NPP report: £6bn Innovation Boost Could Unlock £206bn for the North

The Northern Powerhouse Partnership (NPP) is calling for a tilt in government innovation funding, urging it to back a new £6 billion-a-year boost to northern innovation within their industrial strategy.

Backed by new economic modelling, it shows that targeted public and private R&D investment into the North’s most promising sectors and clusters would help close the productivity gap with the South and unlock up to £206 billion in additional economic output over the next decade.

The proposals form the centrepiece of Innovation For Impact, a major new report published today by NPP in collaboration with Durham University Business School in the House of Commons. The report provides the most comprehensive assessment to date of the North’s innovation ecosystem, mapping cluster strengths across 71 subsectors and evaluating each region’s performance on skills, technology, infrastructure and absorptive capacity.

The report follows the Spending Review announcement earlier this month of limited devolved funding local leaders as part of the wider £22.5bn a year in R&D funding by 2029/30 available through national institutions which could allow for the gap between North and South as the last government to be closed. At the heart of the proposal is a fundamental rebalancing of the UK’s innovation economy to mirror how government has long backed the ‘Golden Triangle’ and doing the same for regions with the capacity to scale innovation and commercialise it as well as up productivity of the wider stock of businesses.

Key findings include:

• R&D spending per capita in the North East is less than half the England average and just a third of that in the East of England.

• Sectors such as clean energy, health, digital and advanced manufacturing are clustered in the North but underperforming in productivity due to lack of support for adoption and scale.
• A pan-Northern innovation strategy focused on diffusion, infrastructure and skills could add £72–£206 billion in GVA over 10 years, even after subtracting business-as-usual growth.

Policy Recommendations

NPP’s overall recommendation is that government innovation funding can deliver productivity growth across the whole Northern economy, particularly the emerging and established clusters in city regions. This means focusing not just on firms producing innovation, but also on increasing the ability of businesses across the economy to adopt and absorb it-especially in areas where growth can be supercharged by wider investment in skills and connectivity through projects like Northern Powerhouse Rail.

The report makes five specific recommendations:

1. Business rates on lab space, particularly to support start-ups and scale-ups, should be reduced in the review of this tax
2. The award of £30 million each in the Spending Review to build on the Greater Manchester innovation accelerator and extend to South Yorkshire, West Yorkshire, Liverpool City Region and North East is welcome. However, across these part devolved funds we need greater levels of ambition, and a total value of £3bn a year across the North to include translational research and diffusion.
3. The Local Growth Fund, which replaces the Shared Prosperity Fund, is to be targeted at the North and Midlands and will help correct the decline in funding since we left the European Union for local adoption by businesses of innovations (specifically SMEs). We strongly support backing regions with agglomeration which in the case of the North includes all those with and awaiting devolution because as demonstrated by the NPIER the sum of the North is greater than its individual parts.
4. Support the catapults as pan-Northern as well as national institutions, to align their funding with the work they would do through innovation deals for northern SMEs and wider place specific activity.
5. Build on the Made Smarter programme to design a series of pan Northern programmes focused on adoption and diffusion explicitly.

Jessica Bowles, Vice Chair of NPP and Director of Strategy at Bruntwood, said: “This report shows what those of us working in northern cities have long recognised: our economy is rich in innovation potential – from healthtech and clean energy to advanced manufacturing and digital. The foundations are already in place, but what’s been missing is a strategic and long-term commitment from government to help these clusters scale and thrive.

“Unlocking that potential means backing the North not only with R&D funding but also with investment in infrastructure and skills that support diffusion and adoption. We know that innovation doesn’t happen in isolation – it’s embedded in our places, our businesses and our universities. Devolved, place-based investment and greater control for local leaders are essential if we want to turn that embedded strength into meaningful economic growth.

“Our report shows the North has the assets to deliver, but it needs the tools to do the job.”

Professor Kieran Fernandes, Executive Dean of Durham University Business School, said:
“This report is a critical step in reshaping the UK’s approach to innovation and productivity. The findings show that targeted investment in the North could unlock both regional and national growth, addressing the persistent dilemma of regional versus national priorities. The economic evidence is clear: rebalancing innovation spending is not just a question of fairness, but a national economic imperative.”

Tom Bridges, UK Government and Innovation Leader at Arup, said:
“As an employee-owned firm of more than 18,000 members worldwide – including teams across eight offices in the North of England – Arup is proud to be a major investor in innovation and R&D. We do this through deep partnerships with universities, clients, industry bodies, and a growing network of start-ups and scale-ups.”

“The North of England is uniquely positioned to help the UK realise its ambition of becoming a global science and innovation superpower. With world-class universities, R&D-intensive businesses, thriving start-up ecosystems, established innovation districts, and the momentum of Freeports and Investment Zones, the region has all the ingredients for success.

“To unlock this potential, we need greater R&D investment in the North, the expansion of Innovation Accelerators, and targeted support from government and Mayoral Combined Authorities — to back innovators and build the labs and facilities they need to grow.”

See full report here:

View the report’s data in more detail through the interactive charts below or in full screen here following this link: https://public.flourish.studio/story/3154346/