Science and TechnologyWritten evidence submitted by Royal Aeronautical Society

(1) What are the difficulties of funding the commercialisation of research, and how can they be overcome?

1. The reduction in the level of government funding in the defence aerospace sector is having a significant impact on the commercialisation of civilian technology. Defence based R&D has traditionally driven forward technologies that are often seen as being too high risk or too early a stage for civilian companies prudently to consider backing. Once defence funding has taken the technology to a level where the risk associated with further development has been reduced or the technology has been demonstrated, civilian companies are then more willing to back further development and subsequent commercialisation.

2. For example, the use of composite materials in structural applications in aircraft was led by early development of composite design and manufacturing technology in military aircraft and missiles. This experience increased civilian industry’s confidence in the technology and facilitated its further development for use in civilian aircraft such as the Airbus A380, A350 and the Boeing 787.

3. The key issue is not actually one of funding defence R&D per se (although the resources allocated to fundamental research have declined over the past decade).The problem is actually more to do with the substantial customer capital investment involved in buying new equipment which, in turn serves to stimulate the market. The 10 year equipment programme is now fully committed to existing programmes. As a result, with few new programmes expected there will be few new market opportunities over the next couple of decades. As a result, industry is unlikely to invest on a speculative basis in R&D. Equally, the UK’s stated policy of buying leading-edge technology “off-the-shelf” on the global market also militates against either public or private investment in core technologies. In short, this prospect underlines the need for another iteration of the Defence Industrial and Technological Strategy which industry could use as a guide to future investment decisions.

4. The reduction in funding for defence related technology will reduce British activity in riskier technology which will not only reduce the overall rate of innovation, but will also imply that the UK potentially could miss out on novel cutting edge technology, which may undermine future commercialisation of “disruptive” products.

5. The Space sector differs in several respects from aerospace generally and the context for commercialisation of R&D is very different. The space industry and agencies in Europe use a system of Technology Readiness Levels (TRL) to characterise the maturity of a technology and its readiness for commercialisation and/or operational use. Items at TRL 1 to 3 are at the research stage while items at TRL 7 or 8 are ready to be applied. The “valley of death” in this case refers to the long-standing difficulty to move technology from TRL 3 to TRL 7.

6. To help address the space valley of death, the UK participates in many of the technology programmes of the European Space Agency (ESA). A new five year plan for ESA will be agreed by Member governments later this year and will include measures intended to help address the valley of death. A refocused General Support Technology Programme (GSTP) would help technology and products to reach the highest TRL by matching technologies needing in-orbit demonstration with the cheapest and fastest flight opportunity available. Flight demonstration is a powerful means of bridging the gap between low TRL and the maturity required for adoption on missions.

7. More generally, one of the key features of ESA’s technology support is that activities at higher TRL levels that have commercial applications are co-funded with the private sector. At the blue skies end of the TRL scale the work is usually fully funded by ESA; but from about TRL level 5 or 6, ESA requires participating companies to provide much of the funding. The level of private sector funding ranges from 50% at about TRL 5 or 6, rising to beyond 70% for demonstration missions at TRL 7 or 8. The requirement for private sector co-funding ensures that activities at TRL 6 and above are efficiently commercialised. One of the weaknesses of the scheme is that there is no intermediate step between 100% ESA funding at about TRL 3 and 50% at about TRL 6, making it difficult to bring promising TRL 3 or 4 technologies to maturity.

8. The UK Space Agency has set in place a number of national initiatives in the past year that complement the ESA programmes. A national space technology programme was announced in 2011, which includes support for In-orbit demonstration. More recently the TSB announced the creation of a Satellite Applications Catapult initiative that will focus on bringing technology to the maturity needed for commercialisation. The Catapult should provide a market pull that complements the technology-push of the national space technology programme and is explicitly targeted at bridging two valleys of death characteristic of the space sector—the first in bringing technology to maturity for space and ground infrastructure, the second in commercially exploiting that infrastructure. The national programmes will also enable the UK to influence the ESA programmes from a position of knowledge and strength, thereby enhancing the value for money the UK obtains from both its ESA subscription and its national programme.


9. In the case of SMEs, companies face a number of particular problems of commercialising R&D. For an SME whose product sales are dependent on long term evaluation and qualification controlled by regulation, raising finance is difficult. Banks need to see regular income to service debt and R&D tends to be variable, often grant assisted with quarterly payments in arrears. Similarly, Angel Funding tends to be in very small amounts which although helps cash flow, is rarely sufficient to take major innovation into commercialisation; and Venture Capital wants a business plan with a three to five year payback where new aerospace ventures often have a far longer timescale.

10. Government backed bank lending for SMEs is considered by banks on the same merits as they would a conventional loan and the cost of these loans is also high, added to which the Government asks for a 2% risk payment. Banks are reluctant to use this system as the Government is very slow to cover losses.

11. A possible solution to these problems would be to establish a government Venture Capitalist such as the original 3i with a remit to invest in UK companies. This body should commit funds for a longer period than commercial venture capitalists. In bypassing commercial funds SMEs would have an alternative route to fund R&D and its commercialisation. This should create a real incentive for commercial lenders/investors to get involved.

12. In times of austerity, other countries are also having to scrutinise public spending and may cut R&D budgets. As many UK companies, certainly those in the aerospace sector, have a global presence and companies all over the world are looking for technical answers to similar challenges, there is significant opportunity for cross-border collaboration to develop and commercialise technology. The European Framework Programme is an example of how cross-border funding schemes can work.

(2) Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

13. All high value manufacturing activities are heavily and appropriately regulated for the safety of workers and end users. Hence there is a need to test and verify materials, manufacturing processes and end products extensively before release to market. Testing is especially critical in proving space technologies and products that have to operate in an extremely stringent environment. Testing takes both time and money and difficult to fund when the potential is recognised but hurdles such as a limited supply chain obstruct near term use.

14. In many cases the challenge of breaking into sector specific “islands of excellence” is a major barrier to commercialisation. As a result, the silo effect can mean that high value innovation in one sector does not transfer readily across to another. The continued difficulties faced by SME engaging with mainly OEM led research centres create further problems. For example, TISICS, a titanium composite technology, has applications in aerospace, space, oil and gas, defence, and marine power. Civil aerospace is well placed to act as a “first user” to develop the technology for future products as other sectors tend to need proven technology before considering it for use in their products.

15. This process could be better supported and technological diffusion encouraged by strategic long term funding for such enabling technology. This would cover development and testing and could be run through the TSB. This would have to be set against a five to 10 year plan where funds are agreed in advance and released against milestones. For example, in the case of Graphene a £50 million investment could bring this product to market. Industry support would be encouraged and banks and venture capitalists might be more willing to lend money if they could see a structured plan backed with government grant funding.

(3) What, if any, examples are there of UK based research having to be transferred outside the UK for commercialisation? Why did this occur?

16. A320 wing work has been transferred from UK to China and Korea by Airbus. If the US buys Hawk trainers, the development R&D will shift to USA. Carbon fibre was developed at the former RAE, but there is no longer production in the UK, leading to the importation of several billion pounds of fibre a year.

17. From the 1990s onwards there have also been relatively few major projects to encourage in new technologies. The UK has not developed a new military or civil aircraft since the 1970s and does not participate in large scale space programmes. Major defence programmes are now collaborative, and in the case of the F-35 led by the US and subject to strict technology transfer controls. This could undermine national capabilities in key areas.

18. Given the cost of developing new technology some loss of overall capability is inevitable and is often the price of collaboration and a globalised manufacturing system, it is essential that the UK is able to keep in touch with a cross-section of critical technologies and, in particular, systems integration skills; hence the important of supporting enabling technology and technology demonstration.

19. These and other examples have been largely caused by the absence of a strategic policy to support the underpinning technologies required for production. The Aerospace Innovation and Growth Team Report some eight years ago established a technology plan for the sector that has led to some important public and private investment in key technologies, particular composite material fabrication. This process should be repeated regularly for aerospace and extended to other high technology manufacturing sectors. This strategic view of aerospace technology needs is maintained in the National Aerospace Technology Strategy and updated by the Aerospace, Aviation and Defence KTN of the TSB.

20. In the absence of new defence programmes, the funding of technology demonstration has special significance in keeping design and development teams in being. This also plays a key role generally in reducing the risk of aerospace programmes and thus aiding the commercialisation of new technology and combinations of technology implied by the development of a complex aerospace system. Before the massive increase in development costs, technology development often took the form of prototype development that replicated some of the fundamental characteristics of the targeted technology. However, in many traditional system development methodologies, costly prototypes are not always necessary or appropriate. Technology demonstrations can provide a variety of benefits throughout the systems development life cycle, rather than at a single time for a single purpose.

(4) What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

21. The collaborative R&D programmes run by the TSB are seen by industry as a key mechanism to increase the Technology Readiness Level (TRL) of those technologies identified as crucial for future products. They also provide a mechanism for supply chain development, with consortia coming together to deliver the programmes. They are viewed by SMEs as an important way to make contact with, and to develop working relationships with OEMs. This is vital to ensure that the innovation created by SMEs is seen and commercialised by OEMs.

22. The TSB programme was developed from cross-sector companies of all sizes and demonstrated that the alliance of OEM and SME companies in a close knit community can cross the valley of death. Members of a consortium collaborate to commercialise their research.

23. In aerospace, the “Integrated Wing” and “Next Generation Composite Wing” are examples of important TSB funded programmes leading to the development of UK technologies that have been fully commercialised. The fact that both Airbus and Bombardier continue to produce wings in the UK, now largely made from composite material, is testament to the long term strategic development of aerospace technology facilitated by the National Aerospace Technology Strategy run by the TSB.

24. The Knowledge Transfer Networks run by the TSB also play an important role in the commercialisation of research.


Help make companies aware of funding and other assistance that may help them increase the TRL of the technology.

Use their understanding of the technology requirements of different industries to encourage consortia bidding for R&D funding.

Provide networking opportunities to help companies with innovative technologies to meet partners or customers who may have a need for the technology and therefore can help commercialise it.

The Aerospace, Aviation and Defence KTN is also the guardian of the National Aerospace Technology Strategy. This long-term strategy helps to ensure that the technologies required by the UK aerospace industry are identified and developed in a timely manner for commercialisation. This strategy is vital to ensure that the UK stays at the forefront of global technology development retaining both know-how and high-value employment in the UK.

25. Overall, the TSB has been very beneficial to the aerospace sector. For example, TISICS helped British companies to access major potential customers either as partners or because companies had experience of working in TSB projects such as the Integrated Wing Project. This led directly to light weight Landing Gear concepts, which UKTI was able to promote to a Japanese customer. Similarly, following a TSB feasibility study for space, TISICS was able to engage with ESA in Holland and to make contact with Astrium France. Government support for Space is bringing a lot more opportunities for TISICS generally to engage with the European space industry. A TSB feasibility study has also enabled TISICS to work with Alstom in the UK and Switzerland to develop a new higher efficiency turbine blade for power generation.

26. The composites “Grand challenge” competition demonstrated that a fragmented industry can be brought together to work on new manufacturing methods. The Grand Challenge fostered strong relationships across the groups of businesses large and small, who by working together have proven importance of open innovation in a focussed and coordinated approach.

27. TSB funding is extremely useful to SMEs; companies can bid for large or small projects with a reasonable expectation of winning. This contrasts with bidding for EU framework 7 funding, which is often too complex, expensive and slow.

28. In the space sector, the government’s decision to fund a national space technology programme and a Satellite Applications CATAPULT Centre, and to participate in the relevant ESA programmes.

(5) What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

29. The Valley of Death problem is difficult to address. TSB funding should only aim to get technologies to Technology Readiness Level (TRL) 6. Companies should then invest to take technology to higher TRL levels and on to full commercialisation. However, under the current austerity conditions companies are finding it difficult to finance such development. The Government thus needs to work with banks and venture capitalists to help provide financial packages that can help both SMEs and large companies to take technology beyond TRL 6 and through to commercialisation.

30. In the aerospace sector, the UK Government has the “Repayable Launch Investment” (RPI) system which typically provides up to a third of the launch costs for a new project, repaid from sales and subject to a long term levy. This has facilitated the commercialisation of extremely large programmes such as Airbus wing and Rolls-Royce engines. RPI has generated a healthy return to the UK taxpayer. RPI has tended to benefit mainly the larger aerospace companies. RPI rules make it difficult for smaller equipment companies to qualify for assistance. The future of RPI in its present form may also be affected by the WTO, which has challenged such systems as a breach of its subsidy code.

31. In the space sector, the Government’s long standing participation in the technology and applications programmes of the European Space Agency have been crucial in giving Britain a successful and growing space industry.

February 2012

Prepared 12th March 2013