22 June 2021
Government investment in technology: is it enough?

In his 2021 Spring Budget, Rishi Sunak announced the establishment of a Modern Methods of Construction (MMC) Taskforce backed by £10 million of ‘seed funding’. It was, he said, designed “to accelerate the delivery of MMC homes in the UK”. This came alongside a ‘super deduction’ tax break to enable firms to invest in machinery and equipment used in MMC manufacturing.

With ambitious net zero carbon targets to meet, are current government policies truly driving uptake of new technologies?

Demand pull, technology push

A 2009 article published in Research Policy looked at whether policies promoting advances in science and technological development (technology-push) or those promoting changes in market demand (demand-pull) are more effective in accelerating the rate of technological change within society.

Technology-push policies involve investment in R&D, tax breaks for companies who invest in R&D, or support for education and training.

Demand-pull policies attempt to stimulate demand for a certain technology by stimulating societal demand, with the hope that this will prompt companies to invest in filling that need.

From these definitions, it can be seen that the abovementioned measures from the Spring Budget were technology-push orientated; both have been largely praised by the construction sector.  

Which is right?

The article concluded that, among other reasons, demand-pull policies have traditionally not resulted in the desired outcome (i.e., technological development) due to the unpredictable nature of government interest in the topic and uncertainty surrounding the longevity of such policies. It seems risky to heavily invest in a technology when the government may decide to revoke the policy at a later date.

A case in point

As an example, let’s take a look at the government’s well-intentioned but abortive Green Homes Grant, announced in 2020 as part of Boris Johnson’s pledge to ‘build back greener’ after the pandemic. Offering homeowners vouchers to be used on retrofitting their homes with low-carbon technologies, it was a classic demand-pull policy. After just six months, however, the policy was scrapped with only 5,800 energy efficiency measures actually installed.

There were several issues with this the policy, one of which was that it was only ever intended to be a short-term scheme. Therefore, companies weren’t incentivised to invest in the training and accreditations they would need to qualify for the scheme. Secondly, there were simply not enough existing businesses and qualified installers to deliver the promised improvements without said training. The demand-pull policy failed because, although the technology (and the demand) was there, not enough people were trained to deliver it.

The skills gap (again)

Once again, it all comes down to that pesky skills gap that has been plaguing the construction sector for many years. According to a recent research paper by Gavin Killip for the Centre for Research in Energy Demand Solutions, the UK has the potential to deliver much better outcomes with current technology; however, a “low skill equilibrium” is preventing this in practice. The author concludes that the vocational education system is entirely focused on the supply of a narrow set of skills required for a particular profession (e.g. plastering), without any general foundation training in energy efficiency or building performance, nor in the processes and practices involved in construction as a whole. The shift required, he argues, is “from the current low skills equilibrium to a state of much greater professionalism, in which learning is in high demand and high supply.”

Technology push

In conclusion, the answer to our original question is a complex one. Neither technology-push nor demand-pull policies can entirely drive technological change in the UK as it stands, due to the lack of available skilled workers to deliver the technology to the end user. While investment-based technology-push policies are a step in the right direction, it is clear that stronger policies relating to education and training are desperately needed as the 2050 net zero target looms ever closer.