The UK stands to lose £44bn in annual revenue unless it invests in the growth sectors that will turn the UK's economic fortunes around.
NESTA's Attacking the Recession report urges the Government to use the Budget as an opportunity to reshape the economy by investing in high growth sectors.
The sectors - healthcare, green technology and digital media - will produce unprecedented global demand due to the combined effect of long-term consumer trends and government action. Failure to invest aggressively in growth sectors will not only cost an annual £44bn in lost revenue to British firms, it will also harm the UK's global predominance in these sectors, the report says.
The UK has the third largest pharmaceutical industry in the world, and risks dropping to fifth position. The future of the UK's emerging biotechnology sector (currently second in the world) and green technology industries are also threatened, as is the sustainability of its world-beating creative sector (the UK has the largest creative sector in the world relative to GDP).
Commenting on the report, Jonathan Kestenbaum, NESTA's CEO said "Previous industrial interventions in the 1960s and 1970s ignored demand and focused on unsuccessful attempts to pick winning firms rather than new growth areas. The Government must invest in areas where future demand will drive next generation technologies".
In a three pronged approach to tackling the recession the report calls for:
- Government to direct a third of its financial stimulus package towards these growth industries, including the use of preferential loans and easier borrowing terms;
- Urgent action to halt the decline in funding for early-stage high growth businesses;
- Regions to end their attachment to the "London model" of financial services and property development;
NESTA's call for a £1 billion high tech start up fund is being carefully considered by the Government in the run-up to the Budget. NESTA wants the money to be focused at these emerging sectors. Jonathan Kestenbaum continued: "One dangerous aspect of the current crisis is the collapse of equity finance for early-stage growth business. These firms will be the heartbeat of our recovery."
Jon Moulton, founder of venture capital fund Alchemy and angel investor said "The Government should use this Budget to give focussed and increased support to our high-tech start-ups, particularly in those sectors that have strong future demand. One only need look at the stimulus package announced by President Obama to see how far ahead the US is planning in areas such as renewable energy. We have to do the same and extend it to biotech and digital media".
"It will incentivise entrepreneurs to go and find solutions to the challenges we know are coming our way. Doing so will create new jobs and will also bring much needed private sector investment back to the table."
Digital media: Potential annual loss of £6billion. Analysis by DCMS (Department for Culture, Media and Sport) of the UK creative industries was used to model their contribution to UK value added. NESTA then constructed a number of scenarios of the potential growth of each sector, drawing on analysis by PWC of the rates of growth in the online and offline parts of the creative economy. Our figure compares the difference between a scenario where the UK is a leader in the development of digital technologies in the creative industries with one where our growth comes predominantly from traditional media. This GVA figure gives a conservative minimum level for the revenue shortfall to the UK sector from a failure to embrace the future