Britain is a factory for ideas applied elsewhere

{"text":[[{"start":null,"text":""}],[{"start":5.76,"text":"Britain excels at producing ideas and advice for others, but it is much less effective at putting them to work at home."}],[{"start":12.56,"text":"Take the country’s comparative advantage in professional services. The UK is the second-largest exporter of business services, advising boardrooms around the world on how to run their organisations. And yet studies show that British companies have weaker management practices than those in peer nations on average, which contributes to the country’s lagging productivity performance."}],[{"start":33.12,"text":"Then there is Britain’s excellence in higher education and research. The UK ranks in the top five worldwide for total publications in high-quality journals across applied, natural and social sciences, according to the Nature Index. But it underwhelms at turning this research into industrial and technological output."}],[{"start":52.08,"text":"For measure, since 2012, 80 per cent of initial public offerings by UK university spinouts have occurred overseas — and between 2012 and 2021, the majority achieving exits through acquisitions were sold to foreign suitors."}],[{"start":null,"text":""}],[{"start":68.4,"text":"Britain’s entrepreneurial activity reflects this dynamic, too. The country does not lack the laboratory breakthroughs to start businesses, ranking only behind the US and China for number of unicorn start-ups. But beyond a few sectors, it often lacks the infrastructure and capital to scale them, fuelling fears that it has become an “incubator economy”."}],[{"start":88.08,"text":"Indeed, research-intensive UK firms have played a foundational role in many of today’s critical technologies. But commercialisation has predominantly taken place abroad. DeepMind, a London-based AI pioneer, was bought by Google in 2014. Cambridge-based semiconductor designer Arm was acquired by Japan’s SoftBank in 2016."}],[{"start":109.2,"text":"There is a similar pattern in the public sector. UK research is cited in policy-related documents twice as frequently as the global average, according to analysis by publishing company Elsevier and trade group Universities UK. However, British governments have not been standard bearers for good policymaking."}],[{"start":126.4,"text":"In this way, Britain has come to resemble a factory for ideas that are mostly capitalised on elsewhere."}],[{"start":132.6,"text":"The speed of the country’s economic transformation is one explanation for this mismatch. The decline of manufacturing and rise of the services and knowledge economy have taken place faster in the UK than in other advanced nations. Strong universities, advantageous geography and the English language positioned the country, and London in particular, to specialise in higher value-added service and quaternary sectors as global trade and industrial supply chains developed."}],[{"start":null,"text":""}],[{"start":160.92,"text":"But this shift has become self-reinforcing. As Britain’s industrial ecosystem — ranging from manufacturing knowhow to component suppliers and testing facilities — has withered, it has become harder to develop research beyond the ideas stage."}],[{"start":175.08,"text":"In turn, talent and capital have gravitated towards higher returns in knowledge-intensive sectors. This has contributed to the dearth of practical and technical skillsets across UK business, industry and government. Compared to the OECD average, the country produces a significantly lower proportion of graduates in degrees such as engineering, manufacturing and construction."}],[{"start":197.4,"text":"The policy environment hasn’t helped either. High energy costs and restrictive planning regulations have made scaling business ideas at home less attractive. Last month, Chris McDonald, UK science minister, lamented that a lack of “industrial laboratory space” was pushing the country’s innovators abroad. Uncertainty, high property taxes and steep labour costs have also undermined the ability of domestic companies to invest and boost productivity."}],[{"start":223.8,"text":"A lack of capital as companies grow is another factor. Seed-stage companies attract close to three-quarters of their funding at home, but less than one-third at the scale-up stage, according to data from the UK government’s council for science and technology. This, in part, reflects risk aversion and fragmented funding pots among domestic institutional investors."}],[{"start":null,"text":""}],[{"start":243.6,"text":"The UK’s knowledge sector is a boon for the rest of the world and a strength the country should reinforce. But if too many barriers remain between the ideas and the company, factory or infrastructure they could create, other nations will continue to capture the upsides of British intellect."}],[{"start":259.78,"text":"Send your thoughts in the comments, to freelunch@ft.com or via X @tejparikh90."}],[{"start":260.28,"text":"Food for thought"}],[{"start":265.76,"text":"Beyond easing traffic jams, a recent study of New York City’s congestion pricing system finds that the policy has improved emergency medical service response times."}],[{"start":276.06,"text":"Free Lunch on Sunday is edited by Harvey Nriapia"}],[{"start":null,"text":""}],[{"start":282.81,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788762111_3514.mp3"}