Innovation, Creativity, and Entrepreneurship Knowledge Economy 2020

© The Work Foundation. Knowledge economy vision 2020 What should a balanced and sustainable Knowledge Economy look like by 2020 and how do we get there? Need for an informed public debate on where the new jobs, sources of growth and innovation are going to come from; Challenge to the new government – if this analysis is shared, how far will it inform the post Election decisions on priorities and future directions?

© The Work Foundation. Growth of knowledge based service industries in Europe and US Note: OECD definition – knowledge based services includes financial and business services, communications, health and education services. Other services includes distribution, hospitality, public administration, other services. Source: TWF estimates from EU KLEMS database

© The Work Foundation. Business investment in intangible knowledge based assets across the OECD Note: all figures share of market sector GDP. Finland excludes financial sector, US excludes farming. US average of ; UK, Germany, France, Italy, Spain are 2004; Japan average of ; Netherlands and Canada Source: Australian Productivity Council 2009.

© The Work Foundation. Rise of the educated and qualified workforce UK, share of total workforce with degree or equivalent (better educated) and share with just basic schooling. Source: EU KLEMS database.

© The Work Foundation. Rebalancing the economy – new sources of growth and jobs Drivers of growth and jobs over past decade no longer available… - financial services - property boom - consumer debt - public sector Must be replaced by big growth areas the UK has some advantage in… - manu-services (integration of high value services with manufacturing) - low carbon economy - creative and cultural industries - high tech and intermediary services

© The Work Foundation.

Entrepreneurship in the knowledge economy Note: all figures employees, excluding health employment. Knowledge service industries are OECD definition and include business, high tech, and financial services. Other sectors include transport, retailing, hospitality and other services delivered by non-public organisations. SMEs defined as all with less than 250 employees.

© The Work Foundation. Rebalancing the economy – new means of intervention Conventional policy levers – tax breaks, public spending – heavily constrained; Low cost solutions must be developed (eg insights from behavioural economics); Even greater use of frameworks, regulation, and legal changes (eg privacy, security and consumer protection issues to encourage greater use and acceptance of the new); Institution building where necessary (eg knowledge transfer, big scale long term private investment in digital and physical infrastructure); Focus scarce resources on fewer key strategic institutions to have biggest impact in critical areas.

© The Work Foundation. Share of manufacturing firms that could be described as “manu services” N ote: all figures 2004, UK is Great Britain. Source: Neely (2009) The Financial Consequences of Servitization of Manufacturing, AIM Research Working Paper, February The term “manu-services” comes from the TWF knowledge economy programme.

© The Work Foundation. Rebalancing the economy – manu-services Vision 2020 Manu-services at the heart of the 2020 knowledge economy – with similar status and prestige of the City prior to the financial crisis; Strong supporting network of innovative, technologically advanced SMEs; First choice destination for graduates from scientific, technological, and creative backgrounds. Policy levers “ Manu –services first” general policy review Exchange rate competiveness R&D tax credit Industrial policy support Innovation policy Competition policy Enterprise policy

© The Work Foundation. Rebalancing the economy – low carbon economy Vision 2020 UK world leader in developing domestic and export markets for low carbon goods and services; - implementation of existing technologies (electric cars, more efficient buildings, nuclear power, renewables, better aero engines); - advanced manufacturing at cutting edge of technological development; - low carbon services (eg design, consultancy, low carbon trading). Potential policy levers Spending Review audit of public support activities to rationalise and focus on key activities and key institutions; Single contact point for business advice and support funded out of the rationalisation suggested above; Single low carbon economy fund, linked to the long term ambitions of the Climate Change Act; Strong strategic commitment to creating a low carbon associated infrastructure – transport, telecommunications, housing, energy supply; Creation of regulatory and planning frameworks that give private investors confidence to invest long term.

© The Work Foundation. Making the most of the public sector Public procurement to encourage innovation and acceptance of the new; Development of the medical and healthcare science and technology base in partnership with commercial sector; The exploitation of the intangible asset base - such as design - to deliver better services at lower cost; The role of educational and creative and cultural institutions such as museums, art galleries, libraries, and design and art schools, and the BBC; The pioneering of low cost initiatives through users and communities aimed at changing public and private behaviours and outcomes; Meeting the regeneration challenge through developing the knowledge based economy at city and city region level; Extending global reach as part of the drive to increase knowledge service exports.

© The Work Foundation. Public sector net job creation in the regions

© The Work Foundation. Knowledge Economy 2020 Publish the report on April 9 Submit and follow up with the new government Develop the analysis and proposals in more detail Further Submission to next full Spending Review in Autumn 2010 Further reports between now and April low carbon economy - creative and cultural sector in the innovation eco-system - high tech manufacturing and services - public services: higher education and the NHS - skills and the knowledge economy - SMEs and cities