Key Economic Argument

Point 1. Investment in science and engineering skills and research gives broad and historically proven economic returns. Such investment, if made now, could drive the growth needed to secure a strong economic recovery:

  • By showing a strong and sustained commitment to science and engineering, the UK can attract and retain excellent and internationally mobile scientists and engineers and the industries that seek to employ them, which will give immediate gains through tax revenues and employment.
  • The UK’s economic climate, funding, and the reputations of its universities, all help to attract more and more overseas students – 250,000 in 2008/09, who contributed about £5bn to the UK economy. (BIS SET statistics)
  • 180,000 people gain from working in R&D. (BIS SET statistics)

Longer-term:

  • Multifactor productivity (MFP) reflects the extent to which an economy can derive GDP growth from a certain level of labour and capital.  A 2004 OECD analysis estimated that a 1% increase in business R&D increases MFP by 0.13% and a 1% increase in public R&D increases MFP by 0.17%.
  • A 2008 medical research report estimated that every £1 spent on public or charitably funded research gave a return of 30p a year in perpetuity from direct or indirect GDP gains, on top of the direct gains of the research.
  • Corporate investment in R&D brings a return of around 50% to the public. This compares to a private return of around 20% captured by investors themselves.
  • Finland and Korea responded to their economic crises in the 1990s by investing heavily in R&D while severely constraining public spending; these investments helped their strong regrowth in knowledge-based economies. The UK has not yet seized the opportunity, still available, to invest in science and engineering to accelerate the recovery

Point 2. The Government is keen to boost confidence in the UK by making decisive cuts. But cuts in the science and engineering sectors would have the opposite effect, damaging investor confidence, reducing levels of investment and impacting the quality of higher education:

  • Modest cuts in support could have a big impact on the economy. Public support leverages private investment, so cuts can be magnified.
  • Science in the UK already operates as a ‘Big Society, with public investment and private enterprise strongly interacting. Cuts to academia  or innovation support could have unforseen and damaging consequences due to the links between them.
  • Investment in science cannot simply be turned off and then turned back on again a few years later. As former Science Minister Lord Waldegrave said, “If we cut science now, just as the benefits of nearly twenty years of consistent policy are really beginning to bear fruit, we will seriously damage our economic prospects.”
  • The total budget for R&D is an important signal to investors and researchers. If the UK is not perceived to support R&D then they move to more favourable countries, as UK business leaders have previously warned. The UK currently receives a very high proportion of its R&D funds from foreign owned firms (17%), which may be even more responsive to market conditions than UK-based companies.
  • If research projects are cut short, this wastes money that has already been spent and risks mothballing projects such as the Diamond Light Source and Isis.
  • Reducing investment in R&D would reduce the potential for economic growth. There will be fewer breakthroughs, and less development of them into beneficial products. The general public will notice falling productivity, given the level of media interest in and coverage of scientific and medical discoveries, as well as new (including green) technologies.
  • The UK’s reputation in science and engineering has already been damaged (e.g. physics funding crisis, and cuts already announced). We can recover with prompt action, but if not done soon, it will be hard to regain our previously enviable reputation.
  • Reduced funding for higher education teaching and research has already resulted in job losses. As the teaching of high-cost science and engineering courses is already under-resourced, and some universities have accepted unfunded places, further financial pressure is likely to lead to departmental closures.
  • Universities increasingly bolster their finances by recruiting overseas students, who bring with them high levels of fees. If the UK becomes less desirable, then this income will fall.

Longer-term dangers:

  • If the capacity and quality of the higher education system is reduced, a generation of less-skilled graduates is the result.  Without enough people trained in science, technology, engineering and maths, it will be difficult to retain industrial investment in the UK.
  • If university funding is lowered, universities will scale back on renewing and upgrading their teaching and research facilities, reducing the value of the skills of new graduates.

Point 3. UK science and engineering is already extremely efficient:

Nearly 30% of the UK’s Gross Domestic Product (GDP) is produced by sectors intensive in science, technology, engineering and mathematics. Yet the UK government spends a smaller proportion of its GDP on research than any other nation in the G7, bar Italy. We rank 14th in the OECD under the same metric – just behind Belgium and Canada, and on par with the EU27 average. Despite this, the UK:

  • Leads the world in a huge range of scientific disciplines.
  • Produces 12% of global citations with around 1% of the population.
  • Is home to 29 of the world’s top 200 universities, including three of the top ten (THE rankings).

This is possible through UK science being very efficient:

  • The UK is 3rd in the world in terms of citations per researcher
  • The UK is ranked first in the G8 for scientific papers produced as a proportion of GDP
  • We overwhelmingly focus on world-class research. About 90% of research funds (£980m out of £1095m) from HEFCE go to 3* or 4* research (defined as ‘internationally excellent’ and ‘world-leading’, respectively).
  • Research council grants are extremely competitive. For instance, success rates of 19% at the MRC (down from 21% in 2008-9) and 22% at the BBSRC mean that thousands of proposals are rejected. In 2003, the overall grant success rate across research councils was around 40% – it has now fallen to around 20% (in 2008).

While efficiency savings in R&D still need to be made, these savings must be reinvested in science and engineering.

Point 4. The Government needs to develop a long-term and stable policy framework to make the UK a country where people and companies want to do science and engineering, enabling researchers to innovate, and encouraging private investment:

  • Analysis of over 100 UK case studies by the Russell Group found that it took an average of 9 years from an initial discovery to produce a license or other measurable impact (e.g., significant commercial investment in a spin-out company). Given that the research cycle can have a decades-long timeframe, the public environment in which research plans are made needs to be of the same order.
  • Private investments, research programmes and careers are reliant on a long-term, coherent, and credible policy framework. Instability will reduce the ability of these individuals to do their most high-impact and valuable work.
  • A lack of long-term investment framework will compound
  • In spring 2010, the most important organisations in UK science urged the government to develop long-term plans. The Royal Society’s Scientific Century report urged the government to outline spending plans over a 15-year period to provide “a clear, long-term framework within which to plan, build, and compete globally”.
  • The House of Lords Science & Technology Committee recommended that the government adopt and articulate a long-term vision for UK Research, and the Council for Science and Technology talked of a vision for the future in which the UK research base is successful and globally competitive 20 years out. They urged that, “the Government needs to develop consistent, focused long-term industrial strategies”.

Point 5. Investment in science must be increased, or at the very least maintained,  it order for the UK to remain internationally competitive

  • The UK invested 1.8% of its GDP in R&D in 2007. This is short of the UK’s own target of 2.5%, and further behind the EU target of 3%.8. The new Government needs to commit to the challenging goal of at least 2.5% of GDP to be spent on R&D from all sources by 2014.
  • The UK has an excellent track record, with four of the world’s top 30 research universities. But this excellence is threatened by rapidly increasing investment overseas, particularly in countries such as Brazil, Russia, India and China, that could grow into research giants. Indeed, the UK’s share of scientific publications fell over the last decade, while China’s quadrupled.
  • Other world leaders have set out the case for investing in science and engineering.
  • The advantages that the UK built upon – including an early scientific and industrial base, the English language, and openness to international investors and workers – will not sustain our excellence without a strong new commitment to the future.

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