Yesterday saw the unusual event of a government with a majority of -43 putting forward a Queen’s Speech to kick-off its legislative programme for the next parliament. This has created the possibility that we will see a Prime Minister lose a vote on a Queen’s Speech for the first time since 1924. Given these parliamentary mathematics, a general election taking place over the next few months is extremely likely. Despite Johnson’s inability to win a vote in the House of Commons, significant uncertainty about whether he can agree a Brexit deal with the EU, and a healthy dose of personal scandal, Boris Johnson is (currently) still favourite to be Prime Minister following a general election.
Since becoming the leader of the Conservative Party in July, Johnson has attempted to establish the Conservatives as a ‘post-austerity’ party. The spending taps have been turned on, with the Chancellor Sajid Javid announcing the largest increase in public spending for 15 years in September’s spending review. While many of the spending pledges have focused on the NHS and education, Johnson’s government has signalled its intent to financially support specific industries to help the UK succeed economically outside of the EU. The ambitions set out in the spending review and the Queen’s Speech may be on hold for now, but they offer valuable insights into the industrial strategy and economic priorities of a potential Boris Johnson government.
In September, Boris Johnson made a commitment to ‘supercharge science’ through more liberal immigration rules and increased government funding for R&D. The emphasis on science is believed to be driven by Johnson’s Chief of Staff Dominic Cummings, who is reported to have been behind the government’s new fast-track visa rules to attract leading scientists to the UK. Johnson has also set out ambitious funding plans for the science and technology sector. September’s Spending Review committed the government to ensuring total R&D spending increases from its current level of 1.7 per cent of GDP to 2.4 per cent by 2027, which would mean an extra £6 billion at the current rate of economic growth.
As part of this effort to boost long-term economic growth through increased R&D spending, the government has made a number of specific funding and policy pledges to support the development of UK science and technology. The Queen’s Speech announced the creation of a National Space Council to launch the UK’s Space Strategy, as well as a new funding body based on the United States Advanced Research Projects Agency. The new body, a brainchild of Cummings, will aim to cut bureaucracy and back emerging technological fields. Johnson has also stated the government will provide over £200 million to help deliver the world’s first commercially viable nuclear fusion power plant by 2040.
Johnson’s plans are bold and represent a clear attempt to shine a path towards the promised post-Brexit sunlit uplands, while also compensating for the loss of significant amounts of research funding from the EU. In the wider context of the UK’s long-term economic performance, a focus on science and technology certainly makes sense. The UK’s most successful exports have always been high-value, capital and research-intensive goods, such as the aerospace industry, and any successful industrial strategy will seek to build on this platform.
The details of the R&D funding framework Boris Johnson will seek to introduce are due to be finalised this autumn and will set out the opportunities available for investors focused on the cutting edge of technology. However, to take advantage of the government’s strategy, investors will need to be aware of the wider political trends that will dictate how and where any additional funding is directed. While the government wants to reduce the amount of bureaucracy in how science and technology is funded, the process itself will still be a political one.