2016-11-03

Introduction

Thank you – and good morning, it’s a great pleasure to open day 2 of Innovate 2016.

The last time I spoke at this conference – Innovate 2014, as it was then – I was the minister for science and cities.
In my new role I’m delighted that science, innovation and cities policy are also part of the brief, but this time with business, energy and the low carbon economy.

And, of course, industrial strategy.

A focus not just for the wide ranging responsibilities of my department.

But for economic policy as a whole.

Last week there was some excellent news for the UK economy.
GDP figures that put Britain at the top of the G7 growth league.

And make no mistake we cannot afford to do anything less.
No nation can.

We need to make the most of our strengths – and face up to our weaknesses.
The strengths are not in doubt.

As Team GB proved in Rio this summer, this country can still amaze the world.

Not least in cycling – a sporting and technological triumph – based here in Manchester at the National Cycling Centre.

Sport, technology, literature, science, theatre, engineering, music, architecture, film, manufacturing, finance:
innovation oozes out of every pore of this country.

A lot was made last month of the fact that all 6 of the American Nobel Prize winners were immigrants.
Rather less attention was paid to the fact that 5 of the 6 immigrants came from Britain.

Now, I don’t want to claim some sort of British exceptionalism:

But there must be something in the water.

A well-spring of innovation that could and should irrigate the whole of the UK economy.

And this is where we must face up to our challenges.

For all of the progress we have made as a nation; it is still too uneven.

For instance we have some of the most productive companies in the world, but, compared to Germany, a disproportionate number of low productivity businesses.

We can boast the richest area in northern Europe – central London – but also 9 of the 10 poorest.

These aren’t remote provinces, without hope of further development; most are centred on great cities – places that could and should be more productive than they are.

There are those who claim these disparities in economic performance are inevitable.

That London is so large and dominant that the rest of the country is cast into shadow.

What rubbish.

Innovation and growth is not, and has never been, a zero sum game.

To have a global city on your doorstep is a plus not a minus.

Furthermore, there was nothing inevitable about London’s success story.

For most of the 20th century our capital city actually underperformed the national average.

It is only from the 1980s that this was turned around so dramatically.

Now we also see revivals in cities like Manchester, Birmingham and Liverpool.

Before 2010, private sector job creation in the south greatly outstripped the cities of the North and the Midlands.

By a factor of 10 to 1.

But since 2010, the job creation gap has all but disappeared.

A Northern Powerhouse and a Midlands Engine? You’d better believe it.

I can assure you that this government is fully committed to both – and to extending these opportunities nationwide through devolution deals, combined authorities and Local Enterprise Partnerships.

Industrial strategy

The potential of every part of this country is beyond doubt.

It just needs to be unleashed.

Fully mobilised through an upgrade in our underlying economic connections:

A world class science and research base.

Leading edge industrial sectors.

A skilled and productive workforce.

Smart, sustainable infrastructure.

Affordable, attractive housing.

Strong, self-confident communities.

High environmental standards.

World-respected corporate governance.

Upgrading each of these is what our industrial strategy will achieve.

Because all are indispensable.

However, if there is a consistent theme, it is this:

The connection between innovation and place.

Now I realise I’m addressing an innovation conference in Manchester, so I would say that, wouldn’t I?

But it’s true.

Scientific knowledge may be universal, but its development is local.

Universities are a good example.

In an age of instant communication, of online access to research, scholars still come from afar to study side by side.

It is, quite literally, a medieval way of doing things, but as relevant as ever.

I’m proud to see so many British universities among the most highly-regarded in the world.
But we can do better still.

We have centres of research excellence throughout this country.

The N8 partnership of northern universities, of which the University of Manchester is one, shows the way.

We should aspire to a golden octagon – glittering every bit as brightly as what people have called the golden
triangle, further south.

And supporting the high tech clusters in the North, Midlands and West as well as those in the South.

That will require investment – both private and public.

But first we need to know where the best investment opportunities are.

Innovation audits

What is needed in each place is different, and our strategy must reflect that.

Today (3 November 2016), I’m delighted to announce the publication of the first wave of science and innovation audits.

Instead of conducting the exercise from on high in Whitehall, we have empowered local businesses, universities, LEPs and local authorities to do the job.

Coming together as self-selected consortia, we asked them to map out local strengths in research, innovation and infrastructure, above all those with the potential for global competitive advantage.

The Greater Manchester and East Cheshire consortium was among the first wave.

You will not be surprised to learn that they identified core strengths in health innovation and advanced materials.

Specific examples of international excellence include the new £235 million Sir Henry Royce Institute for Materials
Research and Innovation; and Alderley Park in East Cheshire, home to over 150 bioscience companies.

Identified opportunities for rapid growth include digital, with a focus on cyber security and exploiting Greater Manchester’s rapidly expanding tech sector.

I want to thank the consortium for their work – along with the other 4 consortia covering South West England and South East Wales; Edinburgh and the Lothians City region; Sheffield City region and Lancashire; and the Midlands Engine.

Not only have they produced extensive, detailed and useful reports – they have proven that the locally-directed, collaborative approach is the right way forward.

Through this approach we will identify and validate the best opportunities across the UK, providing a comprehensive evidence base to inform future investment bids and decisions.

Building on this successful first wave we will announce shortly who will be participating in the second wave and a further opportunity to participate in a third wave of these local collaborations identifying the most exciting innovation opportunities across the country.

UKRI and Innovate UK

The Global Innovation Index is a ranking of 140 countries.

It is, if you like, the Olympics of innovation quality.

And just like the Olympics we came second, beaten only by America.

Innovation quality is scored on the basis of university rankings, academic citations and patents per unit of GDP.

Crucially, where we fall behind America and Germany and Japan is on patents.

Yet again, this is evidence that we don’t always translate research excellence into commercial success.

It’s an old story and it’s time to write a new one.

The evidence is clear:

Innovation helps businesses to grow and the UK’s reputation for research excellence attracts investment from international firms.

Moreover, firms that persistently invest in R&D have higher productivity, better value added per employee and more exports.

Research and innovation aren’t just clearly linked to growth and productivity, they have to be linked to one another.

The creation of UK Research and Innovation, currently working through the legislative process, is part of our strategy to ensure Britain remains a world-leader in both research and innovation.

UKRI will provide a single and stronger voice for UK researchers and innovators, and a more agile approach to supporting the best interdisciplinary and cross-cutting research.

By bringing together the 9 research and innovation funding bodies under one roof we will be in better position to grasp the synergies that other countries achieve, but that we sometimes let go.

We know Innovate UK has a different mission and culture from the research bodies and both I and the interim chair – Sir John Kingman – are absolutely clear that this will be protected.

But we can do even better. By including Innovate UK in UKRI we are ensuring business-led innovation and researcher-led science are well placed to work together effectively, helping to translate our world-class knowledge base into world-beating business.

Indeed, one of the biggest opportunities in creating UKRI is to actively enhance British innovation, and I believe that is how it should be judged.

Innovation will be critical to deliver affordable, clean, and secure energy.

Today, I am delighted to launch the first stage of an ambitious nuclear innovation programme, which will revive the UK’s nuclear expertise and position the UK as a global leader in innovative nuclear technologies.

This first step will commit around £20 million to support innovation across 5 major areas over the next 2 years.

With nuclear power having already played an important role in the UK’s energy mix for over 50 years we have impressive expertise in this country. But we need to expand our capabilities and ambitions to make sure that as more international opportunities arise, British firms and specialists are best placed to advise on everything from next-generation design, to enhanced fuel safety or fuel recycling.

British research has a formidable reputation on the global stage, and combined with our strength in advanced manufacturing, nuclear innovation can deliver real benefits as the world moves toward a low-carbon future.

From local to global

In this speech, I’ve emphasised the importance of place in supporting innovation.

But our local strategy is also a global one.

Indeed, there’s no contradiction between the 2 outlooks.

Localisation enables specialisation – and that can find you a market anywhere in the world.

It’s not for nothing that this conference is jointly organised by Innovate UK and the Department for International Trade.

Increasing UK-based firms’ productivity and competitiveness is key to meeting our 2020 export targets.
Investment into R&D increases UK capability and productivity; productive companies are more likely to export; and through exporting firms become more productive, creating a virtuous productivity/export cycle.

It’s not hard to understand why.

For an advanced economy, the ultimate guarantee of competitiveness is not to pile it high and sell it cheap, but to do what no one else can do better – or do at all.

For instance, the reason why Britain excels in financial services is not because London is the cheapest city in the world, but because nowhere else has a greater concentration of specialist knowledge.

By definition, to innovate is to acquire knowledge that no one else possesses – and thereby the potential to produce goods and services that no one else can offer.

International trade and investment isn’t just about competition.

It also opens up opportunities for cooperation.

An important way of furthering these relationships is to coordinate public investment in skills, infrastructure and, of course, innovation with both domestic and international private sector investment.

I’ve already mentioned our nuclear innovation programme and a further example is the work of the Advanced Propulsion Centre.

Today I can announce the 2 latest grants from this £1 billion, 10 year programme.

Firstly, £1.7 million for Ashwoods, an SME specialising in the electrification of light goods and off-highway vehicles.

This will help support the development of a more efficient integrated drive system and help anchor Ashwoods’ technology in the global transmission supply chain.

The second grant is for the Technology Developer Accelerator Programme, which is designed to support SMEs in the early stages of developing new products for the automotive sector.

In the wake of Brexit we must become more not less international in our outlook.

Openness is very much a theme of our approach to industrial strategy.

A strategy that will be developed in full partnership with the innovators, investors and job creators of the British economy.

All of you here today have made your own contributions to UK innovation.

And I very much hope that you contribute your wisdom and experience to the strategy too.

But for now, thank you for listening.

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