House of Commons - Full speed ahead: maintaining UK excellence in motorsport and aerospace - Business, Innovation and Skills Committee

Full speed ahead: maintaining UK excellence in motorsport and aerospace - Business, Innovation and Skills Committee Contents

6 Research & Innovation

139. The cost of labour in emerging markets means that UK manufacturing will never be able to compete with these markets purely on the basis of costs. Therefore it needs to base its competitive advantage in the value it can add to the manufacturing process. This requires high valued-added manufacturers, and in particular aerospace and motorsport companies, to invest constantly in R&D to discover new and innovative ways to improve their products and processes. Failure to do so would risk losing these industries to other countries. Mr Manahan, Managing Director of Lola Group made this very clear in his evidence. He said that on a recent visit to Malaysia he had seen:

an incredible and politically driven strategic positioning of a South East Asian country […] taking composites into aerospace very, very seriously. […] Right now we have, I would say, with a lot of help, a five year lead, maybe more, but they will buy that, they will get it, they will acquire it. Unless we invest in keeping our lead in that innovation, in that design, in that expertise, we are finished in that particular sector because we can never compete on production costs.[200]

140. Both motorsport and aerospace are R&D intensive industries, investing a large proportion of their profits in R&D activity. UK aerospace companies invested £1.8 billion in research and development activities in 2008,[201] and 30% of motorsport sales revenue are reinvested in research.[202] However, as the example above illustrates, this level of commitment must be maintained if the United Kingdom is to protect its leadership in these sectors.

Centres of excellence

141. Despite these high levels of investment in R&D we were told that there were not enough organisations or institutions with the ability to take projects from the level of pure research to product development. When we visited Bristol University we heard that too often laboratory proto-types were not developed into a technology which industry could exploit. BAE agreed. It believed that:

[A] disproportionate blend of pure and applied research which can cause novel concepts to fail to find their way to implementation and leaving them languishing in a gap between pure research and a level of maturity that allows them to be exploited into real programmes; referred to as the "valley of death".[203]

Mr Mans, from the Royal Aeronautical Society, agreed that universities were delivering good research but the cost of taking ideas to the demonstration stage was a significant obstacle to development. He argued that "we have to go back to the technology demonstrator programmes we had in the past."[204] This was a problem that the Minister acknowledged during oral evidence:

Everyone says that we have tremendous universities and that we have tremendous centres of innovation but the commercialisation of the product has been problematic and we have not really made the progress that we would like to have made in that field.[205]

142. The gap in the technological development process was meant to be addressed by a number of technology validation programmes. These were research programmes led by one company in which other businesses in the same sector were invited to participate.[206] However, they have now been replaced by the establishment of a number of national centres of excellence. These new centres include:

Advanced Manufacturing Research Centre;
Advanced Forming Research Centre;
Manufacturing Technology Centre;
National Composites Centre, and
Centre for Fluid Mechanics Simulation.

143. During our visit to Derby, Rolls-Royce told us of the leading role that it had played in establishing these new centres. It both suggested their creation and identified many of the subject areas the network of centres needed to address. This was a process championed by industry with Government acting on their suggestions. The Minister was complimentary about the new approach asserting that it would be more cross-sectional and co-ordinated than previous efforts:

I think what we are beginning to see is much more co-operation by different businesses across sectors in particular areas which require very, very high levels of research and investment.[207]

144. Our witnesses were particularly complimentary about the work of the Advanced Manufacturing Research Centre. The Centre is run by the University of Sheffield and is partnered by Boeing. Lola argued that, unlike many other programmes, the Centre encouraged SMEs to engage in its work by providing them with tangible benefits. These included access to a wide range of technologies, a better platform from which to compete for EU grants and, most importantly, production time on the Centre's machines. Lola explained:

We could never afford a fibre tape-laying machine, but the fact that the AMRC have got together the funding to buy one and allow us industrial time on it is very useful to people like us, otherwise we would not have a chance to look at that ourselves.[208]

Its evidence concluded that unless there is something "in it" for SMEs such initiatives will struggle to get industry involvement.[209]

145. We welcome the development of the National Centres of Excellence and congratulate Rolls-Royce on its leadership role in this programme. We see it as a strength, not a weakness, that the idea for these centres came from industry itself.

COMPOSITES

146. Our support for the development of centres of excellence, led by industry does not mean that we believe Government should take a backseat: it is a vital partner in the process. So we were deeply concerned about the accounts we heard of events leading to the National Composites Centre being established.

147. Composites are produced by combining a number of individual materials together to produce another material which has new properties.[210] The current research focus is on advanced composites[211] which are lightweight, high-performance materials which can be built as large, single-piece, customised shapes. Composite materials have many advantages over traditional materials such as metals. They are lighter, which reduces fuel use and therefore running costs and carbon emissions; they are also highly resistant to corrosion and they have excellent fatigue endurance. These properties give them many potential applications in the aerospace and motorsport industries.

148. Several companies are already deploying composite technology and other countries are also actively seeking to secure a competitive advantage through the development of this technology. During our visit to GKN and Airbus in Filton we were shown how composites were being used in the production of next generation aircraft wings. In motorsport, the core of many high-performance cars' chassis are increasingly being made from carbon fibre composites. Furthermore, universities are already investigating new applications for this technology. At Bristol University we were shown work they were doing to embed functionality into composite structures, including electromagnetism, sensors and even the ability to self-repair damage.

149. We are in no doubt of the importance of this area of research to the future of the motorsport, aerospace and indeed a large number of other industries. We therefore welcome the Government's decision to use £16 million from the Strategic Investment Fund (SIF)[212] to fund the establishment of the National Composites Centre in Bristol. The Government's Composites Strategy, which announced the Government's decision to allocate funding, also allocated £6 million to the Technology Strategy Board Challenge "to spark innovative solutions for rapid manufacture of composites."[213]

150. However, this happy ending came after a very muddled process. During our visit to Bristol it became clear that the procedure which led to the establishment of the centre was at best disorganised. The idea to establish a National Composites Centre was not the Government's, but arose out of discussions between academia and industry on how to use the Strategic Investment Fund money to support industries in line with the New Industries, New Jobs strategy.[214] A number of institutions proposed a composites centre, so the Government belatedly became involved and ran a separate competition for this project.[215]

151. The competitive bidding process was shrouded in mystery and large parts of the potential stakeholder group were not consulted. We asked representatives of both the aerospace and motorsport industries, both significant users of composite technology, if they were aware of the project, but neither were. Mr Godden, Chairman of A|D|S asserted:

I do not think industry has had a clear picture on this. It is absolutely essential and I am not sure that we have a clear view about what is really happening.[216]

Similarly Mr Aylett, Chief Executive of the MIA said he was "concerned as to why this industry is not involved in some of these consultations".[217]

152. There was also a lack of clarity on the specifications, with additional material being requested from bidders at extremely short notice. SWRDA, the regional development agency that co-ordinated the Bristol University bid, gave examples of cases where the Department requested substantial additional information and only gave them 24 hours to reply:

On 22 October BIS raised specific questions about the bid and requested a response by 10:30 on 23rd October 2009. This included information about:

The amount of money available;
Skills issues;
The terms under which existing equipment would be transferred to the NCC, and
Technology.[218]

153. We asked SWRDA how the management of this bid process compared with those which had been run for similar projects. They replied that:

This project was challenging in that no thought had been given to such an ambitious project in June 2009, a time when the Agency had just announced to partners how it would cut over £50m from its budget. It proved impossible to convene a meeting of the key stakeholders to discuss this opportunity [...]. Relatively short intervals between requests for additional information and deadlines meant that convening meetings with senior representatives from industry and academia continued to be a challenge.[219]

154. When we put these allegations to the Department it claimed that "the idea for the National Composites Centre came from the analysis of the UK carbon fibre market BIS undertook in preparation of the UK composite strategy."[220] This seems difficult to reconcile with the lack of consultation with industry about the process. If the idea for the centre had been developed in the normal way, industry representatives would have been consulted at an early stage of development.

155. In respect of the late demands for information, the Department argued that additional information was required at a late stage because not all the information they had requested was included in the initial submissions:

Some of the information received was not complete so BIS sought further supplementary information. Towards the end of the process BIS requested some bidders to clarify certain information, particularly where financial details were unclear or elements key to the assessment process had not been covered. This was to allow bids to continue to be considered.[221]

156. We welcome the establishment of the National Composite Centre at Bristol University. It has the potential to make a significant contribution to the future development of composite technology in the UK. However, while the right decision was made in the end, the establishment of the National Composite Centre was an episode of worrying mismanagement by Government. We are deeply concerned about the lack of strategic thinking that was present during the bidding process for an institution of such importance to the future of UK manufacturing. The Government must ensure that lessons are learnt, and we therefore expect it to provide us with a clear critique of its management of the competition for the National Composite Centre.

AEROSPACE RESEARCH INSTITUTE

157. Representatives of the aerospace industry told us of the need to establish an aerospace research institute. They argued that the lack of such an institute placed the United Kingdom at a competitive disadvantage in relation to many of its competitors. For example both France and Germany maintain large, powerful, publicly-funded research institutes in the aerospace sector, the ONERA in France and DLR in Germany,[222] while the UK's only equivalent, DERA (Defence Evaluation & Research Agency), was privatised during the formation of Qinetiq.[223] As publicly funded institutes ONERA and DLR have access to up to 100% research funding while a limit of 50% support funding for major industrial technology programmes was available in the United Kingdom.[224]

158. Thales told us that the absence of a UK national research establishment meant that the United Kingdom was unable to join Association of European Research Establishments in Aeronautics, the body that influences large EU aerospace programmes.[225] It argued that this was affecting companies' decisions on where to place research work, to the detriment of the UK. Airbus told us that:

Without steps taken to counter the weaknesses in the current UK research infrastructure, this developing relationship with DLR and ONERA will pose a threat to the future of Airbus engagement with Universities in the UK. Cut off from their source of innovation in the UK, other Airbus development activities may follow the fundamental research, to France and Germany.[226]

159. The Royal Aeronautical Society believed that the UK expertise on the Airbus wing technology integrator (including aerodynamic, systems and structural expertise) had already been put at serious risk as a result. This had the potential to put at risk the future of the Airbus UK "Wing Centre of Excellence", with the possibility of responsibilities and jobs leaching out to other parts of the Airbus consortium or to other suppliers in the worldwide supply chains.[227] Rolls-Royce told us that they believed that an investment of £200 million was needed to re-establish an institute which would be able to compete with France and Germany. [228]

160. When we asked the Minister about this proposal we were told that the Government was still waiting for industry to set out a clear vision of what the purpose of the centre would be:

We are waiting for industry to come to us with a sort of consensus view as to what that would do, because I think there are quite different views in industry, at the moment, as to the role that might play, all the way from something at one end which is a smart programme management organisation right through to something at the other end that owns facilities, employs scientists and does its own research. [...]We are just waiting for industry to come back to us with a justification and strong case for doing it and to come up with a model that actually would work and deliver the sorts of benefits that have been proposed for it at the moment."[229]

161. A dedicated aerospace research institute clearly has the potential to strengthen and secure the UK's aerospace manufacturing base. The industry needs to come together to provide the Government with a clear and detailed proposal for such an institute. The proposal should be used as the basis for an industry bid in the next round of Strategic Investment Fund support. We recommend that the Government looks favourably on such an application. If we do not enable the aerospace industry to compete on an equal level with other nations, it will be difficult for the industry to maintain its strong international position.

CO-ORDINATION

162. It is important that the work of all these centres is properly co-ordinated; so that the maximum benefit can be extracted from their research and that any areas of cross-over are properly explored. However, Rolls-Royce expressed concern that any large bureaucratic "super-structure" created to co-ordinate work had the potential to slow down the work of the centres.

163. We asked the Minister how the Department was planning to ensure that all the centres worked together to the benefit of all areas of UK manufacturing. He replied:

We have a close relationship with RDAs and try to ensure that they are aware of the role that the centres are going to be providing. We need to get that relationship right. It is a question of balance about the RDAs using their local connections to assist on the ground but, also, being conscious of the strategic role that will be left to the specialist centres to deliver. As you say, that is quite a sensitive balance to get right, and we will be monitoring it very, very closely.[230]

164. It is important that all parts of the network of Centres of Excellence work together effectively. We recommend that the Government creates a small, lean team responsible for ensuring that the work of the centres is properly co-ordinated, without placing additional burdens on the research organisations. They represent a national resource and cannot be left to work in regional silos.

Government R&D spending

165. Since 2004, the Government has invested over £270 million in aerospace projects, a figure which has been matched by business.[231] The Engineering and Physical Sciences Research Council (EPSRC) currently funds over £171 million[232] of research with relevance to the industry, and involves over 300 collaborators from industry.[233]

166. However ,the total amount spent on R&D as a proportion of GDP had fallen from 2.35% in 1982 to 1.8% in 2007.[234] This compares unfavourably with international competitors. The OECD average is 2.3% while Japan spends 3.2% of its GDP on R&D activities. The Government's Ten Year Science and Innovation Investment Framework published in 2004 set a target of 2.5% by 2014. While this is a step in the right direction it is much less ambitious than the EU target of 3% of GDP by 2010.

167. Rolls-Royce's evidence laments what it describes as the "long-term, systematic decline in UK R&D intensity."[235] It argued that increasing the UK's R&D spending to the OECD average (an increase of 0.5% of GDP) would result in the United Kingdom conducting £6.5 billion of R&D a year. Furthermore it asserted that an additional 50,000 more graduate engineering jobs would also be created as a result with many more graduate opportunities in production and management positions. Rolls-Royce concluded by arguing increases in R&D spending would have a:

powerful, long-term effect that we believe justify early and sustained action—with emphasis on technology exploitation in the interests of early economic growth.[236]

168. Rolls-Royce also highlighted the fact that the level of funding available through the Technology Strategy Board (TSB) was often insufficient to be the only source of financing for large research projects. This made it necessary to attract funding from other sources, such as RDAs and Research Councils. It argued that this, combined with "the requirement for collaboration", led to "a high level of contractual complexity and this can make the process of commitment too long and wholly uncompetitive with equivalent processes, for example in the USA." Rolls-Royce believed that one solution would be to concentrate a higher level of Government R&D expenditure in the Technology Strategy Board. This would, it argued "bring useful simplification and would also ease the process of prioritisation that is inevitably required in a world of tight money."[237]

169. While we agree that the Government should explore ways of simplifying the funding process for large research project, increasing R&D funding cannot be solved simply by recommending that the Government spend more money on R&D. As we discovered during our inquiry into the higher value-added economy, the amount that the UK Government spends on R&D is not that far out of line with that of comparable economies. That Report noted that UK industry invests less in R&D than other countries, due in part to the makeup of the economy:

Some of the difference in research intensity are caused by the structure of United Kingdom's economy in which the service sector is relatively large, compared to some other countries, and by the sectoral mix which contains many industries which historically have not reported high levels of R&D.[238]

170. However, the Government is currently planning to reduce its research spending as part of the proposals to reduce the budget deficit. The Pre-Budget Report announced that £600 million of savings were to be found in the higher education and science and research budgets.[239] We asked the Department to set out what proportion of these savings would come from the science and research budget, and if this would impact on the availability of funding related to the aerospace and motorsport industries. The Department was unable to provide us with this information and merely stated that:

This was a 2009 Pre-Budget Report announcement and the decisions on how this is going to be apportioned have not been made.[240]

171. When the Department decides on the funding allocation to the higher education sector, the science and research savings announced in the 2009 Pre-Budget Report must be managed in a way that minimises the impact on research that supports higher value-added manufacturing, and areas of research which are directly linked to the UK's competitiveness. We also agree with Rolls-Royce that the there should be a strong presumption in favour of large research projects being funded, on a national basis, by a single organisation. The Government should use its current review of research spending to investigate ways in which the system could be adapted to make this possible.

DEFENCE RESEARCH

172. Even before the Pre-Budget Report cuts were announced the Royal Aeronautical Society had expressed concerns about how future funding for aerospace research might be threatened by cuts in defence R&D expenditure. BAE have asserted that the MoD was reported to be making a 20% cut in its science, innovation and technology budget in 2010-11 compared to 2009-10. This would represent a reduction of £105 million. The Royal Aeronautical Society said that this was in addition to a previous reduction of 7% in both the 2008 and 2009 budgets.[241] Mr Keen, Head of Government Relations, BAE Systems said that this was "an issue of real concern":

If we are looking at developing UK national capabilities for future defence requirements, it is self evident that if there is less being spent on research and technology now, we will have less UK capability in future.[242]

173. During our inquiry into sustaining the higher value-added economy we visited the Defense Advanced Research Projects Agency (DARPA) in the United States where we saw the powerful role that defence research can play in supporting wider R&D efforts.[243] Discoveries made in defence research often have commercial applications and this is particularly true in the aerospace sector. While defence research is primarily the responsibility of the Ministry of Defence it is important that the Government acknowledges the fact that defence research has an impact on other areas of R&D, especially other high-tech industries. The Department for Business, Innovation and Skills should be involved in any discussions about funding for defence research to ensure that the impact of any reductions on advanced manufacturing industries is minimised.

CHANGING PRIORITIES?

174. During this inquiry the aerospace industry aired its concerns that there was a more general move away from supporting aerospace R&D. This view was first raised by Bristol University. It believed that there was a perception that aerospace had already received its fair share of funding in previous years and therefore other sectors should now take priority.

175. We explored this issue with witnesses during oral evidence and found this view to be widely held by the aerospace community. Mr Godden reported seeing a similar trend:

I have noticed in my time here, two years, that our success is a problem. […]. I have seen it happen in front of my eyes. It goes along the following lines: "They've got more than their fair share"—whatever that means—"and therefore we need to divert a bit to demonstrate that we are not giving more than a fair share to aerospace."

Mr Mans argued that the Government "should be backing winners, not picking winners"[244] He claimed that backing sectors which did not have a proven track record could lead to public money being misspent, while previous successes meant that there was less of a risk of research funding not producing the desired outcomes.[245] The Government is wrong to view innovation purely as the creation of new products and processes, it is also about improving the design and manufacture of existing products. There remains much work to be done on 'green' issues in the aerospace industry, for example improving on current designs and processes, which we will return to in the next chapter.

176. The previous success of the aerospace industry should not preclude it from receiving R&D grants in the future. While we understand the desire for Government to support innovative new industries it is important that established sectors—with successful track records—are not disadvantaged as a result. We recommend that the Government ensure that the desire to support new industries is not disproportionally directing funding away from established industries such as aerospace and motorsport.

R&D TAX CREDITS

177. The motorsport sector does not receive direct R&D funding at the same level as the aerospace sector. However, many SMEs benefit from the R&D tax credit system. The credit can be used to reduce a company's tax bill or, for SMEs not in profit, to provide a cash sum. Companies must be spending at least £10,000 a year on qualifying R&D and can claim for revenue, but not capital, expenditure. SMEs (which are defined as companies with fewer than 500 employees and an annual turnover less than €100 million or annual balance under €86 million) can make a deduction of up to 175% of qualifying expenditure incurred on R&D activities when calculating their taxable profit.[246]

178. These tax credits have had a positive impact on SMEs involved in motorsport because they invest a much greater proportion of their profits into R&D in comparison to the average SME. Over 30% of sales revenues are re-invested in R&D by UK motorsport SMEs—double that of the UK's Pharmaceutical and IT sectors, and ten times that of the automotive industry generally.[247] Lola's evidence highlighted the importance of the tax credit in encouraging innovation in the sector:

R&D tax credits are the best initiative to maintain an active R&D programme to this sector and it is hoped that a future government will not remove these vital assistances.[248]

Mr Aylett agreed:

I think the whole R&D tax credit programme was good, and in fact our industry has prospered from it, profited from it and innovated because of it.[249]

The 2009 Pre-Budget Report announced that the Finance Bill 2010 would introduce measures to simplify the R&D tax credit system by removing the condition that requires any intellectual property deriving from the R&D to which the expenditure is attributable be owned by the company making the claim. This change would come into effect for any expenditure incurred by a SME company on R&D in an accounting period ending on or after 9 December 2009. The intention is to allow companies to benefit from the UK's R&D tax credit for SMEs without distorting their commercial arrangements in relation to Intellectual Property. We asked the Government how many businesses would benefit from this change, but they were not able to supply us with this information.[250]

179. However, not all the evidence we received was in favour of the current R&D tax credit system. Rolls-Royce argued that while "in the long term […] it is sensible to work towards a more generous R&D Tax Credit scheme […]" it did not believe it was an appropriate way to spend limited financial resources in the current climate.[251] Instead Rolls-Royce believed that it should be redirected to the Technology Strategy Board's budget, which it believed was a more effective and targeted method of stimulating R&D:

We do believe that resources available to stimulate R&D should be focused to a greater extent on closer-to-market activities capable of generating jobs and value for the UK in the medium-term.

Grants are a more powerful incentive for R&D, typically offering a much higher recovery of R&D costs than tax credits, and the mechanism is inherently more selective. We believe that available resources should be directed towards increasing the TSB's budget substantially and improving the speed and effectiveness of mechanisms for coordinating support for nationally significant R&D projects—for example, across TSB, Research Councils and Development Agencies.[252]

180. When we considered the issue of R&D tax credits in our Risk and Reward Report, we were told that the CBI conducted a survey which had shown that the value of R&D tax credits to companies now exceeded the "noise-level for investment decisions"; it was large enough to influence companies' decisions. The same survey found that the credit was an important factor for companies when deciding where to base R&D activity, improving the attractiveness of the United Kingdom as a destination for high value investment and jobs.[253] We concluded that:

On balance, the evidence available suggests that R&D tax credits have been successful and that they are becoming more so as awareness of them grows.[254]

Since that Report the Government has announced that it will evaluate the impact of tax credit schemes. It will focus first on the SME sector and will report by the end of 2010.

181. We support the Government's moves to simplify and increase the reach of the R&D tax credit system. We note the arguments made by some that directing resources from tax credits to the Technology Strategy Board would be a more effective use of public funds. We believe that this is something that the Government should address as part of its review of R&D tax credits. However, we remain concerned that such a move could penalise R&D intensive SMEs, including those in the motorsport industry, who would find it difficult to apply for grants through the Technology Strategy Board.

Business-academic engagement

182. A recurring theme during this inquiry has been the importance of business and academics engaging effectively with each other to deliver educational courses which produce workforces with the skills which industry needs,[255] and to maximise each other's strengths in the field of research.

183. On 3 November 2009, the Government published its new strategy for Higher Education, Higher Ambition, which addresses these issues. In Higher Ambition the Government places great emphasis on "the important role universities will play in securing the country's economic recovery and long-term prosperity."[256] It also highlights the importance of a strong relationship between universities and businesses, and acknowledged the fact that the relationship between the two had not previously been robust:

The majority of businesses that invest in high level skills do not make enough use of higher education. This should change: businesses should tap the resources available in universities more effectively, and universities should become more flexible in providing for business demand.[257]

184. While we welcome the Government's focus on the need to improve on the existing relationship, it is not clear how this will be improved in practice. It will not be easy, as our witnesses highlighted several obstacles which had prevented the development of this relationship. During the motorsport evidence session witnesses told us of the difficulties faced by some SMEs when they tried to engage with universities. The MIA explained that "time-constraints and speed to market; development being of more practical and immediate commercial value than research; lack of long-term engineering strategy in the sport's rules [and] limited personnel available to maintain ongoing links" were all factors which inhibited closer working. However, it drew our attention to Imperial College, Cranfield, Southampton, Warwick and Cambridge Universities as universities which had overcome these problems.[258] It concluded that, while it would possibly be of benefit for SMEs to better engage with academic research, it was difficult for individual research institutions to overcome these "understandable" barriers."[259]

185. Mr Dickison, Principal Lecturer in Automotive Engineering at Coventry University, gave us a view from academia. He believed that the unwillingness of universities to change their work pattern to meet those of SMEs was the main reason why universities and SMEs failed to effectively work together:

when it comes to actually contributing to a business, they are probably going to be too slow and not very motivated to actually help. I think the tide is changing.[260]

186. Mr Manahan, Managing Director of Lola group, explained that if SMEs were to engage effectively with universities then it would have to be "financially attractive" to work"[261] and that "unfortunately, things like engaging with universities and engaging with organisations that are for the greater good, for people like me, I just cannot afford it. I cannot afford the time and I cannot afford the cost."[262]

187. The Minister remained convinced that employers had "a very strong responsibility to get involved with further education colleges"[263] but that new ways needed to be considered to facilitate that involvement. One possibility offered by the Minister was a campus university whose primary aim was to engage with motorsport SMEs:

We could therefore look at engaging them through having a kind of campus which is dedicated to the approach of linking in SMEs with the university sector and having them attuned.[264]

However, as the Department subsequently confirmed "This is still in the early stages of development but part of the support from Northampton County Council is predicated on the development of an educational facility."[265]

188. We are not convinced that this is the most effective method for linking SMEs and universities. The Government is already doing good work to encourage SMEs and universities to work together through the Innovation Vouchers Scheme. The scheme provides high performing SMEs with a £3,000 voucher which can be used to pay for universities to undertake research for them. We considered the scheme in our Report on Risk and Reward.[266]

189. In its response to that Report the Government told us that:

Innovation Voucher pilot schemes have now been rolled out in eight of the nine English regions, with the South West looking to roll out their scheme from April 2010. By the end of June 2009, over 1,300 vouchers had been issued to SMEs with a total value of over £4.5 million. [267]

The Government is also committed to working with the RDA network over the remainder of the current Comprehensive Spending Review period to evaluate the impact of the vouchers and the different pilot voucher schemes. It said that "this evaluation will help inform considerations on whether Innovation Vouchers are developed into a formal product within the 'Solutions for Business' portfolio of business support products."[268]

190. While improving industry-academia relations is primarily a task for industry and academia, the Government has an important role to play in facilitating engagement and providing a positive policy framework within which this can happen. However, the Government has yet to communicate successfully this need to the SME sector. We have yet to be convinced by the Government's proposal of an SME university, and we believe that it should instead concentrate on promoting and expanding its existing work in areas such as the Innovation Vouchers Scheme.

200 Q 132 Back

201 Ev 150 Back

202 Ev 121 Back

203 Ev 95 Back

204 Q 64 Back

205 Q 309 Back

206 http://www.sbac.co.uk/pages/69836199.asp Back

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209 Ev 112 Back

210 Department for Business, Innovation and Skills, The UK Composite Strategy, November 2008, p 6 Back

211 Structural Fibre-reinforced Polymer Matrix Composites. Back