The Budget reminded us how difficult things are for the British economy.

It did not explain why Britain has found it so hard to recover.

Of course, there is a global crisis.Yet others are navigating the storm more swiftly. Whether Germany, the US or China, those with a record of long term investment in R&D have more to offer growing markets.

Unfortunately Britain’s investment in R&D is lower than the OECD and EU averages. It is even well below our own target. This means our core innovation implementation is patchy.

Yet, it is only by encouraging innovation and investment that we will create sustainable growth.

This requires long term commitments - on capital, research and infrastructure. There are positive policies happening, yet the steps forward don’t cover enough ground.

For example, the Budget talked about £1.6 billion for an industrial strategy including the Aerospace Institute.

But this money is over ten years, and £1 billion of it is committed to just one sector. Surely an industrial strategy should include other key export drivers?

We need to look at the structures that support commercial R&D in Britain. Offering businesses incentives to innovate is useless if there is no innovation capability for them to invest in. To grow, you must build on your strengths.

In Britain, we have outstanding academic research, so we should use that as our super-magnet to attract industrial R&D spending. We need to shake up the whole system of research funding so it attracts backing from companies large and small.

Today, the weight of government R&D funding is insufficient to support business innovation. The Technology Strategy Board is an excellent organisation but its budget is too small compared to the research councils, while the Higher Education Innovation Fund is nowhere near enough to shape academic research priorities.

The Small Business Research Innovation Fund must be made to work. Finally, we should establish a ‘One Stop Shop” approach for industrial innovation budgets.

I have long been an advocate for government “demonstrators” and “grand challenges” as a catalyst.

The Government has identified eight priority technology areas – from robotics to advanced materials – and has allocated them £600 million.

We should make attracting industrial innovation funding central to our “grand challenges”.

*Lord Kumar Bhattacharyya is founder of Warwick Manufacturing Group and a Labour peer