Finance · 7 September 2017

Grant funding in high-tech research and development provides £43bn economic boost

Biotechnology and life science firms are more likely to receive R&D grants
Biotechnology and life science firms are more likely to receive R&D grants

Government-backed grants for research and development (R&D) in high-tech innovation has stimulated growth worth £43bn to the UK economy in the last 13 years, according to comprehensive new analysis of the outcomes of grant funding.

A study carried out by the Enterprise Research Centre, of more than £8bn worth of high-tech R&D grants issued between 2004 and 2016, found that this financial support contributed more than five times to the economy the total amount invested, and created over 150,000 new jobs.

However, the research found large variations in the types of UK company most likely to benefit from government grants.

Firms in high-skill and highly-paid sectors, such as biotechnology, engineering, high-tech manufacturing and life sciences were, for example, more likely to receive financial support in the form of a grant than companies in lower-skilled industries.

What’s out there for tech startups seeking grant funding?

The study also revealed regional differences in the strength and impact on growth of grant funding. Although firms in almost all parts of the country received grants, recipients in some regions fared less well than others in terms of commercial performance.

In the South West of England, Wales and Northern Ireland, for instance, neither employment nor turnover growth was significantly different to non-recipient firms compared with those that have been awarded grant funding.

It is hoped the research will help inform policy makers how best to target future R&D funding. Director of the Enterprise Research Centre, Stephen Roper, said: “The greatest impact seems to be on smaller manufacturing businesses, which see the biggest boost to growth and productivity, helping them to catch up with more established firms.

“There’s also an uneven distribution of impact across the UK which we need to understand to ensure all regions can participate in a broad-based industrial strategy that harnesses regional strengths effectively.”

Job creation from grant funding proved strongest in London, where 31 per cent of recipient firms hired new staff. This was closely followed by the South East and North West of England, where job creation grew by 25 per cent respectively, as a result of R&D funding.

The turnover of grant-funded businesses grew the most in London (35 per cent), Yorkshire (31 per cent) and in Scotland (29 per cent), whereas the largest grant investments occurred in the so-called Golden Triangle area between London, Cambridge and Oxford, as well as knowledge industry “clusters” in the South East of England, West Midlands and East Scotland.

As part of her Industrial Strategy, Theresa May has thrown her weight behind plans to issue an extra £2bn in R&D funding by the end of the current parliament, taking total government spending on R&D grants to $4.7bn. The prime minister has previously outlined her ambition to turn Britain into “the global go-to place for scientists, innovators and tech investors”.

Roper added: “It’s well established that innovation grants can help with commercialising new technology by providing firms with additional financial slack to undertake riskier research activity.

“This is the largest study yet of the impact public funding for science and innovation has on growth at the firm level. It shows very clearly that R&D grants have a positive impact, creating jobs and fueling growth in the high-tech, high value-added sectors that the UK must encourage to remain competitive on the world stage.”

Why my time-consuming experience with grant funding has put me off applying again

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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