often lament major obstacles to securing private finance. UK SMEs generally describe the availability of credit as ‘low’ or ‘very low’, which means that business spending on intellectual property and patenting is typically driven by large companies.
In addition, only 9% of European SMEs register intellectual property rights, compared to 40% of large companies, with the UK again lagging behind comparator countries. This suggests that patents, or the lack thereof, are at the root of the UK’s overall poor IP performance, and that concerted and coordinated action is needed.
Obviously obvious gaps
Above all, policymakers need to find ways to support innovation earlier in the R&D lifecycle, especially since it is the early stages of R&D that generate the greatest benefits for the economy at large. .
Evidence indicates that successful economies generally have ecosystems that foster innovation at all stages of the R&D process. A study found that when policies focus on the later stages of the R&D process – as in the UK now – this support is only effective when combined with measures to address the underperformance of firms. first steps.
This means that support is needed at the pre-innovation stage, which provides the environment for companies to develop ideas; at the R&D stage, where ideas are developed; and at the commercialization stage, where new products and services are created.
Investment credits, grants and incubation spaces can support the generation of ideas, while testing facilities, tax credits and super-deductions, support for industry / university collaboration and l Accelerated depreciation of R&D assets can help the R&D stage.
This list is not exhaustive, but indicates the types of action that should be taken.
With post-Brexit Britain to drive its global ambitions, the country must do more to support its businesses in developing an international presence, while encouraging foreign companies to develop their intellectual property in the UK or invest in it. innovative British companies.
The UK had the lowest number of PCT, or international, patent applications of the eight countries we analyzed, with just 1.8 per billion dollars of GDP. This is a problem when you consider that 26% of internationally active SMEs manufacture new products or services in their sector, but the share of high growth companies in the UK compared to all SME is only 7%, or half of that observed in Portugal.
Undoubtedly, the UK does some things well when it comes to innovation, but it is clear that it lags behind rival economies when it comes to commercializing its ideas, as well as the level of corporate d investment when trying to generate them.
So there is a clear role for politics in creating the incentives that allow investment to take place. With innovation being an undisputed driver of productivity, boosting innovation-related investment will lead to a productivity-driven recovery in the UK that will create sustainable economic growth and prosperity.
Luke Hamm is CEO of GovGrant, a specialist provider of intellectual property services and R&D tax breaks to help clients commercialize innovation.