The UK seems to be at a point of stagnation, with GDP growing at rates below 1% in 2023 and inflation still higher than it should be. Regions such as the North East, which were supposed to be the beneficiaries of leveling up, have been hit hardest. However, there is one area that the UK can still fall back upon – innovation. No matter how scarce money may be, ideas are never in short supply. By instigating profitable start-ups and scaleups, innovation can unlock the growth the UK desperately needs. However, innovation in the UK has been characterised by a scattered approach around location, funding, and scale-up potential. One way to overcome this would be the creation of innovation districts to boost the growth of regional economies.

An innovation district is not a new idea. The precursors to such a district are the numerous science parks dotted all over the UK, which host a wide range of spinouts, start-ups, and small- and medium-sized companies. Despite the presence of such specific infrastructure, a survey conducted among 100 science and technology companies showed that companies faced issues such as a lack of public transport connectivity and a lack of nearby affordable housing for employees. Close to 80% of respondents in that survey also said that their current premises were not suitable to accommodate the future plans of their companies, which could be reasonably related to expansion. Could this be why the UK has still not been able to give rise to the next Google or Amazon?

An innovation district would go well beyond the traditional model of the science park in that it would be a fully self-contained space. With flexible spaces to accommodate companies of varying sizes, it would also bring together academics, existing businesses, investors, and policymakers.

Districts could also be focused on areas that are relevant to their specific regions. For example, one could revive the legacy of manufacturing present in the West Midlands while adapting it to current economic realities by focusing on high-value manufacturing. Giving these districts a unique theme or identity can help them to be modular in nature and therefore be established in almost any part of the country, enabling us to move beyond the traditional Oxford-Cambridge-London arc.

There is already foundational work being undertaken which promotes the development of such districts. In March 2023, £100 million of levelling up funding was awarded through UK Research and Innovation (UKRI) to develop Glasgow, Greater Manchester, and the West Midlands. The aim of this funding was to boost regional growth, and more such funding should be pursued.

If the government is serious about generating regional growth, separate funding grants financed through a range of public-private partnerships should be introduced. But such funding cannot stop at research and development alone; instead, it should focus on supporting infrastructure such as transportation, housing, and related amenities that would make it attractive for talent to move to these places.

More recently, innovation districts have been proposed in Leeds and Manchester, the latter of which is aiming to invest £1.4 billion in this project. Glasgow and Newcastle seem to have a head start, with companies already starting to move into their respective districts.

However, there are certain regulatory obstacles that the government would need to resolve to realise the plans of such districts across the UK. The key one is planning permission, which often has long-winded consultation processes prone to blocking by various parties.

HS2, which was supposed to offer a high-speed rail link between Manchester and London, was the latest casualty of a project being dropped due to ballooning costs, in part due to the extensive planning permissions required. To remedy this, the government could deregulate planning in these districts to remove the arbitrary aspect of planning permission and instead establish a local plan by which buildings should abide to be approved.

The second obstacle is that of attracting external investment. While the levelling up funding provided by UKRI is a start, it will take millions and billions of pounds if UK start-ups must transform into companies that can ultimately rival US science and tech companies. The first step to this would be to further increase tax relief for investors under schemes such as the Seed Enterprise Investment Scheme.

If the government wanted to go a step further, it could adopt some principles seen in Asia’s Special Economic Zones with exemptions on taxes for companies for a time-limited period. Through policy levers, these exemptions can be targeted to promote investment in previously underinvested areas in order to more evenly spread economic growth across the country.

The third obstacle, and perhaps the most important one, is that of talent. Amidst the current immigration rhetoric, where the government is determined to reduce net migration by any means, measures should not deter future founders and talented employees from moving to the UK. Otherwise, investment will simply move to countries which are friendlier to attracting top talent. Equally, there should be more opportunities for British-born talent to thrive. The barriers to entering the start-up world should be lowered by using entrepreneurial education early on and establishing regional accelerators.

In these difficult economic times, the UK cannot afford to rely on state intervention to improve growth forecasts. Only private enterprises can deliver the dynamic growth we need, and unlocking the power of innovation through innovation districts can be a way forward.

This article was written by Akhila K Jayaram. Akhila is a PhD candidate in Biophysics at the University of Cambridge and a contributor with Young Voices UK, writing about science policy, innovation, and growth. She also serves on the committee of Conservative Young Women.