Innovation nation

10 November 2006

With R&D spend sliding dangerously, the government is pouring money into research projects through its Technology Programme and it's now easier than ever for entrepreneurs to access these funds

Ten years ago, the amount of money being invested by businesses in R&D in this country was around 1.5% of Gross Domestic Product. In 2004, that figure was down to 1.15%, well below the average of 1.51% across the developed countries.

According to the government and the Confederation of British Industry (CBI), this is damaging the UK's innovation potential and the standing of its economy on the world stage. 'We have a problem,' says Trudy Norris-Grey, chair of the CBI's Science, Technology and Innovation Committee. 'The UK has a reputation for generating ideas, but not for supporting them, and other countries are coming looking for our ideas to commercialise them.'

She adds: 'R&D is only one measure of innovation, but it's a good indicator. The UK economy is slipping in global economic status. It may be slowly, almost imperceptibly slipping, but it's definitely slipping.'

Early stage progress

Norris-Grey was speaking at an event last week in London to report on progress in tackling the innovation gap. Hosted by g2i partner Quotec on behalf of the DTI's Technology Strategy Board (TSB), Innovate 2006 brought together stakeholders from across government and a host of large and small businesses.

Three years after the government's landmark report on innovation, some progress is clearly being made, but the government insists it's still early days. Graham Spittle, chair of the TSB, which was delivering its second annual report at the event, said: 'The board is now having an impact. We've started reasonably well and got a certain amount of traction going and we're going to stick with it.'

Essentially an advisor to the government on technology strategy, the TSB announced at the event that it's evolving into an arm's length business-led body with a full-time executive based in Swindon. Its main focus so far has been twofold. First, it's been funding collaborative R&D projects, with 500 supported so far to the tune of £365m. Second, it's been setting up 'talking shop' knowledge transfer networks (KTNs). Twenty have been established in varying sectors - from aerospace, through grid computing to photonics - and in all it estimates 10,000 people have been involved.

Spittle says the changes are a natural evolution designed to give the TSB more autonomy of action and speed of response. '[With our new status] we will clarify and review our strategy with the government every three years - then we will have complete autonomy to go and act as we choose,' he told g2i. He likened its status to the eight scientific research councils, which are themselves partners of the TSB.

The good news for entrepreneurs is that the change should make it easier for entrepreneurs to influence the KTN programme and raise R&D funding. 'This is a contact sport,' said Spittle. 'This is not something that's done to you or for you.' For example, the TSB will update its list of KTNs early next year, and Spittle said any number could be established: 'If there's a clear need to bring people together [in a given area], then we'll work with government departments and Regional Development Agencies to set them up.'

The TSB has also established two pilot Innovation Platforms with £10m funding, one in network security and the other in intelligent transport systems. In addition, it has £5m of funding for emerging technologies, and has so far identified quantum information processing, nanomedicine and smart and adaptive optics.

On the fast track

With awards ranging from £50,000 to £95m, the TSB has also reviewed the time it takes to make awards in its competitions for the collaborative R&D funding. 'For relatively small sums of money we wanted to make it easier and faster,' says Spittle. It now operates a three-tier competition. A six-month two-stage competition operates for projects over £8m: for awards under £250,000 the money can be won in as little as 10 weeks. Spittle emphasises that there's a degree of equality in the size of the grants, with big business awards usually having a trickle down effect on smaller organisations ( see Small is Beautiful). 'When you see a large company winning a bid, the money doesn't just stay with the company; there's a whole ecosystem around large companies.'

The comprehensive spending review mid-way through next year is expected to increase the TSB's funding, with the CBI calling for something closer to £500m. It's important to bear in mind that these are 'collaborative' projects and the TSB usually provides less than 50% of the required funding, so companies need to find match funding from investors or research councils.

Challenges ahead

The TSB's goal is 1.7% R&D spend by 2014, but it faces several challenges on the way, not least in the changing dynamics of the UK economy and the need to tap into the public sector's £150bn spend. Spittle stressed that it's important for the various government initiatives to pull in the same direction. 'We can't afford to have a government and business divide. I don't believe we have, but I don't believe we are firing on all cylinders either. There are lots of things we can do to be faster and slicker.'

He added that the UK's entrepreneurial culture needs to adapt. 'In this country, we are a little shy about turning invention into innovation into success. We seem to equate success with excess. In the US, when you fail, you fail fast and get back on your horse. We need to learn to do that.'

By David Longworth, Webster Buchanan Research