Written evidence submitted by the CBI
(TIC 34)
SUMMARY
— There
is a strong case for giving additional support and coordination
to structures which facilitate commercial exploitation of research.
— A major
priority is to ensure the numerous existing centres are more fully
mobilised to contribute maximum benefit to the economy.
— The
growing imbalance between the levels of public funding for research
and for innovation causes a bottleneck which puts UK business
at a competitive disadvantage internationally.
— This
is exacerbated by the difficulty business encounters in seeking
to locate sources of useful skills, knowledge and expertise within
the university system.
— Strengths
of the Fraunhofer model include:
— Explicit
commitment to a core purpose of pursuing knowledge of practical
utility
— Substantial
and stable long-term core funding from government, enabling institutes
to commit themselves to sustained investment in long lead-time
technologies
— Exposure
to market-driven incentives to provide services to business for
which business is willing to pay.
— The
Technology Strategy Board is well placed to oversee the machinery
for promoting applied research in order to create economic benefit,
but it is already inadequately resourced to fulfil its existing
mission.
INTRODUCTION
1. The CBI welcomes the opportunity to submit
evidence to the Committee's inquiry. The CBI is the UK's
leading business organisation, speaking for some 240,000 businesses
that together employ around a third of the private sector workforce.
CBI members also include about half of the UK's universities,
among them most of the more research-intensive universities.
2. Both the Hauser Review and Ingenious Britain,
the report of the Dyson review, highlighted the mismatch between
the quality of the UK's university research base and the weakness
of the infrastructure for commercialising its output to give economic
impact. There is a strong case for giving additional support
and coordination to structures which perform the function of linking
university research to commercial exploitation, though the need
for a wholly new infrastructure of technology and innovation centres
in the UK is less clear-cut.
3. A major priority is to ensure the numerous
existing centres are more fully mobilised and suitably structured
to contribute maximum benefit to the economy. This should
include improving access to facilities and expertise within existing
publicly-funded research establishments. New centres should be
established if that is demonstrably the best solution, for example
based around a large piece of shared physical infrastructure.
4. Part of the problem which the proposed technology
and innovation centres are aimed at addressing is the balance
of public funding between the substantial level of support for
research and the much lower figure for innovation. The Technology
Strategy Board, for example, currently enjoys core funding at
a level which is about one-twentieth of the budget for university
research dispensed by the Research Councils and the higher education
funding bodies such as HEFCE (the Higher Education Funding Council
for England). The resulting bottleneck in exploitation of research
outcomes puts UK business at a competitive disadvantage internationally,
and this is likely to be exacerbated by the disappearance in England
of the innovation funding support disbursed hitherto by the RDAs
- a total of about £350m.
5. An obstacle to innovation which is regularly
reported by CBI member companies, both large and small, is the
difficulty of locating appropriate sources of suitable skills,
knowledge and expertise within the university system - sometimes
described as the lack of a 'catalogue'. A more coherent landscape
of support for commercialisation of technology and innovation
could alleviate this problem by ensuring that an initial port
of call is easier to identify.
Question 1: What is the Fraunhofer model and would
it be applicable to the UK?
6. Others are likely to be better equipped to
describe the Fraunhofer model in detail. From the CBI's
perspective the main relevant features include:
— Explicit
commitment to a core purpose of pursuing knowledge of practical
utility.
— Substantial
and stable long-term core funding from the federal and state governments,
accounting for about one-third of revenue, and enabling institutes
to commit themselves to sustained investment in long lead-time
technologies.
— A similar
proportion of revenue from public sector project income and from
the EU.
— A further
third of revenue earned through contract research for German and
other companies.
— A core
funding model which strongly incentivises institutes to earn between
25% and 55% of their revenues from contract research for industry,
and gives additional rewards for income from the EU.
— A strong
orientation towards working with SMEs, which account for one-third
of industrial contract research income.
— An important
role in facilitating business engagement in the European Framework
Programme for Research and Technological Development.
— Close
links with universities while retaining distinct institutional
character, identity, mission and incentives.
— Great
breadth of scope in activities which support technology deployment,
including technology assessment, training for customers' staff,
and other support services extending beyond the initial phases
of a new process or product.
— A strong
generic brand and corporate governance model combined with institutional
autonomy. The strength of the brand may however distract
attention from the great range of variation across institutes:
this variation includes variation in effectiveness.
— Very
positive perception by German science, engineering and technology
students as a potential employer.
7. There are some aspects of the Fraunhofer model
from which the UK can usefully learn, but the culture, history
and innovation infrastructures of Germany and the UK are different,
and an indiscriminate attempt to apply the model wholesale would
be inadvisable even if it were practically possible and fiscally
affordable.
Question 2: Are there existing Fraunhofer-type
research centres within the UK, and if so, are they effective?
8. There are many centres conducting contract
research and collaborative research with industrial partners.
Many but by no means all are based in, or attached to, universities.
Centres which are wholly embedded in universities can sometimes
have difficulty operating effectively in a commercial environment
and adapting to market incentives. Many centres have been created
with funding from RDAs, but even before the decision to abolish
the RDAs it has never been possible for this support to be guaranteed
over the kind of period for which Fraunhofer institutes' core
funding is stable. Lack of substantial and stable long-term core
funding has been an obstacle to the effectiveness of centres in
the UK, as its existence has in general been a source of strength
to the Fraunhofer institutes - though opinions vary about the
extent to which some Fraunhofer institutes may have succumbed
to the gradual decline in the relevance of their programmes which
can afflict publicly funded laboratories.
9. The effectiveness of such centres varies widely
- some of them are excellent, and benefit from the unique UK model
of cooperation between Research Councils, RDAs, business-facing
universities and industry. A prominent example is the Advanced
Manufacturing Research Centre (AMRC) in South Yorkshire, though
this is not seen by all companies in the sectors concerned as
a fully 'open innovation centre'. A still better model may be
exemplified by the National Composites Centre being developed
in the Bristol area.
10. A merit of the Fraunhofer model is that institutes
are obliged to earn a substantial proportion of their income by
performing research for business customers: since such customers
are free to choose where and whether to spend their money the
system ensures that institutes have to be able to demonstrate
the commercial value of their services. Research and technology
organisations in the UK such as MIRA and C-Tech Innovation are
similarly obliged to demonstrate their effectiveness to business
customers - but they are not funded to support the kind of long-term
investment in future technologies which the Fraunhofer model permits.
Question 3: What other models are there for research
centres oriented toward applications and results?
11. A different model exists in the United States,
where there is an extensive network of national laboratories such
as those of the Department of Energy, Department of Defense, Department
of Agriculture, and National Institute of Standards and Technology
(NIST) of the Department of Commerce. Some of these laboratories
are operated by the Battelle Memorial Institute, which is also
part of the consortium managing the UK National Nuclear Laboratory,
along with Serco and the University of Manchester, on behalf of
DECC. Serco also manages the National Physical Laboratory
under the GOCO (government-owned, company-operated) model, which
has been demonstrated to provide significant operational efficiencies
with strong scientific outputs.
Question 4: Whose role should it be to coordinate
research in a UK-wide network of innovation centres?
12. A measure of coordination could help avoid
the risk of multiple centres in different sectors, regions or
technologies, dissipating resources by pursuing parallel paths
with sub-critical mass. There is also scope for facilitation
of innovation across centres, linking-up research in complex areas,
and coordination of skills development activities, as well as
sharing and disseminating good practice of various kinds.
13. The national body which is best fitted
to oversee the machinery for promoting applied research in order
to create economic benefit is the Technology Strategy Board, which
has rightly been given the role of investigating the potential
for implementing recommendations of the Dyson and Hauser reviews
in this regard. It is less clear that the TSB has been adequately
resourced to fulfil this addition to its mission.
14. A point worth bearing in mind is that the
branding or badging of an existing centre within a national framework,
subject to appropriate quality and other controls, may convey
benefit and enhance impact without the need to commit additional
resources.
Question 5: What effect would the introduction
of Fraunhofer-type institutes have on the work of Public Sector
Research Establishments and other existing research centres that
undertake Government sponsored research?
15. If existing centres are doing their job well
and efficiently there is little obvious benefit in establishing
and subsidising new competitors. Even if they are not functioning
optimally there may be much more cost-effective means of remedying
this. But it is important to bear in mind that the prime
merit of the Fraunhofer model from a business perspective is that
the Fraunhofer institutes are designed to help reinforce the competitive
strength of the economy through the work they do for industry.
If one focuses on government-sponsored research one risks losing
sight of this fundamental fact. However, the example of the National
Physical Laboratory shows that private sector operation can release
the potential of government assets to support innovation in the
economy based on government-sponsored research.
CONCLUSION
16. Experience in the UK and overseas suggests
that centres can only fulfil their mission if they are driven
by business demand. The appropriate model is likely to vary
according to business sector - a hub and spoke system with a small
number of centres tapping into a much wider network works well
for engineering and physical sciences, but in life sciences the
most appropriate model may be one with many specialised research
centres that business can tap into directly. But any new
developments should take account of and build on the best of the
existing apparatus and business models, and ensure that existing
centres are fully mobilised to contribute maximum benefit to the
economy.
Enterprise and Innovation Group
CBI
30 November 2010
| 
