Examination of Witnesses (Questions 300
WEDNESDAY 13 JUNE 2007
Q300 Linda Gilroy: Do you agree with
the comment made that more of this should be driven from the top
Dr Thompson: I think the regional
agenda is quite an interesting one, particularly as regional development
agencies are no longer looking necessarily to source the science
they need from their particularly local area but because they
want to compete globally. That is a very interesting new dynamic
in the UK, so we want to work to support it, but I think we are
all learning as we go along at the moment. I would not claim that
there is an easy mechanism but we all just have to put our shoulder
to the grindstone and work at it.
Linda Gilroy: We have mentioned comparisons
with the United States but are there any other international comparisons
which perhaps might show the way ahead?
Q301 Chairman: Could I come in here
because I am getting increasingly depressed this morning. You
said in your evidence, Dr Rayner, that the Government is spending
£100 million to create spin-off companies and it is ineffective.
That is a very, very strong statement to make. We want to see
some evidence of that.
Dr Rayner: First of all, it is
not my comment. What you are seeing is a collection of comments
from the membership of IMarEST.
Q302 Dr Spink: Are you withdrawing
Dr Rayner: I am not withdrawing
Q303 Chairman: You are the Vice President
of this organisation.
Dr Rayner: I am, yes,
Q304 Chairman: So you are disassociating
yourself from it.
Dr Rayner: No.
Q305 Chairman: Come on, dig the dirt.
Dr Rayner: The problem is making
that funding much more targeted at some of these small niche markets
and connecting it to companies, small niche companies in the UK
that are active in those markets. In some cases, elements of that
funding have been internalised.
Q306 Chairman: What does that mean?
Dr Rayner: I mean that it has
been used to foster the creation of spin-off companies which are
very closely linked to academic institutions and to government
laboratories. It has not necessarily found its way to established
Q307 Chairman: SMEs were once spin-off
companies, were they not?
Dr Rayner: They were in some cases,
yes, but not in the marine science and technology sector. Very
few of the companies in the marine science and technology sector
were spin-off companies.
Q308 Chairman: I am now confused.
If we are talking about small emerging companies.
Dr Rayner: They need support.
Q309 Chairman: They need support
but you are saying that if they get support the established SMEs
do not get the support. Why do we want two lots of support?
Dr Rayner: We want to foster our
existing SMEs in niche markets and help them to broaden their
penetration of global markets. As I mentioned earlier, it is a
collection of small, niche market sectors and we have in the UK
a small number of SMEs active in those niche sectors. They are
competing with small to medium sized companies in other parts
of the world and the market that they are serving is a global
market. It is very difficult for companies of that size effectively
to create a position in a global market because they are very
small scale. The funding should be directed, I believe, towards
helping to foster that process, so creating the avenues from academic
and institutional research to establish new products and then
helping to link the industries, the small industries that are
developing those products, to wider export markets.
Q310 Linda Gilroy: Is the support
more of how to develop the business plan and marketing plan rather
than on the development of the science?
Dr Rayner: Penetration of markets
is where the gap is. For a large company, that is relatively straightforward
because they already have the established infrastructure to achieve
it. They have the local offices; they have the proximity to markets.
For small businesses working in niche markets, that is not the
case. For a small business to go into a new export market is a
very, very significant expenditure. They certainly cannot contemplate
doing this on a global scale.
Q311 Linda Gilroy: One of the things
you refer to is an unfairness because of the way it works at the
moment as between those that emerge from academic and government
laboratory settings. What sorts of small businesses that are not
supported in that way are struggling to make those leaps into
Dr Rayner: I would say that most
of the small businesses engaged in this area in the UK have rarely,
if ever, received any support in this area.
Linda Gilroy: What kinds of things are
they? I can only think of examples from my experience as a constituency
MP of things that have worked and are about to work and therefore
it is difficult to know what is not happening.
Q312 Chairman: You are not giving
us any examples at all.
Mr Burt: Perhaps I might answer
the question from a different perspective. To spin-out companies,
SMEs from academia, it is but one important mechanism. The core
route is technology transfer from academia to market-place. One
route is spinning out SMEs. Another route is to enable that technology
transfer to the existing SME base. The existing SME base, as Dr
Rayner says, is very small and very niche. If you looked at marine
science and technology, and I exclude oil and offshore at this
stage, there is probably less than ten or 12 companies in the
UK. That is as a result of 40/50 years of marine scientific research.
Those companies have matured and are very well placed to identify
production engineer technologies and achieve market penetration
to a degree. Certainly penetrating new markets would require assistance.
If you take the other model, whereby you identify technology in
an academic environment and spin out an SME with it, invariably
you spin out an SME primarily based on the science engineers involved
in that product. As they move across to industry, they suddenly
realise they have no skills in production engineering, no skills
in marketing, market penetration and all that goes with the company
profile, so they would be asking for different styles of funding
from that which an existing SME would. I think there are two different
cases there, but the prime driver is: What is the best route for
me to bring in technology to the market-place? It can go either
of two ways.
Q313 Chairman: Could we hear from
Dr Thompson, because this is your job.
Dr Thompson: It is our job. Certainly,
as a research council, we work both with the university spin-outs
but we also work with existing companies. It is hard to work with
small and medium enterprises because they are trying to keep going
for tomorrow but there are some really good examples of companies
that still work for the science base that are not huge companies.
I am not a technical expert in this area but I am trying to pull
in some areas. Guidance Control System Limited, which is a company
which deals with how you can moor next to an oil rig, started
off from quite a small company but it still very strongly engages
with the science base. When it has a problem, it goes and tries
to find somebody, not necessarily somebody whom they know, but
who knows somebody who can help. They have just had a recent link
with Liverpool University that has really opened up new markets
for them, but that is a company that is attuned and will ask questions.
The real issue for the UK is how you can support people to go
and do that more oftenand that is time consuming. How do
you support that? We are trying to use our offices to do it but
clearly organisations, like all of us sitting here today, have
a duty of care to try to make sure there is that natural ebb and
flow of information between the science base and industry. The
other thing that industry gives is some really important challenges.
If you give the challenges back to researchers, they can lead
to some really interesting research. It is not about a one-way
flow; it is about pulling it back as well. That is how we absolutely
get the ecosystem right in the UK but it does mean a concerted
effort in supporting these companies. It is hard, if you are a
small company, to go and spend an hour in a university. You are
not going to unless you have the support from your regional development
agencies, you know what a research council is and you know a way
you can get help. The mechanisms are there but it is putting the
energy into making sure you can get it going. Working with regional
development agencies that have identified particular priority
areas is probably a smarter way of going than just blitzing all
the SMEs, but clearly you cannot pick off all of the areas in
the UK that might need support and then do it all to all of them
in one go.
Q314 Chairman: I am less depressed
now. Perhaps we could move on.
Dr Thompson: I am not depressed.
Q315 Dr Iddon: Professor Thompson,
considering the importance of the oceans concerning climate change,
in particular, but earth systems in general, do you think the
current level of funding by EPSRC for marine science is adequate?
Dr Thompson: I do not think there
is any area in EPSRC's remit where I would ever answer our level
of funding is adequate. Within the resources we have, we do the
best we can to support high quality science and engineering within
our remit and we work hard to try to increase leverage, so working
with NERC and working with companies to make sure there is additional
funding. Looking to the future, we are concerned that there is
an opportunity for working on living with environmental change
and that is part of the bid that all of the research councils
will be putting into the Office of Science and Innovation for
increased funding to enable us to invest more money into that
area that is opening up with the development of new technology,
with modelling science. Looking to the future, we think that is
an important area for investment but we are halfway through the
allocation of the science settlement and, until we know how that
is settled, we cannot tell you whether we can afford to invest
in it or not. But we think it is an important area, and it is
a high priority, going forward, for increased funding across research
Q316 Dr Iddon: I have some figures
here for 2006-07 and for the two years after that. For the year
2008-09 it shows there is a decline in funding. Is that a temporary
Dr Thompson: It is not a decline
in funding. The figures you have are the figures when we submitted
the evidence. Clearly for 2008-09 we are currently agreeing new
grant proposals that we will fund and that will add to the number.
Significant parts of that funding, something like 70%, is through
responsive mode. How that will stack up as eventual expenditure,
I cannot tell you, so I am much happier to say the figures you
have for 2006-07 and 2007-08 are firm figures. For 2008-09 there
will be additional grants agreed and additional expenditure put
out. It is certainly not an intentional decline and, already,
looking at things in the pipeline, I think you will see it go
up to the 2007-08 level and it could increase beyond that.
Q317 Dr Iddon: I am sure the Committee
is pleased to hear that but, nevertheless, at around £3 million
of the £650 million total budget, approximately, it is less
than half a per cent, is it not?
Dr Thompson: It is less than half
a per cent. It is the money that we are investing in this area,
but other priorities come in and that is our current expenditure
level. Ideally we would like to be able to invest more money but
we have to use taxpayers' money wisely and that is our current
level of expenditure on research. In addition to that, we support
training in universities and there is probably an additional £0.5
million a year going into supporting masters courses. But that
is our research expenditure currently.
Q318 Dr Iddon: We have been talking
about supporting innovation and technology and transferring that
knowledge. Are you able to put a figure on how much you spend
on that at EPSRC or is that difficult?
Dr Thompson: Given the space in
which engineering and physical sciences works, separating out
knowledge transfer into a separate funding pot does not do it
for us, so our research expenditure includes expenditure on KT
because it is embedded in everything we do. For instance, I can
tell you that a significant number of the grants that make up
those values already have collaboration with industry, which adds
money to it, so we do not have separate funding schemes. We try
to ensure that research and KT happen naturally in trying to encourage
it, rather than having a separate pot of money that you access
when you have decided you have to have a good KT idea, because
it just does not work like that in engineering and physical sciences
space. A project was recently approved at Southampton University
looking at sensors in partnership with NERC that will go out into
the marine environment and sample the water but also sample the
marine biological population. That already has three companies
working on that project, so we hope that will shorten the innovation
circle because they are there watching over the shoulders of the
academics. As soon as they see something that they can go and
take value and make a new product from, they will be in there
exploiting it. That is how we prefer to see it happen.
Q319 Dr Iddon: By the nature of the
marine environment quite a lot of the research you have to fund
is applied in nature.
Dr Thompson: Yes.