Last week, the latest edition of the Global Innovation Index (GII) was published, a report that is not only an annual assessment of innovation trends but also examines the individual performance of 131 economies around the world.

According to the index, the three most innovative nations in the world are Switzerland, Sweden and the United States, with the United Kingdom ranking fourth, an increase of one since last year.

Interestingly, the UK ranks first in the world for the quality of scientific publications and second in the quality of its universities.

More broadly, the report makes a number of notable findings. Whilst innovation is concentrated at the level of science and technology clusters in a small number of high-income economies (with Cambridge and Oxford identified as the leading locations), the innovation performance in many developing economies has also been impressive despite various challenges such as the decline in the funding of innovation.

In fact, there continues to be a shift in the global innovation landscape with countries such as China, Vietnam, India and the Philippines continuing their rise in the innovation rankings over the past few years.

More importantly, the most innovative economies have a balance between the science and the market i.e. they emphasis knowledge creation and exploration whilst investing in the application and exploitation of science and technology.

Of course, the burning question is how Covid-19 has impacted innovation and what will happen as economies recover especially as previous GII reports had been showing that innovation has been flourishing across the World.

For example, the latest data prior to the pandemic shows that expenditure on research and development (R&D) was growing at a faster rate than the global economy.

The funding and exploitation of innovation was also expanding with venture capital investments into technology-based firms as well the use of intellectual property being at their highest levels ever.

With the focus of governments and businesses elsewhere over the last six months, the report rightly asks if innovation will continue to be a priority and, if not, whether funding for research and venture capital which drives both sides of an innovation system will decline?

The good news is that despite everything, there is cause for optimism across a range of industries. In particular, both the digital and health economies have prospered despite the challenges of the Covid-19 pandemic.

Companies such as Amazon, Apple and Google continue to hold large cash reserves and the increased emphasis on digitalisation in all aspects of our lives will certainly lead to greater levels of innovation over the next few years.

Similarly, the pharmaceuticals and biotechnology sector – already the largest spender on research – is likely to continue to experience growth in research expenditure given the massive focus on health solutions to the pandemic.

But what is interesting is that, unexpectedly perhaps, the COVID-19 crisis might well catalyse innovation in many traditional sectors such as tourism, education and retail, all of which will need to change if they are survive over the next few years. More relevantly, with the “new normal” resulting in more remote working for many employees, there will no doubt be innovative solutions developed to organise work at a firm level as well as rebalancing the production of goods from a global to a local solution.

Whilst business is adapting quickly, the question is whether policymakers are also doing their bit to mitigate against the potential negative effects of COVID-19 on innovation?

As we have seen with the unprecedented support offered here in the UK, governments have gone beyond any previous policy interventions to ensure that any potential economic impact of the pandemic is minimised through schemes that support workers, such as the furlough programme, or provide financial support directly to businesses through attractive loan packages such as the Bounceback Loans initiative.

With the emphasis on supporting the economy as a whole, it could be argued that innovation may not be an immediate priority to policymakers and universities – the crucibles of much of the R&D that leads to innovation – will be under particular financial pressures without further support.

Of course, the one exception has been the health sector as politicians commit vast amounts of funding to find a coronavirus vaccine but this could mean that other key areas of research and innovation could suffer a shortage in funding over the next few years.

Despite this, and as the great economist Joseph Schumpeter noted, creative destruction as a result of disruption will always lead to opportunities to do things differently and the development of new industries.

Whilst it could be argued that innovation could decline as a result of the pandemic, it is clear that we have seen solutions in health, remote working, distance education and e-commerce that would not have been considered under normal circumstances and, hopefully, will continue as economies emerge out of recession.