A new report from the Northern Powerhouse Partnership shines a spotlight on the North of England’s innovation ecosystem, exploring its role in driving productivity and unlocking future economic potential. The report is co-authored by Professor Kieran Fernandes, Executive Dean of Durham Business School. Here he delves into how the region can harness its innovation strengths to fuel long-term growth and prosperity.
The North has always been a region of innovation, from the railways and steelworks that powered the first industrial revolution to today's fourth industrial revolution, where we’re delivering global breakthroughs in health innovation, advanced manufacturing, clean energy, and digital technologies.
Yet while the assets and ambition are clear, the economic returns are too often constrained by underinvestment and structural barriers.
That’s the challenge at the heart of Innovation for Impact, our new report with the Northern Powerhouse Partnership. It was launched in Parliament to mark the 60th anniversary of Durham University Business School, a fitting occasion to reflect on the role innovation can play in driving long-term, regionally balanced economic growth.
The report sets out the most comprehensive mapping yet of the North’s innovation ecosystem, from research excellence and industrial clusters to technology diffusion and the often-overlooked importance of business adoption.
The findings are compelling. Despite the North being home to world-class institutions and innovation assets, public R&D funding remains heavily concentrated in London, Oxford and Cambridge.
Places like the North East, Yorkshire and the Humber continue to receive far less innovation investment per head, with limited levers to change this locally. This imbalance persists even where the potential for high impact is greatest.
Take, for example, the North’s strengths in net zero innovation. The region is home to nationally significant energy clusters including Drax (pictured below) in North Yorkshire, one of Europe’s largest decarbonisation projects.
We also see cutting-edge work in green hydrogen, offshore wind and carbon capture, industries vital to the UK’s energy security and climate goals. Yet the scale of support needed to translate this innovation into widespread economic benefit is still lacking.
The same applies across other sectors. Greater Manchester and West Yorkshire have growing strengths in digital, AI and advanced materials. The North East leads in electrification and sustainable transport. Across Cheshire, Merseyside and Tees Valley, we’re seeing a surge in health and life sciences, underpinned by the NHS and a strong university base.
These aren’t just hotspots for research, they are places where innovation can drive inclusive growth, creating skilled jobs and supporting supply chains.
Our modelling looked at what could be achieved if investment in innovation, including support for adoption, infrastructure, skills and translational R&D, were distributed in a way that reflects the North’s industrial strengths and untapped potential. The answer? Up to £206 billion in additional economic output over the next decade.
This isn’t a zero-sum game. At a time when the UK is grappling with sluggish growth and one of the widest regional productivity gaps in the developed world, investing in northern innovation will allow us to tap into the underused potential that this report shows exists here, rather than taking from one place to give to another.
Supporting scale-ups in South Yorkshire or boosting SME adoption in the North East doesn’t come at the expense of progress in the Golden Triangle. It grows the pie nationally by unlocking capacity, spreading growth, and creating new markets that benefit the whole economy.
To make that happen, we need a bold but pragmatic policy response. Our report calls for reforms to business rates to unlock lab space for growing firms, and for ambitious long-term regional innovation deals to provide consistency and direction.
We also need to restore funding for local SME adoption and capacity-building, particularly through a revamped Local Growth Fund, and scale up successful initiatives like Made Smarter to reach every part of the North.
This call to action builds on a long tradition. Durham University Business School was founded in 1965 during the first wave of modern industrial strategy under Harold Wilson’s government.
It was created in partnership with the state, driven by the belief that business education and research could power regional development and national renewal. That mission remains as relevant today as it was six decades ago.
Now is the time to rekindle that ambition. If we are serious about closing the productivity gap, we must put innovation at the heart of an economic strategy for the North and ensure that city regions have the tools to turn their potential into progress. Not just in the lab, but on the ground, where ideas become jobs, prosperity, and long-term impact.
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