Speech by David Willetts to the UK Science Park Association

Embracing innovation in the UK.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon David Willetts

I am delighted to be here to help celebrate the thirtieth anniversary of the UK Science Park Association. You have certainly come a long way in 3 decades. In 1982 there were only 2 science parks in the UK – Cambridge and Herriot Watt. Now you have 100 members, supporting 4,000 tenant companies which employ 42,000 people.

UKSPA was born back in 1984 because universities were realising that the era of the knowledge-based business had arrived – and they could be at the heart of that innovation. Those first 2 science parks started out offering services to larger businesses, but the vision for the new national association was to share best practice on getting smaller innovative start-ups off the ground, and helping growing companies. Now of course you have so many different members that we can’t neatly pigeon-hole them. We don’t just talk about science parks, but also about innovation campuses, technology incubators, innovation centres, research parks and technoparks. But big or small, each has the same basic mission to support developing companies close to a centre of research excellence.

The shortlist for tonight’s awards is a showcase of the sort of exciting talent you are nurturing. Take Ecologia, an environmental firm based at Kent Science Park which uses a wide range of innovative technologies to deal with problems such as soil contamination. They started out in 2000 with only 2 members of staff. Now they have a team of more than 60 employees, including engineers, geologists and chemists, and are winning big contracts across Europe. And down the road at the Birmingham Research Park, a spin out from Birmingham University called Smart Antennae Technologies has a real chance at revolutionising the cellular phone market. Their cutting edge new antennae are much smaller – which matters when phones are getting ever slimmer – and much cheaper. And with an expectation that consumers will want 2 billion handsets a year by 2016 they are projecting potential revenues of $2 billion.

I am in no doubt that science parks are an important part of the research infrastructure in the UK - and an important part of our ambitions to be the best place in the world to do science. But you haven’t always been seen in that light, and it is a matter of regret that over the last 30 years you have had a sporadic and unreliable level of engagement from government in both economic and policy terms. So, let me start today by saying firmly that things have changed. We know that you matter. And there is very real and sustained support for what you do in government now.

We all know about the phenomenal strength of British science. Quite simply we have the best, most productive scientific community anywhere in the world. When metrics are used to rank countries for the quality of their scientific output we are outstanding as the country which punches far above its weight. With just over 3% of the world’s spending on research and development, we produce over 6% of the world’s publications and 16% of the world’s most highly cited papers. We transform our funding into great science more productively than anyone else. And as a result we attract more inward investment for R&D than anywhere else in Europe.

It is a mark of our success that we performed better than ever in the recently closed Seventh European Framework Programme for Research and Technological Development. UK organisations took 15.5% of the programme’s budget, or just under 7 billion Euros, second only to Germany. And in the last 2 calendar years of the programme we actually secured more funding than any other country. This means we have a great track record to build on with the new Framework Programme – Horizon 2020 – which has a significantly larger budget of €79 billion, and which expands for the first time into innovation support activities. We will of course be looking to improve even further on the already impressively strong levels of university participation in the programme but more importantly we are working hard to raise levels of business participation significantly above the relatively disappointing levels seen in FP7. To help achieve this we have strengthened the UK’s National Contact Point network, designed a new national website and seen the Technology Strategy Board establish an office in Brussels. I urge you to think of 1, links to other parts of the EU and 2, links to business which are more important than ever as criteria for funding are changing.

All this great science is of course worthwhile in its own right. But it also matters because it drives innovation. Which means it is absolutely key to our economic future. And this is why we have made difficult decisions elsewhere in order to protect the science budget, as well as increasing our investments in innovation. We want to be sure that we exploit our brilliant research to create a better future for our country. So that means supporting the broader institutional landscape that contributes to the UK’s strengths in commercialising research and supporting new high tech businesses. As you know this encompasses lots of bodies, both public and private, which offer a range of services including the work that science parks do to support new and growing businesses and link them with the best scientists, to specialist research, advice and consultancy.

Historically one of the means of tackling our perceived weakness at innovation was to establish Public Sector Research Establishments. Some of these are owned by and contribute to departmental policy making – for example, MOD owns DSTL, which ensures innovative science and technology contribute to the defence and security of the UK. And a substantial proportion are institutes which are owned by and responsible to one of the research councils.

I know from some of the conversations I have had with these institutes that some are finding it difficult to operate in the public sector. In particular there are growing concerns amongst some research council institutes, who feel that administrative barriers are getting in the way of great science. They want greater flexibility on pay within, of course, our overall agreed pay framework. I’m so pleased, for example, we were able to negotiate pay flexibility to operate the JET fusion facility at Culham and hope we can show such flexibility elsewhere.

Another common frustration is the lack of procurement freedoms, particularly when scientists are involved in the design of new equipment. For example, it is hard to fit high performance computing for scientific research into the standard government rules for IT procurement. Of course, HPC equipment like that for Hartree and ARCHER, and high end computing for facilities like the Diamond Synchrotron are worlds away from equipment Government buys and our procurement rules need to recognise that.

At the moment some of these institutes feel that the only way to escape these constraints is by leaving the public sector and becoming part of either a university or a private organisation. But I believe that our science base would be substantially weaker if, unlike the US or Germany, we proved unable to provide a regime in which a public research institute could function well. So I am exploring how we can give Research Council Institutes greater freedoms to continue delivering excellent science within the public sector, through reducing unnecessary red tape.

For PSREs more broadly I am concerned with 2 further issues. First, how we make sure we retain and expand the key science capabilities we need for the long term.

For a start we need to increase our understanding of who the many different independent Research and Technology Organisations (or RTOs) are, and what roles they play in innovation. Later this month BIS will publish a new report by Keith Smith, Professor of Innovation Economics at Imperial, which provides a vital taxonomy of these organisations, taking us much closer to an understanding of different types of organisation and why they matter. At the latest BIS count there are around 200 highly heterogeneous RTOs in the system. On the basis of surveys, interviews and site visits that Keith has conducted over a number of years, it is clear that there are three broad innovation-relevant activities conducted by RTOs.

First, they help business to innovate. This can take many forms. It might mean being involved in the development of a specific product or process. But equally, it might mean taking a phone-call and offering advice on a pretty informal basis. When firms innovate and step into a new area they naturally often encounter problems they don’t have the expertise to handle. Sometimes solving a problem might require more significant science input and specialist kit. A great example of this was the use of the Synchrotron Radiation Source at Harwell too solve problems of consistency in chocolate.

Secondly, they are a vital repository. They offer a place where businesses can access important pieces of equipment that they couldn’t or wouldn’t buy themselves. And a place where knowledge is stored that wouldn’t otherwise be available in the private sector.

And thirdly, they help government to devise and implement policy, perhaps by providing information, or contingency planning and monitoring in the case of an accident or natural disaster, or by driving innovation in social care or public health.

Critically, the paper describes the characteristics of RTO innovation activities as often long-term, indirect, and highly uncertain in outcome. One major issue is that they may only intermittently seem obviously valuable to the nation - suddenly becoming relevant in the case of a crisis. We have to be patient, long term supporters of such enterprises, sadly history has too many examples of creation, investment and divestment. There are some powerful historical lessons to be learned in agri-science for example. Back in the 1980s the argument was that near market work shouldn’t be done in the public sector, and intermediate research institutes should be privatised. So the Plant Breeding Institute was sold to Unilever in 1987, resulting in the loss of key national plant breeding facilities and programmes. Unilever went on to sell to Monsanto, who subsequently closed the site.

That is why this government has established new guidelines for use when reviewing the future business model of public sector research establishments. At a time of great pressure to control spending I was concerned that these decisions should not be made in isolation, nor on the view of the sponsoring body alone. The government has put in place new guidance to be applied when an institute is being reviewed. It is based on expert advice from the Manchester Institute of Innovation Research. Departments must consider: the institute’s policy, regulatory and emergency response roles; its special scientific and technical capabilities, facilities and resources; and its broader economic role regionally, nationally and internationally. Taking into account these factors should lead us to make better long term decisions about the future of organisations that make an important contribution to UK science capability and drive our innovation.

One of the misconceptions that we Brits have tended to beat ourselves with in the past is the idea that we somehow fundamentally lack the culture of risk-taking that thrives in countries like the US. This isn’t true. In many cases we were simply expecting companies to step in earlier and take on more of the risk than in the US. This is why the Technology Strategy Board is so crucial. It takes on some of the closer to market risks which in the US are borne by DARPA or the National Institutes of Health. Thanks to the TSB many more innovative products now make it through the so-called Valley of Death. In the last few years their investments have increased substantially. According to our latest analysis, between 2010 to 2011 and 2013 to 2014 funding committed to businesses across a range of core TSB programmes has increased by almost 140% - from £152 million to £362 million. We are building the sort of integrated approach to supporting innovation that has been so successful in the US. Indeed the latest figures suggest that where the US produces 18 spin-out companies per billion pounds of research resource investment, the UK generates 30. But that doesn’t mean we are obsessively counting spin-outs to prove we are innovating. We understand the dangers of pushing companies to spin out too soon.

We are not afraid to back big disruptive technologies. The Chancellor and I have announced an additional £600 million of investment for ‘Eight Great Technologies’ where the UK is world-leading, or has the potential to be so with the right investment. They are Big Data, Space and Satellites, Robotics and Autonomous Systems, Synthetic Biology, Regenerative Medicine, Agri-science, Advanced Materials and Energy. This is not the same as picking winners. Each of the ‘Eight Great’ has applications potentially so significant and wide-ranging that they stretch way beyond any particular industrial sector. They are the result of the distillation of work done by experts in the Research Councils, the Technology Strategy Board and Foresight exercises conducted by the Government Office for Science. And now we have strong leadership groups and networks in each of these areas drawn from academia and business to help identify solutions barriers, prepare roadmaps and generate new research collaborations. Our focus on these technologies is already encouraging much greater collaboration and joint working between business, the research community and government. And science parks can help us strengthen these links further.

Often the most innovative environments are clusters and we are backing them across the UK. A new report on clusters, published by McKinsey and the Centre for Cities earlier this month, highlighted 31 economically significant clusters containing 8% of the UK’s businesses but generating 20% of UK output. Science parks do much to support clusters, often by forming the heart of the cluster itself, such as the National Agri-Food Innovation Campus in York. This site in Sand Hutton houses key public sector agri-food organisations alongside private sector companies, including the Food Environment Research Agency, the Animal Health and Veterinary Laboratories Agency and the Environment Agency, making it a real hub and the only place of its kind in Britain.

Our clear agenda is to promote the places where this sustainable innovation flourishes, and science parks are certainly a key part of this picture. Let me give you a progress report on how we are getting on and the issues we are considering. This government has focused on 5 important initiatives to drive forward collaborative R&D and innovation. They are:

  • Catapult technology centres
  • Catalysts
  • Launchpad competitions
  • the Research Partnership Investment Fund
  • University Enterprise Zones

I shall update you on each one in turn.

First, we are proud to have set up the network of elite Catapult technology centres, which bring researchers and businesses together to help commercialise technology. Seven of these centres are now up and running, and 2 new ones will kick off next year. Each one is focused on a globally important area where we show real leadership. We have now asked Herman Hauser to undertake a review of Catapults, to help define how we should develop this network in the future. The public consultation closed at the end of May, having received a substantial set of responses. Hermann is now considering what the scope and scale of our ambition for the future Catapult network should be. He is looking at critical questions such as how should we decide whether to invest more in our current centres or to expand the network? What technologies might the next Catapult Centres cover? What other roles might they play in areas like skills, finance and business support? And finally he is considering whether our current funding model, with a mix of public, commercial and collaborative R&D funding is the right one to take forward as we develop the network.

Secondly, we are supporting innovation through our new Catalyst R&D funding, which aims to bridge that yawning gap between bench and market, and take projects as close to commercial viability as possible. Catalysts are run jointly by the TSB and the research councils, and they support research in priority areas where there is clear commercial potential. In the biomedical catalyst for example the TSB and the Medical Research Council have invested £170 million in grants to date, and that has leveraged nearly £100 million of private finance on top. Current catalysts have focused on biomedicine, agri-tech and biotech. But next we will be launching an Energy Catalyst to accelerate innovation in that field.

Thirdly, the TSB runs hugely successful Launchpad competitions aimed at ambitious early stage small and medium sized enterprises. They provide funding for innovative R&D projects which then act as a catalyst for companies to pull in more investment. Crucially these competitions are focused on particular geographical areas, building on geographical clusters that are already emerging. For instance, the TSB ran a Launchpad for companies in the emerging ‘tech city’ in Shoreditch in East London, and there are Launchpads in space at Harwell, and supporting Motorsport Valley in Oxfordshire. The TSB has plans for 5 new Launchpads in 2014 to 2015 in the following areas:

  • Healthcare Technologies, supporting the growth of that cluster in Wales
  • Manufacturing Process Industries in the North East
  • Internet of Things Launchpad investing in clusters in London and Cambridge
  • Digital Media Launchpad investing in an emerging cluster of small creative businesses
  • Entry to the Space Sector Launchpad attracting new players to Harwell

Fourthly, when it comes to research collaborations and innovation we have learned to use our resource smartly. Our Research Partnership Investment Fund gives awards to large-scale projects that can attract at least double our investment from private or charitable sources. It has been a huge success, so far securing more than £1.3 billion of new investment in world class research facilities that both universities and their business partners can benefit from. Proof that clever public spending can crowd in private investment.

Building on this tremendous success we are committing another £100 million of new funding to a third round of awards under this scheme. Today I am delighted to announce the first 3 winning partnerships from this round.

We have awarded £25 million to the Cambridge Institute of Therapeutic Immunology and Infectious Disease. This centre aims to move us closer to the discovery of new medicines and treatments for autoimmune and inflammatory diseases like Type 1 diabetes and inflammatory bowel disease, as well as addressing the looming threat posed by antimicrobial resistance. It will bring together a key range of partners, including Astra Zeneca, GlaxoSmithkline, UCB/Celltech and Wellcome Trust. Our investment has leveraged nearly £63 million of co-funding, bringing the total project close to £90 million.

The Cranfield Aerospace Integration Research Centre will receive an award of £10 million, with co-funding of an extra £20 million from Airbus and Rolls Royce. This project at Cranfield University will research innovative aerospace technologies, with the aim of making future aircraft more efficient and faster with lower emissions.

And we have awarded £14.5 million to Warwick University Advanced Propulsion Research Laboratory, with a further £51 million of private co-funding taking it over £65 million. This lab, in partnership with Jaguar Land Rover, will create the next generation propulsion technologies that are essential to the future competitiveness of the car industry. It will address the huge challenges that this industry faces as the world moves towards low carbon technology. By 2040 it is predicted that almost none of Europe’s new cars will be powered solely by a traditional engine. This centre will lead the way in introducing the alternatives.

So RPIF is our fourth important programme. And we look forward to the outputs of all these groundbreaking new centres with great interest.

Our fifth important initiative to support innovation is our new University Enterprise Zones. Under this scheme we are providing capital funding for new business spaces across England which will host a range of new high-tech start-up companies. This scheme is in part a response to the argument that developers don’t want to invest in office, lab and workshop space for small innovative businesses because of the associated risks. Last week, the Chancellor announced the first pilot University Enterprise Zones in Liverpool, Bradford, Nottingham and Bristol. They will foster stronger local partnerships and better strategic links between university and local enterprise partnership (LEP). Proposals have had a strong technology focus – for example the Liverpool proposal focuses on sensor technology, and Bradford on digital healthcare technologies. And critically although the government funding is of course the necessary carrot to get these spaces off the ground, it has leveraged double that amount in additional private sector funding, which makes each venture more sustainable and embeds it in the local region.

Of course if businesses are to be truly innovative they need to have the best people with the skills to move them forward. I am delighted to announce today that the government will be providing £18.4 million investment in a new network of employers and tech professionals who have come together to create the skills needed to accelerate the growth of our digital economy. This Tech Partnership, which is part of our Employer Ownership of Skills pilot, will be led by Cisco. And employers will be investing more than £35 million alongside us, in both cash and in-kind contributions. It will establish a wide range of employer-led schemes, including a MOOC (Massive Open Online Course) to help computer science graduates develop their employability skills; careers advice for young people; industry accredited Apprenticeships; Industry Gold standard degrees; conversion courses and graduate training programmes. In addition, Tech Skills Hubs will be created to accelerate growth in specific skills areas, such as cyber security and big data.

And there are other ways that the wider national-level infrastructure in the UK makes this the right place for innovation. The UK has the best intellectual property regime in the world for protecting our innovators. Our vibrant design sector helps to translate new technology into user-friendly and desirable products.

And the National Physical Laboratory is 1 of the world’s top 3 national measurement institutes, enabling businesses to innovate at the cutting edge of physics. It is a key element of government’s science capability and of our national support for innovation. That is why I decided in 2012 that we should not continue with the existing model of contracting out its operation, but instead it should be led by a partnership between government and academia. I am pleased to announce today that we have appointed a group led jointly by the Universities of Strathclyde and Surrey as our preferred partners. Many Independent Research and Technology Organisations can trace their roots to the public sector in the near or distant past. And they have sectoral and technology expertise which means that they continue to be important players in the UK’s innovation system. Their membership and their independent status brings them closer to the businesses they serve and they contribute vital translational capabilities in important areas of the economy.

But in many cases these institutions have been buffeted about by the erratic winds of public policy over the years, as they move in and out of the public sector. They have been treated pretty badly. What they need and deserve now is some stability. And one obvious way of delivering this would be to think about the sort of financial support they are entitled to. Often these organisations feel they are expected to behave like the R&D function of a larger business, but they need to sustain their entire organisation on the provision of research solutions alone. Some are eligible for public research grants and do get project funding, but they have found it a struggle to get capital funds. They don’t know where to turn for support in purchasing the equipment they need to keep up to date. If they are already eligible for some current public funding for R&D and are good enough to win it competitively then there is a strong case for them to get access to science capital now that we have committed to the greatest ever sustained investment in this area.

There is a critical role that science parks and innovation campuses play in this landscape too. You know that you play an important role in local and national innovation systems supporting and driving clusters. Related to this, science parks offer access to important networks and provide a gateway to support for new businesses. The diversity of science parks we now have in the UK demonstrates a range of innovation ecosystems, centred around universities, like Surrey or Warwick; or around PSREs, like Harwell Oxford or the Babraham Research Campus; or independent RTOs, like Granta Park or the Mira Technology Park. And each of these ecosystems in different ways supports innovation and the development of new technologies.

But of course the public sector and universities aren’t the only birthplaces for successful science parks. Another increasingly common route is for big companies to pull out of a classic old-style R&D facility and instead become the anchor tenant of a new science park. This was the story at Kent Science Park, which grew up on a site that used to house Shell. It is the story of Discovery Science Park at Sandwich, which used to be Pfizer. Lasalle Investment have acquired five science parks in that mould. They include Langstone Tech Park, in my constituency of Havant, which was formerly an IBM factory (back in the days when computers were big). Most recently there are plans for what was the Astra Zeneca facility at Alderley Park, in the Chancellor’s constituency, to become a science park. This model can certainly work well. One factor is that when a big industrial player moves away they often leave behind a cohort of highly skilled people who don’t want to move with them, and instead choose to set up their own business. So you end up with an exciting core of highly skilled new businesses in the same area. But of course it isn’t for government to say where and how science parks ought to emerge. We know from history that dictating where clusters ought to be from Whitehall is a path to failure. But it is our job to remove unnecessary barriers so that these exciting clusters can prosper wherever they spring up.

Today I have set out a number of issues which this government is keen to wrestle with. However, they are not one-sided. Let me leave you with some challenges for you to think about. The first is what exactly a science park ought to offer. Of course there are a variety of models for the types of service on offer from different science parks. But we would like to see more science parks thinking harder about all the things those businesses need in order to succeed. So it isn’t just about offering a place where companies can base themselves. It is about the role you can play in supporting the local innovation ecosystem, making better links with local and national support available. As you will know it is difficult to properly separate out the technology a company is developing from the support it needs to develop as a business. So in taking up this challenge, you will need to think holistically about asking what you can do to help businesses succeed. At any given stage, businesses have a variety of needs. They might need good legal advice to sort out their patents, or help hiring, or some advice on raising finance. The challenge is to offer all this as part of the same package - rather than saying we do business support over here, and technology over here.

There is also a challenge in making sure you are visible to potential innovation partners both locally and nationally. This is about using all opportunities to bring in investment you need. The delivery landscape has changed and with central government funding continuing to be tight, you will need to make sure you make a strong case for what you contribute to the local innovation plans that are being led by the Local Enterprise Partnerships. You should also look to the opportunities for international collaboration and providing a landing pad for businesses from overseas as part of your strategy.

So, I am pleased that one of the things you will be discussing today is a new review of UKSPA’s impact. We certainly welcome this and hope it will feed into a meaningful debate about where impact lies. Naturally the challenge then for your UKSPA and its members will be to ensure that you go onto adapt your business models to respond to the lessons learned.

It is because we know that science and innovation really matter to our long term economic growth that we have made tough choices and protected the ringfenced science budget, and made an unprecedented long term commitment to invest in science capital. Now we are working hard to ensure that we really do have an environment in which innovation can flourish. With your help Britain can and should be the best place in the world to do science. And the best place to innovate.

Published 10 July 2014