Lord Sainsbury, Minister for Science and Innovation, who was at Coventry University yesterday, to meet innovative companies, explains the challenges for British industry...
Boosting our rate of innovation is going to be the key to our future economic success.
Increasingly, the UK has to compete in the global economy against countries with significantly lower labour costs and well-educated labour forces.
Wages in China are less than five per cent of those in the UK, while hourly labour costs in Korea are just over half UK levels, and it has a virtually identical proportion of graduates in its working population.
At the same time, technology and scientific understanding are changing our world faster than ever before.
Barely a day goes past without another development in ICT, new materials, biotechnology, new fuels and nanotechnology creating a new wave of innovation and new opportunities for entrepreneurial businesses - large and small - to acquire a competitive advantage.
This Government believes that British businesses will only be able to compete in the global economy if we improve our rate of innovation and if more of our resources are moved from low to high added-value areas.
The Midlands is already making exciting progress in this area.
In 2002, West Midlands businesses invested £695 million on business research and development - and the combined annual turnover of the region's universities is now about £1 billion.
Science and technology businesses in the region are growing in key sectors such as medical technologies, environmental technologies and digital media, creating new jobs and competitiveness for the region in new markets.
It is also home to a number of well-known, successful businesses, including JCB, Jaguar/Land Rover, and Marconi who have built their brands on the back of innovation.
Through its high-technology corridors, regional development agency Advantage West Midlands is encouraging businesses to work closely with the science and technology research base of the region - in universities and independent research organisations - to create hotspots of activity where knowledge intensive businesses can grow with all the support they need.
It is a very good start. But every sector of the economy will need to innovate if the Midland is to continue to have a healthy economic future.
The future doesn't just belong to a few high-tech industries. Almost all companies can use science and innovation to create competitive advantage.
Our vision is for the UK to be a key knowledge hub in the global economy.
In July 2004, we set out our Science and Innovation Investment Framework 2004-2014, which detailed how we were going to achieve this - increased public and private sector investment in Research and Development as a percentage of GDP, rising from 1.9 per cent in 2002 to 2.5 per cent by 2014.
The Government is playing its part. By 2006-07, we will have more than doubled the science budget to £3.3 billion from £1.3 billion in 1997-98. And in the future we will be raising it further.
We have introduced R&D tax credits which are worth £ 600 million a year to businesses and by 2006 we will have invested some £350 million in knowledge transfer from British universities to British businesses through schemes such as University Challenge, Science Enterprise Centres and the Higher Education Innovation Fund.
In the Midlands, the Department of Trade and Industry has funded two Science Enterprise Centres, which aim to give science and technology graduates the entrepreneurial skills to launch new businesses based on their ideas.
And Birmingham has recently been made a science city. In parallel with this, AWM has been working in partnership with the region's universities to develop spinout businesses from their research and development base through the Mercia Spinner programme.
Over 45 new knowledgebased businesses have been created under this scheme, attracting more than £5 million of venture capital funding to date. AWM is also supporting programmes to encourage the employment of graduates in small companies (Graduate Advantage) and has been the major sponsor of the Lord Stafford Awards that celebrate excellence in university/business collaborations.
Working with the Mercia Institute in the West Midlands, the Lord Stafford Awards have promoted Bizcom - a business plan competition aimed at encouraging students to create their own businesses when they graduate.
The Government is committed to creating the best possible conditions for companies to innovate because only in this way will businesses be able to compete against lowwage emerging economies.
We have made real progress in taking forward this agenda in recent years.
But there is still much to do if we are to realise our vision of making the UK a key hub in the new global knowledge economy.