King, M; Olakojo, S (2023) NMS business case model: an explanatory note. NPL Report. IEA 15

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Abstract

This note presents the NMS business case model focusing on estimating the costs and benefits associated with funding the programme. All monetary values that feature in the analysis are in real values by adjusting for the effects of inflation on prices using 2022/23 as the base year. Economic direct benefits are derived from jobs created by firms supported by NMS and the wage premium (which tracks changes in workers’ productivity) earned by job-switchers into those businesses. The present value of the total benefits (direct and indirect) was calculated using the 3.5% conventional discount rate from HMT’s Green Book. The social cost includes the public investment made from the BEIS’ R&D budget to resource the NMS (DEL), private direct and indirect cost respectively to those businesses who engage with the NMS and second-round innovators, and private opportunity cost of not allocating those resources to other profitable activities. The net present value (NPV) of the programme (£255.83 million) is found by subtracting the present value of total benefits (£425.19 million) from the social cost (£172 million) to arrive at NPV-to-DEL of approximately 2.7. This shows that NMS programme produces net benefits that are more than double of the value of the public investment of about £94 million. These results, however, only cover quantifiable benefits to the private sector. There exist a host of non-market benefits that didn’t feature in this analysis.

Item Type:	Report/Guide (NPL Report)
NPL Report No.:	IEA 15
Divisions:	Strategy Directorate
Identification number/DOI:	10.47120/npl.IEA15
Last Modified:	21 Aug 2024 08:59
URI:	https://eprintspublications.npl.co.uk/id/eprint/9681