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The taxpayer tech dividend: R&D grants provide £43bn economic boost, study finds

Taxpayer support for high-tech innovation benefits the economy by significantly boosting jobs, turnover and productivity among the companies backed, new research has found.

Over a 13-year period, research and development grants spurred growth worth £43 billion to the British economy - more than five times the £8 billionn invested - and created around 150,000 jobs.

The study - the largest and most comprehensive of its kind - was carried out by the Enterprise Research Centre, which is funded by the Economic and Social Research Council. ERC also found big variations in the types of firms most likely to benefit from grants, as well as regional differences in the strength of the effects.

Scientific and technological innovation is seen by the Government as a key plank of its new industrial strategy.

But until now, our understanding of the effects of grants - largely distributed by research councils such as Innovate UK and the Engineering and Physical Sciences Research Council (EPSRC) and totalling some £1.7 billion per year - has been limited.  

The Enterprise Research Centre, which is co-funded by ESRC, studied £8bn worth of grants to nearly 15,000 firms over a 13-year period (2004-2016). This research shows the effects can be transformative for recipients.

The main findings show:

  • Across all recipients, employment grew by 6% in the short term and 23% in the longer term (after six years), compared to non-recipient firms.
  • Taken together, grant-receiving firms created an estimated 150,000 new jobs, many in highly-skilled, well-paid sectors such as biotechnology, medical equipment, engineering, life sciences and high-tech manufacturing.
  • Across all recipients, turnover grew by 6% in the short term, and 28% in the longer term, compared to non-recipient firms.
  • Productivity was unaffected in the short term, but grew 6% compared to non-recipient firms in the longer term.

The full research report, Assessing the business performance effects of engagement with publicly funded science, co-authored by Stephen Roper, Enrico Vanino and Bettina Becker, can be accessed from the Enterprise Research Centre website. The findings will be presented at the ERC Annual State of Small Business Britain Conference, 2017 - 'Driving Innovation and Growth', on 7 September.

Blog: Using new evidence on innovation

Max Nathan looks at what new evidence means for public policy, including the industrial strategy, and the UK response to the existing evidence on innovation. Particularly reassuring for UK policymakers is the extent to which the UK evidence matches with OECD evidence, despite concerns that this would not be the case.


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