The CBI Annual Conference 2022: the Prime Minister’s speech

Innovation is often associated with new gadgets – a faster car, or a better smartphone. But innovation isn’t just about new technology. New ideas and creative thinking are also vital. And according to the Prime Minister, the UK really needs a culture and mindset of innovation to achieve the economic growth we need.

The Prime Minister’s three-step plan to fire up the UK’s innovation engine

1. Harness innovation to drive growth

Over the last 50 years, innovation was responsible for around half of the UK’s productivity increases. But the rate of increase has slowed significantly since the financial crisis. This difference explains almost all our productivity gap with the United States. So how do we fire up the innovation engine?

It all starts with government investment in science and research. In the Autumn Statement, the government protected the budget for research and development at £20bn.

But businesses need to play their part too. They need to take advantage of the tax cuts announced in the Autumn Statement and spend the money they’re saving on research and development – for example through R&D tax relief.

That said – CBI analysis of the detail of the 2022 Autumn Statement reveals that there were significant changes announced to the R&D tax credits system.  Specifically, the increase in the Research and Development Expenditure Credit (RDEC) rate for large businesses from 13% to 20%, coupled with substantial cuts to the rate of the SME tax credit scheme which will come into force from April 2023. These reforms will have a significant financial impact on innovative businesses – positive for bigger businesses but largely negative for SMEs.

All too often, firms are keen to invest, but can’t access the finance they need to do so. The government knows this, and is looking to radically reform the regulation of the insurance and pensions sectors, to release funding for exciting, innovative businesses.

2. Embed innovation into our public services

The UK’s ambition for the future of our NHS can’t simply be measured in terms of how much money the government spends on it – quality of care is crucial, and better care requires innovation.

Partly, of course, that means new drugs and technologies. But the UK can go much further. Imagine, for example, robots assisting surgeries. Or doctors being trained with VR headsets. Or drones transporting medicine to patients in remote locations.

Innovation in healthcare must also be in the form of ideas and processes. For example, Community Diagnostic Centres, and elective surgery hubs to expand access to the most common procedures. Patients must be given genuine choice about where and when to access care.

3. Teach people to think innovatively

There can be no innovation unless people have the skills to innovate. Firstly, we need an education system built to ensure young people enter the modern economy equipped with the right knowledge and skills. And we need to end the idea that learning is something you finish at 18 – something the PM believes the government’s Lifetime Skills Guarantee should help to do.

Then, to ensure the UK is truly an island of innovation, we need to ensure we attract the best and brightest from around the world. And the government has committed to creating one of the world’s most attractive visa regimes for entrepreneurs and highly skilled people.

One of the areas we should be most ambitious is in AI – artificial intelligence. AI has the potential to transform every aspect of our lives in the UK, so we can’t allow the world’s top AI talent to be drawn to the USA or China.

So, what does the government ask of business?

The Prime Minister acknowledged what government needs to do, but in his speech he also had a series of asks of businesses:

1. Keep investing in innovation

Times are tough, but the Prime Minister wants businesses to keep investing in R&D.

2. Share your ideas for regulatory reform

The Prime Minister and his government want to hear from businesses themselves about the unique challenges they face with regulation, and the reforms you’d like to see.

3. Tell the government about your specific talent pinch points

Is your business struggling to recruit for particular roles or in particular areas? The government may be able to support with targeted interventions.

4. Spread best practice across the UK

Finally, businesses have a responsibility to continue to share best practice with other businesses across the UK, so we can face into the challenges together.