UK technology innovation is driven by the so-called Silicon Fen, Glen and Thames Valley areas but the government needs to stump up more cash for the SMEs and start-ups that come out of these regions.
The UK has several "clusters of excellence" but the government needs to adopt a US-based approach to set out clear budgets and guidelines for SMEs and start-ups, according to a report.
In the US, 23 percent of prime federal government contracts and 40 percent of subcontracts must go to SMEs. It has been estimated that, if the UK government were to adopt a similar strategy, it would inject almost £8bn into the UK's SMEs.
These geographical clusters of innovation are important to develop the UK's IT industry and are focused around locations such as Cambridge's Silicon Fen, Scotland's Silicon Glen and the Thames Valley region, according to the Developing the Future 2007 report.
By 2010, more than half of the UK's gross domestic product will be generated by people who create "something from nothing" — or the so-called "knowledge economy", which includes sectors such as business services, financial services and IT, the report reveals.
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The report included views from 20 organisations from academia, government and industry on how globalisation, innovation and skills are driving the UK economy. It was commissioned by the British Computer Society, City University, Intellect and Microsoft.
Tom Wills-Sandford, deputy director general of Intellect, said there is currently a transatlantic innovation divide and the UK does not spawn start-ups and fast-growth new companies in the same way as Silicon Valley.
Wills-Sandford said that, if the UK government supported innovation — as the US government does — SMEs would benefit and the public sector would be repaid with the kind of technology needed to support a 21st-century democracy.
The private sector invests £127bn per year on intangible assets — such as scientific and non-scientific R&D (£38.1bn) and software development (£19bn) — which equals the amount the private sector also invests on tangible assets, such as property.
Mark O'Neill, chief information officer of the Department for Culture, Media and Sport, said the IT industry has the technology to deliver applications the public sector needs but it is "doubtless sitting on someone's desk in Silicon Valley" and not being brought to market.
O'Neill added that the private and public sectors should work together to use IT to transform the way government bodies communicate with the public.
