Innovation for all? Clusters and economic growth

By Rachel Smith, Head of Innovation Policy, Department for Science, Innovation, and Technology (DSIT)

As the Head of Innovation Policy at DSIT, I spend a lot of time thinking about how government can nurture and empower local innovation ecosystems to grow. The new guiding mission is to kickstart economic growth, and DSIT’s role is to drive innovations that sustain that growth, through world-class science and R&D. Part of my role is to advise ministers about how we achieve that at the national level, by helping regions and clusters achieve it at theirs.

Nurturing the innovation ecosystem

This isn’t straightforward. Innovation isn’t a linear process. It’s not just about having great science and tech and it’s not just about entrepreneurs and businesses either. The 2021 Innovation Strategy, the 2023 Science and Technology Framework, and this year’s Industrial Strategy Green Paper all try to recognise that boosting innovation – and growth – requires us to work on the whole, UK-wide system. Whether that’s talent and skills, finance, infrastructure or regulation, government has to bring it all together to create holistic policy solutions that don’t just help one industry or region but help them all.

The same applies at the local level. Whatever region you’re looking at, enabling ‘innovation-led growth’ requires thinking about the confluence of a whole range of opportunities. One place might have great access to cheap, renewable energy but lack connections to financial backers that start-ups desperately need; another might have deep pools of capital but lack space to build new facilities or links with advanced manufacturing. The challenge for policymakers is that no two places are the same, so one-size-fits-all solutions are never going to work.

At the same time, government is often criticised for having too many different interventions that add confusion to a complex system. It also faces the inevitable difficulties of there just not being that much systemic, long-term evidence about ‘what works’ to support innovation in a place. This means officials’ advice ends up having to balance the vitally important step of testing new things in a way that preserves value for public money, while eventually taking what I’d describe as informed leaps of faith to meet everyone’s desire for concrete, long-term solutions.

Building on high potential

This is why getting as many different views as possible on what’s worked in the UK and overseas, and what could be extrapolated elsewhere, is so crucial to the policymaking process. It’s why I applied to be a Policy Fellow at The University of Manchester, and why I was so excited to join the roundtable they organised for me in August, where I could benefit from the collective experience of the University’s academic experts.

There was inevitably far more we discussed than I have space for here. But one of the things that struck me was the potential for friction between government’s overarching mission to create economic growth everywhere, and its simultaneous focus on growing clusters of pre-existing strength, whether those are emerging or already mature. 

DSIT recently published a map of all innovation clusters in the UK, which shows clusters up and down the country, in all sorts of sectors. But there clearly aren’t clusters in every single place. Clusters are agglomerations – spatially concentrated groups of firms, research capabilities, skills, and support structures in related industries – and there are more, bigger clusters in and around cities and the functional economic geographies around them. In a difficult financial environment, central and local governments alike have to make really difficult choices about where to focus their spending. And so this pushes them towards backing what’s already good (see the debate about ‘excellence’-focused funding in research), rather than taking the much more high-risk strategy to try to transform something that’s much more nascent. But in doing so, they need to be alive to the risk of inadvertently creating a system where the economic benefits of innovation are felt mainly, if not solely, by the people who live in a place with existing innovation potential, rather than across the breadth of the place. 

Creating connections

One of the ways attendees suggested we can try to address this is by creating more connections within and between regions. Especially in the context of the consultation on ending pan-regional partnerships, it was encouraging to hear about the particular role universities can play. Of course, universities often take a formal role in government’s place-based policies, but they can also catalyse wider conversations. That can be inter-regional (collaboration between the universities of Manchester and Liverpool to grow knowledge transfer) or cross-country (the Manchester-Cambridge university partnership where Manchester benefits from Cambridge’s knowledge, and Cambridge from Manchester’s literal space). They’re also joining forces to seize opportunities to tackle issues around them like financing, as is the case with Northern Gritstone. 

There’s a huge amount of ongoing research into how links like these contribute to innovation and growth at local and national levels, empirical studies that are so important for policy development.  I’m immensely grateful to everyone at the University who’s taken time to share their ongoing work and expertise around these topics, especially Kieron Flanagan and Elvira Uyarra, who have been so generous with sharing their time and their insight into how governments historically and across the world try to accelerate clusters’ growth. A huge thank you also to Policy@Manchester for organising the fellowship and providing support throughout. I look forward to continuing the conversation with them as my team builds on our experience of place-focused programmes like the Innovation Accelerator pilots, Strength in Places Fund and Launchpads to think about what a future, long-term intervention to support local innovation-led growth should look like.  

 

December 2024