3 Connecting science with industry |
88. The importance of the university sector in
attracting inward investment by business was made clear to us
on several occasions.
BP, in its evidence to us, highlighted the value of academic research
and development to where they site their own research and development
BP spends 40% of its total research & development
funds in the UK and has three major research centres in Sunbury,
Pangbourne and Hull. The excellence of UK academic research is
a key factor in determining why companies like BP choose to site
their R&D activities in the UK.
A fundamental ambition of UK
innovation policy is to connect the science base and industry.
In this chapter we explore the Government's innovation agency,
the Technology Strategy Board (TSB)
and how the university sector is encouraged to facilitate and
advance innovation policy.
Technology Strategy Board
TSB is the Government's prime channel of support for business-led
The TSB describes its work and role on its website:
Our role is to stimulate technology-enabled innovation
in the areas which offer the greatest scope for boosting UK growth
and productivity. We promote, support and invest in technology
research, development and commercialisation. We spread knowledge,
bringing people together to solve problems or make new advances.
We advise Government on how to remove barriers to
innovation and accelerate the exploitation of new technologies.
And we work in areas where there is a clear potential business
benefit, helping today's emerging technologies become the growth
sectors of tomorrow.
90. Sir Peter
Williams, Treasurer of the Royal Society and Chair of the National
Physical Laboratory, was concerned the TSB would not have sufficient
funding to achieve what was expected of it, stating, "you
can never have too much money in this sector. [The TSB]
is small by comparison with, if you like, the private equity players
in this space, and, therefore, being brutal about it, its impact
will be commensurately small if we are not careful".
91. Rolls Royce also questioned whether the TSB
was adequately resourced even to operate its core remit of funding
The TSB has developed efficient
mechanisms for supporting collaborative research. Their funding,
at just over £300m p.a. is, however, inadequate for the task
is spending over £3.5bn on low TRL research, and cannot hope
to adequately capture the benefits from this investment when spending
so little on support through the valley of death.
92. Iain Gray, Chief Executive of the TSB, did
not think that the balance was correct.
Sir John Savill representing Research Councils UK was sympathetic
to that view, though he was clear that any increase in the budget
to commercialise should
not be funded through a cut to the Science Budget.
93. Evidence on the TSB uncovered a number of
criticisms on small issues but, overwhelmingly, there was an appreciation
for their work and their funding programmes and a consistent call
for funding to be increased.
The key programmes are SMART Awards
and the SBRI.
Dr David Connell recommended a huge increase in SBRI funding
and Sir Peter Williams told us that the Government need to pick
some winners and give them generous funding. He considered the
SBRI a decent vehicle through which to do this but it would need
more extensive funds than those envisaged by the Government.
94. We examine the role of SBRI in relation to
Government procurement in more detail later in this report.
95. SMART Awards are a key funding initiative
for proof of concept work
and have been subject to strong competition; Rolls Royce told
us that the competition for those awards indicated the strength
of the technology marketplace. The University of Birmingham was
concerned that the inability of universities to gain access to
SMART Awards would push university spin-offs into commercialisation
too early just to become eligible.
Although there are other sources of funding for proof of concept
work, the University
and others argued
that the total amount was insufficient. The University of Edinburgh
The valley of death can be encountered at various
stages of the commercialisation process, but is most often acutely
felt in pre and early stage company formations where there are
gaps between the early stage/proof of concept nature of the technology
and the beginning of increased production and generation of significant
The Association of Independent Research and Technology
Organisations (AIRTO) (V45) suggested that better proof of concept
funding would encourage more equity funding by effectively reducing
the risk of investment.
96. We recommend the Technology
Strategy Board examine the current provision of proof of concept
funding to universities and small companies and report to Government
a coherent view of the amounts of funding available along with
a recommendation on whether there exists a shortfall of provision
of these funds and whether a consolidation of provision into a
single programme would be helpful.
97. We sought views on the Technology Strategy
Board (TSB) and how effective its intervention was in stimulating
innovation and helping companies across the valley of death.
Many responses indicated that it was still too early to make that
98. Others, however, were critical. We received
evidence suggesting that TSB funding might not suit small businesses,
public sector research organisations or research and technology
The SME Innovation Alliance recommended that the TSB stop "playing
at 'Dragon's Den', themed competitions, timed 'calls' and [...]
stick to funding projects quickly and simply on pure merit".
Plant Bioscience Ltd told us that "TSB
funds are slow to obtain and involve far too much bureaucracy".
Sir Peter Williams was more challenging. He was supportive but
had some concerns:
I am a fan of the TSB in concept. In fact, in my
SET and the City report, I single them out as being worthy of
receiving more Government funding and having more clout and influence.
I always fear in this country when things become centralised [...]
that they become risk-averse at the same time. [...] if we are
here criticising Government for becoming timid and the City for
being risk-averse, we have got to show by what the TSB does that
it is bold, brave and is not risk-averse. That is my only fear.
99. His main criticism was
that the "central executive did not have enough absolute
power to just get on with the job".
Imperial Innovations told us that "within
our company portfolio we have many examples where the TSB programs
have been a great catalyst and shared risk method of facilitating
small growing companies to collaborate on commercialisation with
larger companies without having to give up early rights".
100. There is an evident need
for an innovation agency in the UK and it makes greater sense
to ensure the TSB and its schemes evolve to meet this need than
create a new organisation. It also makes sense to concentrate
the innovation function within a single agency to ensure there
is coherence and consistency within the system. We support the
approach to its innovation policy.
101. One of the determinants of whether the TSB
is effective will be the success of the Catapult system, a key
policy intended to bring together SMEs with university based research
and one we commended in our report Technology Innovation Centres
in 2011. One measure of this success may be how involved smaller
companies are with the Catapults and how regularly companies of
that size, which have serious growth potential, access catapult
102. However both Rolls Royce and ADS
warned us that pressure from Government for the Catapults to start
earning revenue too quickly could potentially lead to a distortion
of their priorities
and stifle the growth of their capabilities.
103. We consider it vital that
the Catapults are made to work. We ask the Government to confirm
to us that they will not seek to push the Catapults to generate
revenue but instead allow them to grow slowly and organically
with a focus on developing the necessary capabilities to support
THE NEED FOR LOCAL KNOWLEDGE
104. We received mixed commentary on the loss
of the Regional Development Agencies. While there was no general
desire to see them reinstated and some definite criticisms of
their work, we did see some instances where particular agencies
played a significant role in connecting local business and research
organisations. While we found Sir Peter Williams compelling in
his evidence about the potential overplay of regional policy,
we have concerns that the TSB are properly resourced to facilitate
the necessary local components of innovation activity that was
once the remit of the RDAs.
105. Douglas Robertson, UnicoPraxis, highlighted
the value of advice in addition to funding:
The KTP scheme in terms of evolutionary technology
developments, is a very good co-funding scheme. It has been running
for over 30 years. One of the reasons why it works is because
it has advisers who work with the company to help them figure
out how to get through the process. It means it is more costly
because you have to provide advisers
106. This was supported by small technology businesses
we spoke to. Dr Francis, Technical Director, Byotrol Technology
Ltd, told us:
our relationship with the North West Development
Agency and through some of the business contacts was very good.
It was local; they were quite often in Daresbury. You could meet
them and have a coffee and talk to them about what you were trying
to do, and they would help to guide you as advisers. 
107. Dr Worswick, Chairman, Cobalt Light Systems,
The regional support was pretty well organised. Whether
one is in favour of regions having their own budgets and so on
is another matter, but the network they created was very helpful
when you applied to them.
108. Another source of local advice that has
been lost to business
was outlined by Stephen Welton,
Chief Executive Officer, Business Growth Fund:
If the banking industry have a challenge, it is that
they have centralised their model so much that the credit committees
are all-powerful, and a lot of the local credit officers in the
regions do not necessarily know what the outcome of the credit
committee is going to be. That is not empowering the
people on the ground, who have to make decisions that are pretty
fundamental. Do you trust the people you are backing? The judgment
of people, understanding how they sit within their local communityall
these very old-fashioned business principlesare critically
important, and we need to do more to invest in that.
109. We have concerns about
the ability of the TSB to provide real local information unless
they have the funding and resources to develop regional points
of contact that can talk knowledgeably to local businesses. We
recommend that the Government consider how they can resource the
TSB to provide local level advice to technology businesses.
Leveraging our research establishments
110. The Government,
in its evidence to us, pointed out that the Higher Education Institutions
generated external income of over £3 billion in 2011/12.
What may be surprising is that only 2-4% of that money was due
income from licensing and sales
of shares in spin-outs. The greater part, in cash terms, was the
conduct of collaborative and contract research, consultancy and
the provision of professional training.
THE VALUE OF UNIVERSITIES
111. The university sector as it contributes
to academic research and development is a global success. A report,
produced by the Department for Business Innovation and Skills,
looking at the competitiveness of UK said:
While the UK has far fewer researchers than larger
countries such as the US and China, as a country, it is far more
efficient in terms of output per researcher: of the top five research
nations (based on article output in 2010: US, China, UK, Japan,
Germany), UK researchers generate more articles per researcher,
more citations per researcher, and more usage per article authored
as measured by global downloads of UK articles.
112. The challenge for Government is how that
world class academic research can be translated into commercial
activity. Despite the problems outlined throughout this report,
there are many instances of fruitful collaboration between business
and universities. In its written evidence the Government provided
examples of how universities have been involved in the development
of new businesses, participated in the improvement of existing
business, improved public policy and services and attracted foreign
113. David Connell, of Cambridge University,
described the myth of the role of academic research:
Besides being intuitively attractive, the myth surrounding
university spin-outs has been perpetuated as a result of premature
celebration by government and media of high profile, VC-backed
spin-outs when they are still at a pre-revenue stage, together
with a tendency to incorrectly ascribe university research origins
to successful Cambridge companies such as ARM and CSR.
There is no doubt that policies could be put in place
to improve the commercialisation of academic science. However,
the reality is that at Cambridge, just as at MIT, it is entrepreneurial
university alumni rather than research results which play the
key role in building successful new S&T companies. This distinction
is important as it has profound implications for policy.
114. The UK Deans of Science questioned how far
universities should be expected to commercialise their research
In addition to the financial risks and the challenges
of finding commercial partners there is a question as to how far
a university should extend its traditional role of teaching and
research to encompass commercial activities that others are better
placed to do. Thus many reports have suggested that universities
and public research bodies should regard the IP they create as
supporting wider societal and economic benefit rather than expecting
commercialisation to deliver a significant income stream
115. The Wellcome Trust was concerned that pressure
from Government to increase the monetary value of knowledge exchange
with business misunderstood the broader nature of the relationship
with business and the longer term public benefits:
Universities should be recognised for the broader
value they add to the economy, for example through tacit knowledge
and the provision of skilled graduates, rather than just the external
revenue they generate.
116. Plant Bioscience Ltd
argued that universities' genuine need to pursue world class scientific
progress was often fundamentally incompatible with business need
and that the incentives
for academics to do excellent science made them less inclined
to pursue business related work and added:
We find it often quite challenging to find public
sector researchers interested and able to conduct some of the
applied proof of concept work that is needed even if funding can
Cambridge Environmental Research Consultants Ltd
agreed that universities may not be capable of the kind of development
that innovative small companies need:
Academic Research Council grants or short period
DTI, TSB etc. research projects do not take the place of long
standing applied research laboratories, which also play a role
in the development of small companies. Indeed where they have
existed in the UK some have been closed down such as the NE wind
energy centre. The policies of the present UK Government for technology
centres announced by the present government may provide some stimulus
to commercialisation of research, but they do not have the same
focus or continuity or labs based on a specific industrial objective.
117. UK universities collectively
constitute a world class research base which is, consequently,
attractive to foreign businesses. Even if they are not focussed
on commercial considerations, they will inevitably generate ideas
and discoveries that are of commercial value.
118. They are an important facet
of the UK innovation ecosystem but a resource to be drawn on rather
than a primary driver of commercialisation.
119. The value of universities also lies in the
people they produce: not only the academics who will engage with
the cutting edge research that is so vital to innovation
but also those who will provide the technical backbone to the
knowledge economy. Highly
skilled technicians have a valuable role in academic and private
sector companies. Sir Peter Williams, Treasurer of the Royal Society
and Chair of the National Physical Laboratory, told us that "the
technician class is a forgotten, underrated and undervalued one
in this country and has been endemically".
REALISING THE BENEFITS OF UNIVERSITIES
120. Tim Crocker, of the SME Innovation Alliance,
told us that the current models for knowledge exchange were predicated
on universities pushing information into businesses but, he argued,
the flow of information should be two way. He thought there could
be a more effective sharing of knowledge if there was more mobility
of people from business into universities and back again:
in the UK we have the KTP finance
systemknowledge transferwhich assumes transfer of
knowledge from the university outwards. If you are on a peer-to-peer
basisin lots of cases our companies are more advanced than
universitiesthere is no funding mechanism at all by which
we can engage with the universities and our time and theirs can
be paid for. All we can ever do is use TSB money to subcontract
to them, and that is a very unsatisfactory relationship. [...]
Visiting professors [in Germany] spend half a day a week teaching,
and the integration between universities and industry is entirely
on a peer-to-peer basis.
121. This perspective was endorsed by Tim Bradshaw
of the CBI who thought that the two way flow of information between
universities and business was essential.
Plymouth University wrote that they would like to see "national
schemes such as 'senior
internships' or 'industry-academia secondments' where the exchange
of senior personnel can create productive and strategic relationships".
The UK Deans of Science suggested "initiatives to encourage
secondments to university departments".
122. However, the Campaign for Science and Engineering
suggested that the Research Excellence Framework (REF) might discourage
hiring staff with backgrounds from industry
due to gaps in (or absence of) publication records".
Sir Tim Wilson's review
of collaboration between universities and business also looked
at the topic of knowledge transfer through secondment of people
but followed the model of transferring knowledge from universities
to business, making no mention of secondments
in the opposite direction.
123. We are sympathetic to the
demand that universities become more accommodating to non-traditional
backgrounds among their academic staff. We regard it as axiomatic
that the extended presence of people with an industrial background
within university faculties would facilitate a greater understanding
of commercial imperatives and the most effective ways to engage
university resources within businesses.
124. David Connell argued that innovation policy
should encourage businesses to draw upon university resources
rather than pushing academics into becoming businessmen.
125. An important facet
of commercialisation of university based research is achieved
through technology transfer offices (TTOs) in universities. However
the Scottish Lifesciences Association wrote that "each
university having its own TTO can become a significant barrier
to larger companies seeking commercialisation agreements with
a number of institutions".
In response the Scottish Government plans to streamline the technology
transfer functions of all Scottish Higher Education Institutions
through a single office that will have representatives within
HEFCE wrote that English universities are also consolidating their
126. The Society of Biology suggested that there
needed to be recognition of academics who engage in commercialisation
The excellence of a University or academic has until
now been judged at review on the basis of scientific achievement,
publications and achievement of grant-funding, with less focus
on translation and impact. Thus the former have remained academic
priorities. Greater recognition for achievements such as filing
IP and forming industry collaborations (at a realistic value)
could address this deficit and it may be redressed by the [Research
'economic impact score'. Knowledge transfer should be recognised
as a contribution worthy of academic recognition and reward.
In 2003, the Lambert Review of the collaboration
between business and universities indicated that:
The main challenge for the UK is not about how to
increase the supply of commercial ideas from the universities
into business. Instead, the question is about how to raise the
overall level of demand by business for research from all sources.
127. We are concerned that driving
an innovation agenda too aggressively through universities may
have diminishing returns with regard to commercialisation and
risk damaging the academic research that is working well. We
recommend that the Government's
should be to create a commercial demand for university engagement
to which they are already primed to respond. This echoes and reinforces
the point made almost 10 years ago in the Lambert Review.
Engagement with businesses
128. We received suggestions on how universities
could be encouraged or incentivised to engage more closely with
129. The Electronics Technology Network stated
that their members felt that services tendered through universities
were too expensive and that universities needed to have incentives
to engage with their local businesses:
Future funding for Universities should be based upon
their past record of commercialisation. Incentives should be given
to Universities to adapt research to reflect the
skills and interests of their local business community, thereby
strengthening the region's cluster.
130. The University of Plymouth supported the
establishment of fellowships for universities to engage in research,
embedded within industrial partners.
Bournemouth University suggested the creation of "a list
of 'industry/university brokers' who could assist linking industry
to universities and assessing the relevance of university research
to an industry".
PUBLIC SECTOR RESEARCH ESTABLISHMENTS
131. Universities are not the only publicly funded
research organisations. There are also the Public Sector Research
Establishments, The Department for Business, Innovation and Skills
Public Sector Research Establishments (PSREs) are
a diverse collection of public bodies carrying out research. This
research supports a wide range of Government objectives, including
informing Government policy making, statutory and regulatory functions
and providing a national strategic resource in key areas of scientific
research. Many of these bodies are involved in commercialising
132. The Association of Independent Research
and Technology Organisations (AIRTO) told us that these laboratories
cannot access the funds available to universities to replace the
loss of Regional Development Agency funds towards commercialisation
activity. AIRTO suggested that funds from the Research Councils
should be extended to PSREs and even to commercial organisations
to make that funding more effective.
This stance was supported by Midven, a venture capital fund manager.
AIRTO also pointed out that the structure of funding from the
TSB means that PSREs may find they cannot participate in TSB related
innovation activity without losing money.
133. The National Physical Laboratory (NPL) pointed
out that while the Government's
recently published Innovation and Research
Strategy for Growth
"recognises the importance of PSREs like
NPL for translational research, it does not include any recommendations
to enhance their role".
NPL explained the benefits that they provide to small businesses
seeking to innovate technologically:
Public Sector Research Establishments (PSREs) like
NPL maintain significant scientific and technological capability
to fulfil their core government function, in the case of NPL to
provide the UK national measurement system infrastructure. NPL
makes spare capacity on this capability available to business
and government customers through R&D services at commercial
rates. NPL often receives inquiries from SMEs with a need to de-risk
a technology through the application of our specialist facilities
and knowledge which they cannot afford to access, putting the
commercialisation of their research at risk.
In paragraphs 47-53,
we addressed the lack of access to test facilities and the fragmented
approach to capital equipment. Engineering the Future stated:
Among the developed European nations, the UK is unusual
in that it has not historically
supported 'intermediate institutes' of any significance and certainly
not on the scale of the Fraunhofer Institutes (Germany), TNO (Netherlands)
or VTT (Finland). Instead, the UK placed greater emphasis on university
research with mixed results
for the nation's innovation performance. The creation of the TSB
Catapult centres, following the announcement of a £200m innovation
programme in 2010, was a welcome development. The TSB could also
coordinate a strategic programme to support and strengthen
the supply networks.
134. The Council for Science
and Technology (CST) in its report "A
Vision for UK Research"
recommended that the Government consider the establishment of
Large Technology Platforms:
New technologies often need to be further developed
by substantial teams for a number of years before they are commercial.
These teams need to be larger than the research teams which first
made the discovery. They often need expensive production equipment
to make the research industrially useful. This requires a dedicated
environment with a clear focus for a period of 5 to 10 years.
To make a difference in a global context we suspect
that each of these platform technologies will need
between £50 to £100m over a 5 to 10 year period to become
the basis of numerous start-ups and licensed projects to large
companies. This will lead to clusters of expertise in these sectors
that feed off each other in a virtuous circle enabling the UK
to retain global leadership in large markets.
The CST recommended that funding should come from
various public sources (TSB, EPSRC, European Framework Programme,
RDAs, Universities etc) but should have a substantial industrial
component that would require some incentive from Government.
135. Public Sector Research Establishments were
identified in Lord Sainsbury's
"Race to the Top" review of government's science and
as key players in innovation and commercialisation activity. However,
the review made no reference to the role PSREs might play in hosting
technology that could be made available to commercial exploitation.
136. It is crucial that the
Government has a coherent plan on how to engage the research base
(people, facilities and intellectual property) with the innovation
agenda. However, the current situation is fragmented and confusing
and, as such, extremely difficult for small businesses to engage
137. We ask the Government to
provide, in their response to this report, its perspective on
the adequacy of the national infrastructure for innovation, benchmarked
against nations with which we compete and how it intends to remedy
structural short-comings, possibly along the lines recently recommended
by the Council for Science and Technology. We recommend that Public
Sector Research Establishments play a key role in this infrastructure
and we plan, in future, to examine their role within the research
and innovation ecosystem in more detail.
134 For example Q 24, Q 111, Q 241 Back
Ev w101, para 4 Back
Ev 101, para 41 Back
Q 130 Back
Ev 183, para 1.6 Back
Q 241 [Iain Gray] Back
Q 241 [Sir John Savill] Back
For example Ev w154, para 14 Back
SMART awards are operated by the TSB to provide support for proof
of concept and proof of market activities within businesses and
universities. Companies can also seek support for the development
of prototypes through this programme. Back
The SBRI is operated by the TSB to enable technology-based SMEs
to compete for contracts developing innovative solutions to public
sector challenges, and has helped to support the commercialisation
of new technologies in sectors such as healthcare, defence and
Ev 119, para 6.1 Back
Q 9 [David Connell] Back
Ev 96, para 13 Back
Ev w 49, para 1.4 Back
For example, Ev 100 and 102, paras 37 and 51 Back
Ev w8, para 6, Back
For example, Ev w18, para 3; Ev w47, para 2; Ev w70, para 6; and
Ev w79, para 5 Back
Ev w10, introduction Back
Ev w90, para 6.2 Back
Ev 128, para 23 Back
Ev w91, para 7.4 Back
Ev 129, para 32c Back
Ev w69, para 4 Back
Q 127 Back
Q 130 Back
Ev w76, para 4.1 Back
House of Commons Science and Technology Select Committee, 2nd
Report of Session 2010-12, "Technology and Innovation Centres",
HC 619, 17 February 2011 Back
ADS is the trade organisation advancing the UK Aerospace, Defence,
Security and Space industries which, together with its regional
partners, represents over 2,600 companies across the UK supply
Ev w198, para 5.2.3 Back
Ev 186, para 5.3.1 Back
Q 10 [Dr Robertson] Back
Q 82 [Dr Francis] Back
Q 82 [Dr Worswick] Back
Q 72 [Stephen Welton] Back
Ev 95, para 5 Back
BIS, "International Comparative Performance of the UK Research
Base - 2011", 2011
Ev 105, Appendix A Back
Ev 114-115, paras 2.5-2.6 Back
Ev w51, para 5 Back
Ev 136, para 25 Back
Ev w68, para 1 Back
Ev w101, para 16 Back
For example, Ev w37, para 3 Back
Q 112 [Sir Peter Williams] Back
Q 224 [Tim Crocker] Back
Q 224 [Tim Bradshaw] Back
Ev w4, para 6 Back
Ev w52, para 6 Back
Ev w177, para 5 Back
Professor Sir Tim Wilson DL, "A Review of Business-University
Collaboration", February 2012, recommendations 15 and 16 Back
Ev 119, para 6.5 Back
Ev w10, Appendix, para 7 Back
Ev w10, Appendix, para 7 Back
Ev 139, para 17c Back
Ev w63, para 2 Back
HM Treasury, "Lambert Review of Business-University Collaboration",
Ev w115, para 3.6 Back
Ev w4 para 10 Back
Ev w8, para 7 Back
Ev 97, para 18 Back
Ev w90, para 5.4 Back
Ev w91, para 7.4 Back
BIS, Innovation and Research Strategy for Growth, December 2011
Ev 154, para 7 Back
Ev 156, para 9 Back
Ev 167, para 5.1 Back
Council for Science and Technology "A Vision for UK Research",
HM Treasury, "The Race to the Top: A Review of Government's
Science and Innovation Policies", October 2007 http://www.hm-treasury.gov.uk/d/sainsbury_review051007.pdf Back