If we are to compete in the global economy we can only do so on quality and excellence.

There is massive economic change happening all over the world. And this change is happening on a timescale we could hardly imagine even ten years ago. Changes as profound as those of the eighteenth century Industrial Revolution.

China, where I was last week, is now producing 80 per cent of the world’s photocopiers, 60 per cent of digital cameras and 50 per cent of textiles. And at wages that are just five per cent of ours.

It’s share of the global economy was just under 7% in 1980. It is expected to grow to nearly 20% by 2020 - that’s in the space of 40 years!

In fact, China and India together are expected to account for nearly half of global growth over the next 15 years.

Of course, globalisation brings challenges. But it also offers huge opportunities provided we are ready to seize them. And we have a choice.

We can’t compete on low wages or low skills, and nor should we. But we can and must compete on quality and excellence. Particularly on our design and creativity. Something we are good at.

Because if you bring Research and Development into the market place, you produce new products and services that the world wants to buy.

So the challenge is there. And we are well placed to meet it.

That’s why the Review, by Sir George Cox, on Creativity in Business was commissioned and then published last year.

And we are here today to assert the progress we have made in promoting the value of design and creativity to the economy – the key recommendation of the Review.

Responding through Innovation

Innovation and business success have always gone hand in hand.

That is why science and innovation are at the heart of our economic strategy, and at the heart of the Government Manufacturing Strategy. Put in place to help companies respond to the challenge of globalisation and technological advance.

We must seek competitive advantage by exploiting capabilities that our competitors cannot imitate. The UK has distinctive skills in innovation and creativity that we can draw on to produce high value goods and services. And there are good examples. Some of them household names.

Such as James Dyson and his distinctly designed “bagless” vacuum cleaner. His company is one of the fastest growing in Europe with sales of over £3bn worldwide.

Government has taken the lead by encouraging investment in R&D. Creating incentives for companies to invest in their future.

We introduced the R&D Tax Credit to promote investment and stimulate innovation. And it has provided £977 million in support for SMEs, the majority to manufacturers.

We’ve more than doubled the Science Budget to almost £3.5 billion a year – and half the DTI’s budget – for the last nine years. And it will increase in the future. Because it is necessary for the country’s future.

Often it is design that holds the key to turning research and development into commercial products. Taking them from the lab and the design bench to the shop shelf.

For example, the technology behind the I-Pod was well-known (and developed in Edinburgh). But it was the consumer friendly and up to date design that brought a revolution in the market.

Design

Design is often the key to transforming our world-class science into the products and services that the world wants to buy. In the face of increased global competition, creativity can make or break a product particularly in manufacturing where there is the fiercest competition from low-wage economies.

Research shows that companies that take design seriously and integrate it into their business thinking are much less likely to compete on price. Be more innovative. Produce more. Sell more.

And the UK has a dynamic, world-class design industry. Whether it’s a web designer on the Isle of Mull or an interior design firm on the Isle of Wight, there are designers and design companies in all parts of the UK.
The industry employs nearly 900,000 people. And it’s a youthful professional with 62% of them under 40.
The creative industries contribute 8% of the UK economy. Between 1997 and 2003 the sector grew by 6%, twice as fast as rest of economy.

We are a creative nation. We’re good at invention. The list of developments we’ve given the world include: the computer, the TV and the telephone, the CAT scanner and, of course, there’s the UK fashion industry.
We’ve made huge strides in key areas such as photonics, mobile network and broadcast technologies. We’re brilliant at design and we’re outstanding at science.

But they have to be brought together to ensure global competitiveness.

The report George Cox did last year for the Government acknowledged all of this but saw that there were weaknesses. 69% of UK companies were not spending anything on design. Showing that design-led planning was not part of mainstream business thinking.

Yet design is good for the bottom line. Without great design, a great idea will wither on shop shelves instead of flying off them.

Designing Demand

That’s why we are putting in place help for business to boost the power of design through the new “Designing Demand” programme.

The programme, developed by the Design Council will be rolled out across the country over the next two years.

It will provide advice for businesses, teaming them up with design managers to investigate what design can do for them. To improve their products and their profits.

It will provide advice on technology start-ups and explore what new technology can offer business.

Working alongside our Manufacturing Advisory Service, it will help hi-tech ventures to use design to attract investment, reduce risk, refine strategy and speed up their production times.

The programme has been tested and trialled by Yorkshire Forward with more than 700 businesses in South Yorkshire, with impressive results. Companies taking part have recorded increased sales, launched new products and attracted fresh investment.

Such as the established cutlery firm Harrison Fisher which took part in the test run working with the Design Council. In 2002, after taking advice, they carried out a £80,000 redesign of their range. This has led to a projected sales increase of over £800,000 for 2005-6.

We have recently extended the trials to the South East of England and to the West Midlands. The North East and the South West expect to roll out the programme by early next year.

By 2010 we anticipate that over 6,000 UK companies will be using “Designing Demand” to boost their businesses.

I have asked Sir George Cox to consult further with business and industry and report back to me in a year’s time on the uptake of design by businesses in the face of increased globalisation. This reflects the importance the Government place on design and competitiveness within national competitiveness.

Audience business leaders, manufacturers, designers, scientists, artists and academics.

The Review also recommended the formation of a network of Centres of Creativity throughout the UK to give design advice to businesses.

London is the natural home for the centre of this new network because it has an international reputation for design and is home to the Design Museum and nearly half of all the UK’s design houses.

The Centre will be developed in partnership with people from the Arts, Science, Technology and Education fields.

Education Centres of Excellence

The Review also proposed that the next generation of business leaders should have better training.

As the Leitch Report said earlier this week, without increasing our skills, we condemn ourselves to a decline in competitiveness and diminishing economic growth.

And the case for action is compelling and urgent. Becoming a world leader on skills will enable the UK to compete with the best in the world.

That’s why new Education Centres of Excellence are being developed by the Higher Education Funding Council for England.

They are currently looking at six proposals from educational institutes who want to set up multidisciplinary business courses. These will combine management studies and engineering and technology studies in partnership with design an creativity.

We will announce where these courses will be soon.

The Government fully agreed with the recommendations Sir George made on the R&D Tax Credits and the important role the scheme plays in encouraging innovation.

Already firms like Nissan are successfully claiming this tax credit for design activity. The Treasury is currently setting up specialist units in Revenue & Customs to handle all SME R&D tax credit claims to ensure they receive a high quality service.

As a Government we are committed to supporting design and creativity in business. It helps drive economic progress, and for one of the world’s most open trading nations, it is essential that we develop this partnership.

To make better use of our acknowledged world-class science base. Our innovation. Our design. Our creativity.

Because in the rapidly changing global economy, it is those businesses that innovate and create that will succeed.