View from City Road: Policy needs development

Michael Heseltine admits that British companies do not spend enough on innovation. But, sadly, the President of the Board of Trade does not plan to do much about it.

He has correctly identified a central weakness in the UK's competitive position and backed publication of the Research & Development Scoreboard (published exclusively on pages 28 and 29). But this does more to highlight the problem than solve it.

Mr Heseltine believes publication of the Scoreboard helps to increase R&D spending through education, comparison and persuasion. Ultimately, he wants to see a change in the culture of British industry, something that he admits will take time and be hard to measure.

This is all very well, so far as it goes. The danger is that while he talks of worthy concepts such as partnership, dialogue and education, British companies face being knocked out of the running by overseas rivals.

The Scoreboard provides evidence that this is happening already. Last year, ICI, the UK's largest corporate spender on R&D, slipped from 35th to 47th place in the international rankings and the number of UK companies in the top 100 slipped from 10 to seven.

Actions as well as words are required. But these have been few and far between and some have have not been well thought out. Take the shift of resources from big to small companies announced by the Department of Trade and Industry following publication of the recent White Paper on science and engineering.

The problem here is that there is precious little evidence to show that the pounds 125m industrial innovation budget is better spent on corporate tiddlers than on giants. Indeed, the Scoreboard reveals that R&D spending is highly concentrated among big companies - the top 10 spenders account for approaching two thirds of the total - and this means they have far more experience in bringing products to market than do their smaller rivals. It looks as if this shift of resources has more to do with Tory dogma than well-researched policy.

Nor should proper measures to encourage R&D fall foul of the Treasury. What is needed is not so much an increase in resources, as a switch within a substantial budget. Now the Cold War is over, there is no longer a case for such a hefty defence component. Whitehall's money would be better spent encouraging the civil products and processes that can earn Britain's future prosperity.