Lord Sainsbury made a series of recommendations in the report entitled: 'The race to the top - a review of Government's Science and Innovation policies', all of which are designed to "help position the UK as a key knowledge economy at the forefront of 21st century innovation" .
The UK Government has accepted the review and will invest £1bn in business innovation and technology development over the next three years through the newly established technology strategy board (TSB).
The report states that 'the best way for the UK to compete, in an era of globalisation, is to move to high-value goods, services and industries' and highlights the need for an effective science and innovation system to achieve the objective.
The importance of a knowledge-based economy in the UK is hard to overstate, with manufacturing dropping form 32 per cent of GDP (gross domestic product) in 1970 to 16 per cent in 2003.
Worryingly, the report states that the UK fares poorly in the two most commonly used measures of innovation performance: the quantity of industrial research and the volume of patenting.
"The challenge is not to hide behind trade barriers or engage in a 'race to the bottom' but to invest in the future in areas such as knowledge generation, innovation, education, re-training, and technological infrastructure," said Lord Sainsbury.
"Twenty-five years ago it would not have been possible to imagine the UK as a global leader in science and innovation in the world economy, but today it looks like an attainable goal.
We can be one of the winners in 'the race to the top' but only if we run fast".
Two key recommendations were the development of a national "proof-of-concept fund" and more flexible 'knowledge transfer programmes' (KTPs) to help firms to gain funding and personnel as they grow.
In addition, Lord Sainsbury recommended that the Small Business Research Innovation (SBRI) scheme should be reformed to adopt the principles used by the US's successful Small Business Innovation Research (SBIR) scheme.
The Government's acceptance of Lord Sainsbury's recommendations and news of increased investment has been welcomed by the pharmaceutical industry and laboratory sectors.
"The bioscience industry would like to commend Lord Sainsbury for his insightful analysis of the issues experienced by our sector," said Aisling Burnand, CEO of the BioIndustry Association (BIA).
"We welcome his recognition of the difficulties faced by early-stage companies in attracting equity finance.
We are particularly pleased to see the inclusion of the BIA's recommendations for targeted measures such as a national proof-of-concept scheme and reforms to the SBRI."
Professor David Goodall, founder and chief scientific officer of Paraytec , a spin-off from the University of York, was quick to hail the introduction of the mini KTP scheme.
"Having previously been involved as an academic in two very successful KTPs, I've seen the benefits to the industrial and academic partners and the individual KTP associates.
It would be particularly good if mini KTPs could offer flexibility of linking in with the academic cycle, and the excellent training courses designed to develop business skills in KTP associates could be open to those on the mini schemes," said Prof. Goodall.
"Another aspect I welcome is endorsement of the proposal for a single EU community patent.
The costs of obtaining patent protection covering Europe are currently nine times higher than for the US or Japan.
This is a huge drain on the resources of SMEs such as Paraytec."
Dr Philip Wright, the ABPI's (Association of British Pharmaceutical Industry) applauded the Government's response to the report, and its "desire to build a science-based economy for the future" but highlighted the fact that "the issue of skills remains key".
"The UK needs to up its game in encouraging hard science skills at all levels and also in providing easier access to new knowledge," said Dr Wright.
The report highlights the importance of a skilled workforce, claiming that training is a key part of any innovation 'ecosystem' and should be a key priority for policy-makers.
Proposals to improve the teaching of science, technology, engineering and mathematics (STEM) subjects were also highlighted in the review, as well as new measures to improve collaboration between academia and industry.
Only time will tell if the new recommendations and extra funding will keep the UK innovative enough to compete against low-wage emerging economies such as China and India.