Stimulate Private Investment to Sustain Critical Security and Intelligence R&D

In a complex threat environment and ongoing budgetary pressures, a new RUSI report recommends increasing market confidence to attract new private investment in security and intelligence R&D.     

• Government spending on research and development in security and defence has fallen faster than in any other area of government in recent years. 
• The Security Service and intelligence agencies face an ever-more diverse range of technically competent adversaries, yet have less control than ever over the development of new technologies.
• Government needs to attract more private investors to the security and intelligence sector by increasing market confidence.
• The government and the intelligence community should articulate requirements and procurement policy more effectively in order to improve investor confidence and help industry.

Ahead of a Strategic Defence and Security Review later this year the RUSI report explores the UK’s R&D roadmap to 2020 and identifies a series of recommendations for the British government and stakeholders in the security and intelligence community.

The report, entitled ‘The Future of Research and Development in the UK’s Security and Intelligence Sector’, is written by Charlie Edwards, Director of the National Security and Resilience Studies group at RUSI and Calum Jeffray, Research Fellow in RUSI’s National Security and Resilience Studies group. The RUSI report suggests that there is ‘a widespread belief that current levels of funding for R&D activities in this sector are insufficient…This is problematic in the area of national security where operational priorities often necessitate innovation that is fast and responsive to the needs of the security and intelligence agencies without disproportionate financial burden.’

While R&D spending is the most-cited metric of innovation in an economy, overall public and private sector investment on R&D in the UK has been in steady decline since the 1980s. Charlie Edwards said: ‘Investment in R&D in the UK has continued to fall over the last thirty years. In 2012 (most recent figures) R&D amounted to 1.72 per cent of UK GDP which was lower than the 2.06 per cent average for the EU, and far short of government’s target to have increased UK R&D investment to 2.5 per cent of GDP by 2014.’

The British government’s national security strategy identifies technology as a key driver of many of threats facing the United Kingdom. It emphasises that, in the future, both state and non-state actors will have access to a greater range of technology which can be used both to protect and attack national security. Recent government reports describe threats that emanate from both sophisticated military weapons, and greater innovative and ingenious application of readily available civil technologies. A Defence White Paper suggested ‘adversaries can more easily buy high-technology products on the open market, [which] potentially reduces our operational advantages.’

The report’s authors conducted a number of interviews across government and industry as part of the research. Calum Jeffray said: ‘Coupled with declining R&D spend, many we spoke to were equally concerned by a commensurate decline in the ability of the security and intelligence agencies to keep pace with the rapid development of new technologies, driven by consumer demand and exploited by increasingly sophisticated adversaries.’The UK has a flourishing private technology sector, yet many start-up companies and small and medium-sized enterprises continue to find it difficult to secure appropriate funding and support from investors in order to develop their concepts into capabilities.

While the government and its agencies have recently taken notable steps to increase their level of transparency and open up the market to a broader range of young and technically adept SMEs, there remain significant obstacles to linking government requirements for national security with innovation and emerging capabilities within the private sector.

R&D in security and intelligence capabilities suffers from a number of market failures, including the inherent tension between a fast-moving technology market and a slow-moving government bureaucracy, and the secret and sensitive nature of the work of the security and intelligence agencies. As a result, industry is often unable to communicate with its end-users, ascertain their capabilities and requirements or focus its R&D efforts appropriately. To help address these significant challenges in sustaining technological advantage, the RUSI report explores ways to improve engagement between government, private investors and industry operating in this sector, in order to ensure that R&D investment is strengthened, priority capabilities are understood by investors and critical capabilities are sustained. The report identifies a series of recommendations including:

• Government needs to attract private investors to this sector by increasing market confidence: The absence of private investors hinders the sector’s ability to sustain high levels of R&D funding within the ecosystem.
• Articulate requirements and make-buy policy more effectively: Clearer indications from the government on technology policy, strategy and procurement would improve investor confidence and help industry to better allocate their R&D resources in priority areas.
• Investment for R&D in security and intelligence should be increased: there was widespread consensus among both public- and private-sector stakeholders that current levels were insufficient to ensure the development of long-term, disruptive technology.
• Break down the culture of secrecy: This culture of secrecy is particularly problematic for investors, who are unable to gauge the market requirements and the ultimate return on their investments. 
• Open up the market and be flexible enough to make tactical investments: SMEs are deterred by the challenges of operating a market that is dominated by a small number of large companies and which they struggle to penetrate.

Download report at: https://www.rusi.org/publications/occasionalpapers/ref:O552EA5CB4F0F3/ 

Notes to Editors

1. ‘The Future of Research and Development in the UK’s Security and Intelligence Sector’ is a new RUSI Occasional Paper published by the Royal United Services Institute for Defence and Security Studies. It can be accessed here https://www.rusi.org/publications/occasionalpapers/ref:O552EA5CB4F0F3/
2. RUSI is an independent think-tank for defence and security. RUSI is a unique institution; founded in 1831 by the Duke of Wellington, it embodies nearly two centuries of forward thinking, free discussion and careful reflection on defence and security matters.
3. Please contact : Saqeb Mueen smueen@rusi.org