Innovation, Creativity, and Entrepreneurship
Knowledge Economy 2020
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 1970-2005
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
50
50
US share of value added
45
45
40
40
35
35
30
30
share of value added
percentage of value added
EU15 share of value added
25
25
20
20
15
15
10
10
Total Manf
Total Manf
KE Services
KE Services
5
5
Other Services
0
0
_2002
4
00
_2
_2004
2
00
_2
_2000
0
00
_2
_1998
8
99
_1
_1996
6
99
_1
_1994
4
99
_1
_1992
2
99
_1
_1990
0
99
_1
_1988
8
98
_1
_1986
6
98
_1
_1984
4
98
_1
_1980
2
98
_1
_1982
0
98
_1
_1978
© The Work Foundation.
8
97
_1
_1976
6
97
_1
_1974
4
97
_1
_1972
2
97
_1
_1970
0
97
_1
Other Services
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 1998-2000; UK, Germany, France, Italy, Spain are 2004; Japan
average of 2000-2005; Netherlands and Canada 2005. Source: Australian Productivity Council 2009.
140%
16%
14.6%
14%
Ratio intangibles\tangibles
Share of GDP
120% 120%
13.5%
120%
13.0%
12.6%
110%
12%
100%
100%
10.5%
10.1%
90%
9.6%
10%
9.3%
90%
80%
9.1%
80%
8%
7.4% 7.3%
60%
60%
6%
40%
40%
4%
30%
20%
2%
0%
0%
ly
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© The Work Foundation.
Rise of the educated and qualified workforce 1970-2005
UK, share of total workforce with degree or equivalent (better educated) and share with just basic schooling. Source: EU KLEMS database.
70
UK Better educated
UK No qualifications
US better educated
60
share of total employment
50
40
30
20
10
0
_1970
_1972
© The Work Foundation.
_1974
_1976
_1978
_1980
_1982
_1984
_1986
_1988
_1990
_1992
_1994
_1996
_1998
_2000
_2002
_2004
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.
Knowledge economy and 1990s recession and recovery
total em ploym ent, EU KLEMs database 1990=100. KE m arket based is telecom s, high tech, business, financial, and cultural
services; KE public based is education and healthcare.
1.25
KE market based
KE public based
Manufacturing
Other Services
1.2
1.15
index 1990=100
1.1
1.05
1
0.95
0.9
0.85
0.8
1990
© The Work Foundation.
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
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.
130
SMEs in knowledge based service industries
SMEs in other service industries
number of employees index 1995=100
120
110
100
90
80
1995
© The Work Foundation.
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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”
Note: all figures 2004, UK is Great Britain.
Source: Neely (2009) The Financial Consequences of Servitization of Manufacturing, AIM Research Working Paper, February 2009. The term “manu-services” comes from the TWF
knowledge economy programme.
70%
60%
59%
53%
49%
50%
46%
40%
40%
38%
31%
29%
30%
28%
26%
27%
25%
24%
23%
21%
21%
21%
21%
20%
15%
14%
12%
10%
1%
0%
Un
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at
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Fi
© The Work Foundation.
Fr
A
Si
Gr
Au
C
De
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M
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In
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Rebalancing the economy – manu-services
Vision 2020
Policy levers
• Manu-services at the heart of the
2020 knowledge economy – with
similar status and prestige of the City
prior to the financial crisis;
• “Manu –services first” general policy
• Strong supporting network of
innovative, technologically advanced
SMEs;
• R&D tax credit
• First choice destination for graduates
from scientific, technological, and
creative backgrounds.
review
• Exchange rate competiveness
• 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).
© The Work Foundation.
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.
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 1998-2008
© 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 2011
- 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
© The Work Foundation.