BRITAIN’s economy is more innovative and competitive than is generally thought, according to two officially commissioned reports to be published this week.

One of the reports, Innovation in Services, will be presented by Alistair Darling, the trade and industry secretary, in one of his last acts in the job before his expected promotion to chancellor when Gordon Brown takes over as prime minister.

The DTI commissioned experts to assess whether Britain’s record on innovation was as bad as traditional statistics have suggested. Those statistics characterised only 6% of the economy as “highly innovative”, largely sectors such as pharmaceuticals with high levels of research and development spending. They also suggested, across a range of sectors, Britain was significantly less innovative than competitors, notably America.

But the DTI study, along with another report from the National Endowment for Science Technology and the Arts (Nesta), suggests there is a high level of “hidden innovation” in these sectors that means they are doing much better than commonly thought.

Among the sectors studied in the two reports were retail banking services, oil production, construction, the entertainment industry and airlines. In oil production, the Nesta report gives the example of nuclear magnetic-resonance measurement and four-dimensional seismic surveys, the use of which is reducing exploration costs and could add 1 billion barrels to the amount of oil produced in the North Sea.

In construction, Nesta found that modern methods of construction were cutting costs and improving efficiency, while the techniques and management used in the construction of Hea-trow’s Terminal Five were highly innovative. “We all know Britain is world-leading in science and research. But in some areas, research and development figures and numbers of patents don’t show everything that is truly innovative,” said Darling.

“Innovation in our services sector has been too often a well-kept secret and we have a chance to change that. For instance, we have the best financial-services sector in the world. And it is innovative, but not in ways we’d traditionally measure.

“We’re looking at these areas – where innovation might have been hidden – and are working closely with industry to see how we can further expand and profit from this ‘hidden’ innovation.”

Jonathan Kestenbaum, chief executive of Nesta, said it was vital that the hidden innovation within British business was discovered and best practice spread.

In construction, modern methods of building were highly innovative, but were currently used in only 4% of new-build properties.

“It’s clear we need to develop policy that supports innovation above and beyond its traditional home in science and technology, and be more sensitive to other contributing factors,” he said.

“This change should be driven not just by government but by business leaders across all UK sectors who must also commit to recognising, measuring and promoting innovation.”

The Nesta report highlights an initiative, Constructing Excellence – a scheme that brought together major companies, clients, different levels of government and researchers to identify, develop and spread innovation – as a good example of the way in which industry leaders and government can collaborate.

The government, it said, should do three things – extend innovation policy beyond its usual bounds of science and technology policy; give every White-hall department a brief to be innovative themselves and to act to stimulate innovation elsewhere in the economy; and establish a senior departmental “home” for innovation closely linked to the department primarily responsible for the productivity of the economy. This is an issue at present, given uncertainty over the future of the DTI.

Kestenbaum said: “Too many people still see innovation as the reserve of scientists and in doing this they overlook our broader capacity for innovation in the UK.

“Without the right kind of support ‘hidden innovation’ will remain just that.”

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