Written evidence submitted by the University of Edinburgh (IGR0043)
The House of Commons Science, Innovation and Technology Select Committee Inquiry:
Innovation, Growth and the Regions
The University of Edinburgh is a leading centre for research and innovation, hosting the fourth largest cluster of world-leading research in the UK. Ranked 22nd globally in the 2024 QS World University Rankings and number one for Industry, Innovation, and Infrastructure according to Times Higher Impact Rankings 2024, the university has a history of transformative discoveries – from the Higgs Boson to Dolly the Sheep, and as host to internationally leading clusters in AI and Engineering Biology. We integrate research from a wide spectrum of disciplines to further three central missions: shaping future health and care; tackling the environmental crises; and harnessing data and AI for public benefit.
With over 45,000 students, both on campus and online, and a reach extending to over five million MOOC learners globally, Edinburgh has a broad and diverse student body, including 10,000 international students annually from over 160 countries. Economically, the university contributed an estimated £7.5 billion to the UK economy in 2021/22 (London Economics 2023), supporting nearly 33,000 jobs.
The university is also deeply invested in commercial enterprises, having recently generated 127 new companies and attracted £290 million through venture fund and industry collaborations. On a regional level, the University of Edinburgh manages the largest component of the Edinburgh and South East Scotland City Region Deal – the Data Driven Innovation Initiative – which is greatly exceeding planned performance – for example, supporting 550 high-growth start-ups that have gone on to secure investments of over £200 million. This investment significantly bolsters the regional economy while advancing the regional ambition to become the 'Data Capital of Europe’.
1. How does the Government drive research and innovation in our regions?
1.1 How effective are the government’s policies in supporting the innovation ecosystem across the UK’s nations and regions, particularly through commercialisation initiatives?
The university makes a significant contribution to the UK economy, estimated at £7.5 billion in 2021/22, of which £3.2 billion through research and innovation (London Economics 2023). Much of our innovation activity is focused on our missions: addressing global challenges in health and care; the environment and net zero; and developing key enabling technologies that will transform UK innovation across multiple sectors. Of particular note is our support for AI and data-driven innovation. Collaborative efforts under initiatives such as the Edinburgh and Southeast Scotland City Deal and the Data Driven Innovation (DDI) initiative have been pivotal, dramatically boosting regional economic growth and innovation capacity – with DDI supporting 550 data-centric companies, which have leveraged over £204 million in investment.
However, the effectiveness of government policies is uneven across the UK due to variations in funding and support structures. Scottish universities face particular challenges in funding research and innovation. These include:
- Reduced UK student funding compared to their English counterparts: around £7,000 per Scottish student, compared to the £9,250 tuition fee per student in England, necessitating a greater level of cross-subsidisation of research and innovation activity from international student fees.
- Research England investments: Scottish researchers are unable to tap into a range of additional investments that benefit our English counterparts, including substantial funding for innovation and impact, as well as support for enhancing research culture.
- National Institute of Health Research funding: many areas are not accessible to Scottish universities. Edinburgh receives a fraction of the funding for biomedical and clinical research compared to that available in England.
- Innovate UK funding: most Innovate UK (IUK) schemes are ill-equipped to support Scotland’s largely SME-based profile, with limited Tier 1/corporate industry influencers. Between 2016-22 Scotland received just 5.9% of IUK funding overall despite Scotland hosting 11.4% of the UK’s researchers. The IUK match funding model is unattractive to many SMEs with typically limited resources and lack the support of larger companies to co-develop propositions.
These disparities impair the ability of Scottish universities to fully exploit the commercial potential of their innovations. Despite these challenges, the success of the University of Edinburgh and similar institutions underlines the potential for government policies to significantly enhance the national innovation landscape when adequately supported and funded. Continued and balanced support is crucial to ensure all regions and nations within the UK can equally benefit and contribute to the overall innovation ecosystem.
1.2 How should devolution be harnessed to support innovation across the regions and nations, and what role should local government play in supporting research and development?
The Scottish university sector has made significant advances in commercialisation and industry engagement over the past decade. The University of Edinburgh has demonstrated an especially striking trajectory: a 4-fold increase in industrial and translational income over the past 5 years, over 100 student startups annually, and significant growth in both licencing income and Venture Capital investment into our spinouts and startups. The University has ranked 4th in the Higher Education Business and Community Interactions survey (for the past 2 years).
Integral to this performance has been Edinburgh’s unique research and innovation ecosystem, including hosting the UK’s most powerful supercomputer (and the world’s 5th largest cores-only system), the Edinburgh International Data Facility (in partnership with Hewlett-Packard Enterprise), and the significant investment in Data Driven Innovation through the Edinburgh and Southeast Scotland City Region Deal. Exploiting the power of data and novel data-driven technologies will transform innovation into the future across many applications and sectors – and hosting the right enabling infrastructure will be key to this.
Scotland’s National Innovation Strategy provides a good road-map to guide activity to better exploit the huge innovation potential of our universities. However, the Strategy needs to be resourced to deliver its focus on investment in key clusters, and aligned with UK Government and UKRI strategy and investments to ensure research advancement and translation to drive innovation and ensure delivery of government ambitions.
There are key sectors where Scotland is genuinely world-class and has the potential to be a global leader:
Data, AI and digital technologies: During the past decade, Scotland has become the fastest growing digital hub in the UK. With over 1,000 tech companies, Scotland outperforms all nations and regions in digital sector employment growth (8.2% p.a.). As the data revolution rapidly evolves and becomes pervasive in other sectors (tourism, financial services, manufacturing, health and other public services), Scotland could capture a global lead. Scotland could capture a global lead.
Innovation across these sectors will be underpinned by AI and data-driven technology, and the University of Edinburgh is exceptionally well positioned to drive these transformations, with its outstanding AI expertise and training, advanced compute facility, data assets, and well -developed platform for supportive spinouts, adoption and industry partnerships across these sectors.
To leverage this potential fully, increased investment in skills and technology diffusion is vital, building a foundation for sustained economic growth and international leadership in targeted sectors. Academic, industry and investor collaboration are critical to ensure technologies can be exploited, commercialised and adopted, and interventions are urgently needed to support this. Recommendations to boost this ecosystem include devolving innovation powers regionally, creating a regional energy plan to ensure the ongoing supply of inexpensive energy, fostering collaborations beyond Scotland's borders, engaging investors earlier in the technology development pathway, and creating an interconnected public funding investment pipeline.
Such investment would be effectively delivered through a next wave of UK/Scottish Government supported city region deals for key Scottish regions, with a focus on supporting innovation and skills that drive inclusive economic growth.
2. How do factors such as the tax system, regulatory frameworks and standards influence the success of start-ups, spin-outs, and other innovation-driven businesses?
2.1 What challenges do innovation-focused researchers and businesses face in spinning-out or scaling-up, such as accessing venture capital, infrastructure and intellectual property rights?
Innovation-focused researchers and businesses face several critical challenges in spinning-out or scaling-up, notably in accessing venture capital, infrastructure, and protecting intellectual property (IP) rights.
The University of Edinburgh provides crucial infrastructure and networking opportunities, helping innovators gain the necessary skills and connections to navigate these challenges. Examples include the Venture Builder Incubator, which has supported 131 founders and companies to raise £8.8 million through grants and investments since 2021; and the AI Accelerator, which has raised £67 milion funding supporting the growth of 81 innovative companies since 2019. Enhanced government support and aligned funding strategies, alongside targeted, practical programs that bridge academic research and commercial success, are crucial for overcoming these barriers and fostering a robust innovation ecosystem.
2.2 How does research and innovation in our regions drive growth and prosperity in those regions?
Research and innovation in regions, exemplified by the University of Edinburgh and similar institutions across the UK, significantly contribute to regional growth and prosperity. A key enabler of this impact has been the Edinburgh and South East Scotland City Region Deal with its focus on Data Driven Innovation (DDI). This is evidenced in several ways:
Overall, the symbiotic relationship between universities, business and healthcare within these innovation ecosystems not only furthers technological and scientific advancements but also significantly enhances regional economic growth and sustainability.
2.3 How does research and innovation in our regions drive growth and prosperity in those regions?
Regional innovation hubs and clusters, such as those fostered by the Edinburgh South-East Scotland City Region Deal (ESES-CRD) and its Data Driven Innovation (DDI) initiative, are highly effective in supporting regional growth and prosperity. By focusing on leveraging data science across various sectors—from healthcare to FinTech—these hubs facilitate substantial regional economic impacts and robust job creation. The DDI initiative alone has embraced over 3,000 research ventures, demonstrating broad interdisciplinary collaboration and innovation.
Key outcomes of such innovation ecosystems include significantly enhanced data literacy across the community, as evidenced by the Data Skills Gateway programme, which has engaged 34,500 participants, boosting digital skills and employability. Furthermore, Edinburgh’s enhanced global ranking in AI and its recognition as a financial hub emphasize the direct benefits of concentrated innovation activities on the region’s international stature and economic competitiveness.
The global impact of a world-leading University working in data cannot be underestimated in terms of regional economic impact. The Data Capital report by Accenture (2023) highlighted the position of Edinburgh as one of the top cities for Artificial Intelligence (AI), with Harvard Business Review ranking the city fifth in Europe on its list of top 50 global cities for AI, highlighting DDI.
The structured approach of integrating academic strengths with public, private, and third-sector partnerships through frameworks such as the Regional Prosperity Framework (RPF) and the Innovate UK sponsored Regional Innovation Action Plans ensures a comprehensive strategy for sustainable economic development. These collaborations not only foster a fertile environment for new technologies and industries but also help to attract continued investment necessary for scaling innovation.
However, to maintain momentum and address infrastructural strains due to population growth, consistent and strategic funding remains crucial. The initial focus on infrastructure under the City Region Deal has set the stage for the next phase, which promises to exploit fully the hubs' capabilities for regional and even global influence. This has been a highly impactful model, offering a replicable model for other regions aiming for similar success. It is crucial to sustain this momentum, through a next phase of strategic regional investment in areas such as regional energy supply to scale up and exploit these successes. With adequate support and investment, regional innovation hubs will be a key driver of prosperity.
It is crucial to sustain this momentum, through a next phase of strategic regional investment to scale up and exploit these successes. With adequate support and investment, regional innovation hubs will be a key driver of prosperity.
3. How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from?
Research and innovation are diffused and supported to drive productivity and growth in regions through strategic development of clusters, investment in academic centres of excellence, and fostering academic-industry collaborations.
Collectively, these strategies ensure that research and innovation originating from academic institutions transcend regional boundaries, leading to widespread economic and productivity gains across the UK.
3.1 How well are universities and businesses coordinating efforts to develop and commercialise research, including the role of spin-outs and collaborative R&D projects?
The University of Edinburgh exemplifies strong coordination between universities and businesses in developing and commercialising research. Notably, over the past five years Edinburgh has seen a fourfold increase in industrial and translational income, which includes a record number of student start-ups and staff spinouts, along with significant income from licensing and venture capital. In the 2022/23 academic year, the University raised over £88K as collaborative research income, and ranked first in the UK (figure from HESA and excludes in-kind).
This success has been strongly driven by strategic initiatives and structures in place at Edinburgh Innovations (EI) the university's dedicated commercialisation service. EI provides substantial support in all aspects of innovation, from business development embedded within the University's Schools to guide commercialisation processes, to a restructuring of the Tech Transfer team that enhances support for spinout and collaborative activities. Key actions include streamlining the innovation disclosure process, integrating technology transfer with legal and investment advice, and implementing incentive policies that encourage faculty participation in innovation.
The university also supports translational research through seed funding and investments, specifically targeting early career researchers to facilitate a seamless pathway from ideation to commercialisation. Moreover, Old College Capital, the university’s in-house venture fund, plays a crucial role in supporting spinouts and start-ups financially. Additionally, collaborations like NEURii highlight the university's ability to engage in complex multi-partner projects, partnering with entities including global pharmaceutical company Eisai, Bill Gates’ private office Gates Ventures, HDRUK and medical research not-for-profit LifeArc to transform the care of people living with Dementia.
In parallel we are working with the TenU an international collaboration of leading university tech transfer offices, to share experience and best practice. Together we have published and adopted, the University Spinout Investment Terms (USIT) Guide.
While these efforts have yielded substantial results, the University faces challenges such as an overall reduction in industrial income, which mirrors a broader sector-wide trend. This emerging challenge underscores the need for government action to ensure continuous support and development of the innovation ecosystem to maintain and enhance the UK's global position in innovation.
4. What is the relationship between investment in innovation and economic growth, both regionally and nationally?
4.1 How does the UK’s innovation ecosystem compare to those of other countries, and what lessons can the UK learn from international models in terms of commercialising research and innovation to benefit both regional and national economies?
The UK's innovation ecosystem, particularly in the context of commercialising research to benefit regional and national economies, holds considerable strength but can still learn from international models, particularly those followed by high-growth economies like Switzerland, Finland, Israel, South Korea, and Singapore. These countries pursue efficient and holistic coordination of the 'triple helix' model of cooperation between academia, industry, and government to drive innovation in small, high-growth economies.
Key Lessons from International Models:
Proposed Actions for the UK:
By implementing these lessons, the UK can enhance its innovation ecosystem, making it more robust and responsive to both regional and global economic shifts.
4.2 How are funding bodies such as UKRI and ARIA contributing to the UK’s innovation ecosystem and delivering the government’s growth missions?
UKRI and the Advanced Research and Invention Agency (ARIA) are both critical to fostering the UK's innovation ecosystem and supporting the government's growth and development missions. However, their effectiveness in achieving these goals shows different levels of transparency and impact assessment.
UKRI generally operates under a structured and transparent framework, directing funding to projects across a broad spectrum of disciplines. It supports innovation by financing research that underpins technological advances and by fostering collaborations between academia and industry. UKRI plays a significant role in developing skilled personnel and contributing to economic growth through its extensive funding programs.
ARIA is a newer entity with a mandate to fund high-risk, high-reward research that could lead to ground-breaking innovations. While it is intended to operate with a high degree of freedom to foster a fast-fail approach and speedy innovation, there are significant gaps in the transparency and accountability of its operations. The HEI sector would benefit from greater clarity about ARIA’s review processes, governance, and the strategic distribution of awards, as well as how its operations align with the national interest in terms of economic return on public investment. Moreover, the lack of inclusion under the Freedom of Information (FOI) laws and calls for an independent review suggest that establishing ARIA's value and effectiveness in the innovation ecosystem requires more robust oversight and clearer reporting mechanisms.
Thus, while UKRI has a well-established role with clear contributions to the UK’s innovation landscape, ARIA’s impact and the efficiency of its contribution need further assessment to ensure that it effectively complements the broader goals of UK research and innovation funding, particularly in delivering on the government's growth missions.
22 January 2025