UK Innovation Policy: a post-summer update
Back from summer holidays? Feeling out of the loop? To help you out, we've pulled together a briefing on publications and announcements relating to innovation policy that have taken place over the summer months.
It covers recent updates from the Government - including the Industrial Strategy, the Patient Capital Review and the Industrial Digitalisation Review - as well as comparisons on the state of the UK innovation ecosystem, both domestically and internationally.
The UK’s Industrial Strategy
It has been confirmed that the next stage in the Government’s consultation process is due in Autumn 2017 with the publication of a White Paper. In the meantime, the independent Industrial Strategy Commission (run by Manchester and Sheffield Universities) has published an interim report Laying the Foundations (the final report will be published in October 2017). It sets out the emerging findings of the Commission, and restates the original 10 pillars of the Industrial Strategy Green Paper into seven key themes:
- Institutional framework - a long-term set of institutions to determine, implement and monitor a new strategy;
- Place - recognition of the importance of place and the need to increase growth and productivity everywhere;
- Science, research and innovation - a joined-up approach to science, research and innovation;
- Competition policy - a strong competition regime;
- Investment - an increased investment rate;
- Skills - a comprehensive effort to improve skills;
- The state’s purchasing and regulating power - effective use of the state’s purchasing and regulating power.
The report sets out the importance of a positive vision for the long-term, strategic economic management of the country, and cautions against government simply handing out money to chosen businesses or industries. The Commission sees the Industrial Strategy as a unique opportunity to build momentum and political consensus among public and private sectors.
Dame Kate Barker, Chair of the Industrial Strategy Commission, said: "Summer 2017 is a critical moment for the UK economy. The election [resulted in] political fragility against a backdrop of growing economic concerns following the EU referendum. Now more than ever we need long-term strategic economic management to enable the UK to respond to current challenges and invest in our people, places and industries to achieve greater future prosperity. This is what industrial strategy is and how it should be thought about by the government as it prepares its new strategy.”
There has been some initial progress on implementing the Industrial Strategy Challenge Fund (for further details see this new introductory video from Innovate UK) with competitions for funding under three of the six main challenges opening during the summer:
- As part of the healthcare and medicine challenge, up to £8 million in funding is available as part of a competition focussed on digital technology for healthcare, closing October 4.
- The £246 million Faraday Challenge has been launched under the clean and flexible energy challenge, funding businesses to seize opportunities presented by the move to a low carbon economy. A competition on Battery innovation for the electrification of vehicles, closing September 14, has set aside up to £30 million for R&D projects and up to £10 million for feasibility studies. Applications for funding under the National Battery Manufacturing Development Facility, supporting scale-up activity for automotive batteries, will close on September 7.
- Set up to address challenges raised by robotics and artificial intelligence, a demonstrator programme, proposing up to £6 million in grants for testings in extreme and challenging environments, closed its first round of applications in July. A competition for another £10 million for collaborative R&D projects, with co-investment from the industry, closed in August.
A recent update from Innovate UK on ISCF funding they have distributed, so far indicates that 250 projects have benefited. The projects were selected through proposals that were submitted in previous competitions, but that Innovate UK were not in position to fund at the time. Alongside the examples of projects currently being funded, Innovate UK also provides a map of ISCF investment by region and local authority.
Set up of UKRI
Newly appointed CEO Sir Mark Walport, gave a speech (slides here) on July 4 setting out his vision for UK Research and Innovation (UKRI) - a new organisation, set to launch in April, 2018, which will supervise research and innovation activities in the UK.
Its role will involve coordinating the actions of Innovate UK, the existing seven Research Councils, and Research England (see diagram on the photo below).
In an interview with the BBC, Sir Mark Walport faced some probing questions about the remit of the new body, but was firm in his reply that the main purpose of UKRI would be to oversee and give strategic direction to a research funding system that has, so far, been perceived as uncoordinated and lacking in strategic planning.
By boosting STEAM skills and encouraging cross-field science research, Walport's long-term vision is to make the UK research system “the best in the world” while “remaining very global in our outlook”. Critics did, however, remark that during his speech “the word ‘Brexit’ did not pass Walport’s lips”.
To keep up to date with forthcoming news and announcements, you can follow UKRI on their new twitter account @UKRI_News (or alternatively Sir Walport’s account @UKRI_CEO) or check our their new website.
Patient Capital Review - consultation launched
In August, the Government launched a consultation on financing growth in innovative firms, which closes on September 22.
It is seeking views on a clearly identified gap in the UK financial system to provide long-term, ‘patient’ capital for high growing firms seeking to scale up. The lack of capital provision is holding back the UK on the international scene, and has been identified as a notable weakness in European and international innovation rankings (see below).
A New Investment Fund has been proposed to help address the lack of patient capital supply for cutting edge startups, as a funding gap of $4 billion between British and American firms has been identified, Setting up a new UK funding stream appears even more sensible given that British startups are currently receiving substantial funding from the European Investment Bank, the future of which is uncertain should Brexit negotiations turn into a hard exit deal.
This consultation is part of the Patient Capital Review, launched by HM Treasury in November 2016, which seeks to identify access barriers to long-term finance for growing firms, in line with the objectives of the Industrial Strategy‘s fourth pillar; supporting businesses to start and grow.
An industry panel chaired by Sir Damon Buffini has now been appointed - the list of panel members is available here. It will support the Treasury in shaping the key themes proposed for consultation, and will provide a set of recommendations as part of a formal response to the review’s consultation.
The Patient Capital Review’s final recommendations will be presented to the Chancellor ahead of the Autumn Budget 2017.
The Industrial Digitalisation Review - interim report
An interim report was published by the Industrial Digitalisation Review, led by Juergen Maier - CEO of Siemens UK and Ireland. The six-month review was announced as part of the Industrial Strategy, to assess how the UK could benefit from the accelerated adoption of digital technology across advanced manufacturing (also referred to as Industry 4.0 or the Internet of Things).
Carried out by a leadership team of business representatives on behalf of the Government, the review particularly seeks to identify industrial sectors with the most potential, to benefit from the adoption of industrial digitalisation technologies. The objective is to identify the digital technologies with the highest likelihood of being able to create new industries and new jobs, including artificial intelligence, robotics, augmented reality solutions, automation technology, blockchain and data analytics.
This interim report presents the work undertaken so far, exposing the barriers limiting the opportunity in the UK and the review’s emerging recommendations to address these barriers. Lack of leadership in industrial digitalisation in the UK, poor adoption among SMEs and under-leveraged innovation assets to support start-ups/scale-ups have been identified as the main barriers to the wider adoption of industrial digital technologies.
Provisional recommendations include:
- The establishment of a Digital Technology Institute and Digital Technology Networks to identify clearer priorities and ensure better coordination;
- A stronger and clearer national framework of effective business support, especially to SMEs;
- The creation of clear standards for emerging digital industries and the ownership of data;
- Boosting digital skills to enable successful deployment and exploitation of digital technologies.
Over 200 companies are already involved in the work, and sharing this interim report is the next step in testing the initial findings with an even wider audience. The recommendations in the review's final report will pave the way for a blueprint for a ‘Sector Deal’ for manufacturing and industrial sectors. To keep up to date with upcoming developments, you can check the Industrial Digitalisation Review’s website.
Where is innovation happening in the UK?
The Smart Specialisation Hub has published a report Mapping England’s Innovation Activity. It presents an overview of innovation activities by Local Enterprise Partnerships (LEPs) and the sector, organised by Emerging and Enabling Technologies, Health and Life Sciences, Infrastructure, Manufacturing and Materials. Allowing for a local, place-based analysis of strengths and opportunities, the report aims to address a gap in existing analyses that tend to only be produced either at the national or regional level.
According to the report, such level of granularity would particularly help policymakers tackle the following challenges:
- Identify hot and cold spots of innovation activity nationally;
- Search sectors to identify areas of peak activity;
- Investigate for any particular LEP the sectors they are most active in;
- Get a sense of regional activity;
- Identify potential partners and potential areas to prioritise investment.
Centre for Cities published a briefing examining how to encourage innovation through clusters. Looking at how and why industry clusters might occur, the briefing argues, however, that it is in cities, not clusters, where policy can help firms locate in one place. It recommends that industrial strategy and relating cluster policy should concentrate on encouraging innovation in cities by encouraging density and knowledge-spillovers.
Centre for Cities also published a controversial piece considering whether public sector jobs should be moved out of London, looking at the impact of two notable cases of high-skilled publicly-funded jobs that have been moved in recent years – the consolidation of the Office for National Statistics (ONS) in Newport and the move of part of the BBC’s national activities to Salford in Greater Manchester. Its conclusion that the BBC relocation had limited impact across Greater Manchester has been quite strongly rejected by Greater Manchester.
How is the UK innovation system comparing with international competitors?
The 2017 edition of the European Innovation Scoreboard (EIS) was published this summer. The UK is now ranked fifth behind Sweden, Denmark, Finland and the Netherlands, for the first time appearing in the top-tier group of ‘Innovation Leaders’.
Credits: European Innovation Scoreboard 2017
A granular analysis of the UK innovation system is given through a set of 27 indicators.
Relative weaknesses are around intellectual assets (patents, trademark and design applications), innovators (lack of SMEs’ in-house products, process, marketing or organisational innovations), and limited financial support for startups and/or scale-ups - an issue in general among EU member states that makes the Patient Capital Review particularly timely and crucial to the international competitiveness of the UK’s innovation system.
Relative strengths of the UK encompass the attractive research system, human resources, employment and sales impacts. The leading position of the UK is driven by its attractive reputation for research and innovation, companies’ excellent access to a highly qualified and diversified talent pipeline, and its ability to export innovative outputs internationally. As a ‘hard Brexit’ could seriously endanger those competitive advantages, striking a good deal with the EU seems key, particularly to secure some research funding and a single market deal that enables exports and movement of high skilled workers.
None of those challenges will be new to the Brexit negotiators, but this edition of the European Innovation Scoreboard is a timely reminder that they are still on the negotiation table.
While the UK is doing well on the European scene, it has been downgraded globally, dropping down to fifth position of the Global Innovation Index 2017 (GII) behind Switzerland, Sweden, the Netherlands and the United States.
Credits: Global Innovation Index 2017: Innovation Feeding the World Results in this ranking confirm some of the UK's strengths and weaknesses that emerged in the EIS, including a strong position in human capital and research (6th) but a drop in knowledge and technology outputs (13th), especially of patents.
The GII’s considerations of education and creative issues help assess the UK's competitiveness against international contenders in these areas. The UK remains a leader in creative industries, ranking fourth globally in creative outputs (intangible assets, creative goods and services, online creativity). Concerning education, the GII reveals a gap between inputs and outputs as the UK’s expenditures - per pupil and as a percentage of GDP - have increased, yet last year's PISA results show UK students have fallen down international rankings.
While the largest improvements have been made in areas such as political environment (18th), education (22nd), and knowledge absorption (28th), at the indicator level the UK maintains its first spot in citable documents, and gains the first rank in Government online services, e-participation, and Information and Communications Technology (ICT) and business model creation.
 Healthcare and medicines; Clean and flexible energy; Driverless vehicles; Robotics and artificial intelligence; Manufacturing and materials of the future; Satellites and space technology