Written evidence submitted by the University of Cambridge (IGR0080)
Science, Innovation and Technology Select Committee Inquiry: Innovation, growth and the regions
About the University of Cambridge
The University of Cambridge is one of the world’s leading universities, with a rich history of radical thinking dating back to 1209. Its mission is to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence.
Cambridge was second in the influential 2024 QS World University Rankings, the highest rated institution in the UK.
The University comprises 31 autonomous Colleges and over 100 departments, faculties and institutions. Its 24,000 students include around 9,000 international students from 147 countries. In 2023, 73% of its new undergraduate students were from state schools and more than 25% from economically disadvantaged backgrounds.
Cambridge research spans almost every discipline, from science, technology, engineering and medicine through to the arts, humanities and social sciences, with multi-disciplinary teams working to address major global challenges. In the Times Higher Education’s rankings based on the UK Research Excellence Framework, the University was rated as the highest scoring institution covering all the major disciplines.
The University sits at the heart of the ‘Cambridge cluster’, in which more than 5,000 knowledge-intensive firms employ more than 71,000 people and generate £21 billion in turnover. Cambridge has the highest number of patent applications per 100,000 residents in the UK.
1. How does the Government drive research and innovation in our regions?
There are several challenges innovation-focused researchers and businesses face in spinning-out and scaling-up. In our response we identify these barriers and suggest how the Government’s policies might address these in order to further support innovation-driven business.
Space to house, incubate and accelerate new companies
The translation of breakthrough ideas into companies relies on a dynamic ecosystem where researchers, entrepreneurs, investors and corporate leaders can collaborate seamlessly. Across the world, innovation hubs have been created to bring these components together at scale, in a way that accelerates the transition from discovery to market success. This kind of infrastructure acts as a magnet for companies, talent and capital.
A transformational opportunity lies in developing a multi-sector Innovation Hub in central Cambridge. This hub would accelerate Cambridge’s capacity to grow new businesses and deliver innovation at scale, comparable to global leaders like Station F in Paris, The Engine in Cambridge MA, and Lab Central in Boston. This would be a national asset, symbolizing the UK’s commitment to innovation-driven economic growth. We have attached our full proposal on a UK innovation hub for reference (Annex A) and would be delighted to discuss it further with the Committee if it is of interest.
Government support for this kind of strategic asset is critical. It accelerates delivery of the infrastructure, attracts private capital and establishes a long-term strategic mission.
Availability of talent and skills
Economic growth globally is now defined by the “war for talent”. This is what differentiates locations and provides the fuel for innovation. Sustainability of a place is driven by the confidence that it continues to attract and produce talent that can provide future innovations that can change the world.
Cambridge faces a shortage of skills at all levels in the life science, tech and advanced manufacturing sectors. There is also a lack of senior management commercialisation skills.
PhD graduates are a key talent source and a key driver in attracting investment – both venture and FDI. The University currently has c.4,000 PhDs students – among the highest of any UK higher education institution – but has experienced a drop of around 140 funded doctoral places each year since 2018. That number is expected to continue rapidly declining. Through the withdrawal surveys we conduct, we know that a majority of graduates decide not to pursue Master’s or PhD study because of a lack of funding. A commitment to invest research funding in attracting the best global graduates to the UK to do PhDs is essential for the long-term competitiveness of our and the UK’s innovation proposition.
In addition, the UK’s student visa offer needs to be as competitive as possible with that of other major recruiting nations, in terms of fees, post-study leave, dependents’ rights and the bureaucratic burden. Frequent political shifts around talent mobility over the past few years have been damaging. A clear and firm commitment from the Government to make the UK attractive to global talent is essential.
Access to proof-of-concept funding
If the aspiration is to create more investable spinouts, then early-stage research funding should be coupled with an ongoing ambition to increase availability of proof-of-concept funding. This funding supports academic inventors to demonstrate the viability of a research idea as a marketable technology, when it is still too early-stage to attract venture capital.
Government’s commitment to £40m over the next five years is welcome but still does not match up to the scale and mechanisms for investment in translational research internationally. TenU, a group of leading international research universities, has recommended the addition of 4.3% of all public core research funding to every research funding award to create sustainable, self-managed proof-of-concept funds - this equates to £108m annually 4.
Access to venture capital
There remains a significant deficit in venture capital for investment at all stages of the company growth pipeline, from seed through to scaling capital pre-IPO. In the last few years more venture capital has found its way to Cambridge-born companies. Cambridge startups raised $1.6bn in the first half of 2024. However, this still lags behind other globally leading innovation ecosystems1. In 2023, San Diego based companies raised $3.6bn in venture capital and Boston companies raised $14.5bn2.
Spin-out equity policy
An ongoing focus on applying best practice in innovation friendly equity policies can also further accelerate the success of university spinouts. In line with the Independent Review of University Spin-outs and TenU’s University Spin-out Investment Terms (USIT) Guide, we believe that a “landing zone” for best practice can be developed which can help speed up the process and remove inefficiencies.
Cambridge takes only a low equity stake – 10% on average – in our spin-out companies, the lowest of all UK universities. Going further we’ve recently established an opt-in model that will allow pre-seed startups to agree a deal without lengthy negotiation. Recognising that companies have varying capital requirements we’ll introduce a tiered structure with standard terms in place. It will range from 5% to 20% of equity, fully dilutable, depending on the technology from software to therapeutics.
2. How does research and innovation in our regions drive growth and prosperity in those regions?
Cambridge is one of the nation’s leading innovation hubs, with the University of Cambridge at its heart. Over the past 30 years, the ecosystem has expanded significantly and is now home to over 5,500 knowledge-intensive businesses. Cambridge boasts the world’s highest concentration of academic entrepreneurs[1], and 24 Cambridge-born companies have hit Unicorn status.
The impact on regional growth and prosperity is significant. The University supports more than 52,000 jobs in the East of England and contributes over £13 billion in gross value added (GVA).
Many companies emerging from University research, such as global leader in semiconductor design ARM, developer and global distributor of biological binders, Abcam, and an exciting new spinout in the field of quantum, Nu Quantum, have a strong Cambridge presence. Others are fostering wider regional growth with locations in Huntingdonshire (Paragraf), Norwich (Colorfix) and Histon (Nyobolt).
The University delivers hundreds of annual outreach initiatives and events to help the most disadvantaged young people into higher education and provides significant local benefits through its research. For example, partnership with local health services maximises patient proximity to the latest medical breakthroughs - the result is world leading treatment and lower mortality rates across cancer, heart disease and respiratory illness.
The University recognises that there is more to be done to ensure that all local people are benefitting from regional innovation led growth. As founding partners of Innovate Cambridge, we have supported the creation of the Cambridge Pledge. Through the Cambridge Pledge entrepreneurs and institutions are taking bold actions against systemic inequality by committing a percentage of their future wealth drive transformative change. It will help address the region’s most pressing challenges – for example, radically reshaping children’s homes, improving outcomes for disadvantaged pupils, or helping to end homelessness – achieving real impact by nurturing innovation and offering long-term funding.
It is vital that Government decision-making is informed by the best possible evidence base about economic growth in order to properly monitor and inform evidenced-based policymaking in Whitehall.
The Centre for Business Research (CBR) at the University of Cambridge, in collaboration with Cambridge Ahead, creates detailed local datasets on companies in the Cambridge city region, including their sectors, employment, and turnover. This effort addresses the limitations of national datasets in capturing the complexities of innovation-driven economies.
CBR analysis highlights significant under-recording of employment in Cambridge’s knowledge-intensive sectors within national datasets like the Business Register Employment Survey (BRES). These data gaps contribute to inadequate infrastructure planning for the region. The gaps arise partly from shrinking sample sizes and methodological issues in national surveys such as BRES and the Annual Population Survey. While these datasets remain valuable, more precise local data is essential for informed policymaking.
A key issue is the inappropriate use of BRES as a time series by local planners, contrary to ONS guidance. Additionally, the outdated Standard Industry Classification (SIC) codes fail to reflect modern economies. For instance, the CBR uses a tailored "life sciences and healthcare" classification to accurately represent Cambridge’s life sciences cluster, as SIC codes miss much of this activity. Similarly, leading companies like Arm are misclassified, resulting in undervaluation and misunderstanding of their economic contributions.
Yes, attracting at scale investment continues to be a significant barrier in the growth of science and technology companies. Attracting additional investment capital at all stages of the company growth pipeline, from seed through scaling capital pre-IPO, should be addressed through multiple interventions:
The Government’s emerging Industrial Strategy and associated Local Growth Plans present a valuable opportunity to drive growth through a truly integrated, cross-departmental approach. This strategy should not be limited to place-based or sector-specific initiatives but should instead encompass a holistic view of economic development.
We recognise the value that a place perspective on innovation can have in helping to shape strategies and investments that are bespoke to the strengths and requirements of specific regions. However, we would always argue that the distribution of UKRI funding must remain merit based, supporting the highest levels of excellence wherever it is geographically located. We have some concern that the model of a “regional innovation funding programme” as set out in the Devolution White Paper might risk undermining this principle.
We would also guard against any model which might inadvertently pit different UK regions against each other in competition for funding. We see the direction of travel as increasingly being one of pan-regional collaboration between clusters of innovation excellence across the UK in order that we can compete in a globally competitive environment. This is a model which we are pioneering through the Cambridge x Manchester partnership (further detail below).
3. How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from?
Partnership across and between clusters of innovation excellence is an essential tool in driving scale and delivering social and economic benefits across the UK. Increasing the ease in which innovators, entrepreneurs, investors, academia and industry can collaborate with other ecosystems will be crucial to the diffusion of innovation and realising benefits beyond the geographical limits of a region.
The Cambridge ecosystem alone will never be at the size of its international competitors, like Boston or San Diego or Shenzhen. A key objective for Cambridge is therefore to become much more porous, making the ecosystem easier to navigate thereby creating scale and delivering economic benefits across the UK.
Cambridge is partnering with Manchester in a first pan-UK Universities and cities partnership to consider how to collectively grow FDI, attract investment capital and build inclusive innovation environments. Through the partnership we are establishing strong strategic collaboration between clusters which effectively leverages each region's unique strengths and moves away from the previous model which could sometimes be one of unproductive competition between Golden Triangle and Northern Powerhouse. Cambridge brings internationally recognised academic excellence, a mature scale-up ecosystem, a deep early-stage investment market and inward investment. Manchester brings space and capacity to grow, a very large talent pool, affordability, academic excellence, and liveability.
We also work across other innovation clusters. Notably the Ox-Cam corridor, a region which, with the right support, has the potential to contribute a further £50bn in GDP to the UK economy by 2050. The OxCam Supercluster Board is playing an essential role, bringing together diverse perspectives from the private sector, universities and investors, to provide expertise that can be used in partnership with Government to unlock investment, promote international connections, and champion sustainable and inclusive growth for the region.
In Greater Cambridge business and academia are highly aligned in their vision innovation led growth, including the role of spin-outs and collaborative R&D projects. Over the last few years Innovate Cambridge has been established to develop a compelling and forward looking vision and strategy for the region to ensure that Cambridge remains the leading innovation ecosystem in Europe and competes for the UK on the global stage.
Over 200 Cambridge organisations are actively involved, including The University of Cambridge and Anglia Ruskin University (academia) , AstraZeneca, Microsoft, ARM (industry), Cambridge GAN Devices, Apollo Therapeutics (spin-outs), Cambridge Innovation Capital, Start Codon, Amadeus Capital (investors), Cambridge City Council, and the Cambridgeshire and Peterborough Combined Authority (local government).
Innovate Cambridge’s ambition is that Cambridge will be known for: (i) nurturing people who deliver pioneering discoveries (ii) frictionlessly translating ideas into successful business (iii) collaboration and partnering within and outside the region to amplify impact and (iv) leading on sustainable and inclusive growth.
The University works closely with industry at scale, both in Cambridge and across the East of England, combining expertise at the University of Cambridge with the insights, resources and capabilities of commercial partners to enhance our impact.
The University recently announced a new five year partnership with one of our long-standing partners, GSK (UK hub based in Stevenage) who are investing more than £50 million in the Cambridge-GSK Translational Immunology Collaboration (CG-TIC), which combines University and GSK expertise in the science of the immune system, AI and clinical development, further strengthening Cambridge’s position as Europe’s leading life sciences cluster.
Cambridge also works closely with leading national tech and digital organisations. Cambridge maintains strong ties with ARM plc, the semiconductor and software design company that originally spun out of the University, who recently donated £3.5 million to enable 15 PhD students over the next five years to study at CASCADE, the University's new Computer Architecture and Semiconductor Design Centre.
We have also been working with BT, again with a footprint in the East of England, who we have been working together for more than 25 years developing new technologies, exploring human behaviour and considering how those two things come together to shape our world.
This University also has partnerships with KPMG looking at the future of work, with AstraZeneca and the Medical Research Council to set up a new state-of-the-art functional genomics laboratory in Cambridge and a multi-year research collaboration agreement with Google plus funding to support progress in responsible AI.
In addition, the Committee welcomes submissions on the following points:
Analysis by London Economics found that the total impact on the UK economy associated with University’s activity in 2020-21 was £29.8bn, of which £23bn came from the research, commercial activity and hundreds of companies spun out of the University.
For every £1 million of publicly funded research income the University receives, it generates £12.65 million in economic impact across the UK. For every £1 the University of Cambridge spends, it creates £11.70 of economic impact.
In the 2020-21 academic year, the University of Cambridge’s knowledge exchange activities generated an estimated £18,119 million across the UK economy, of which £9,843 million (54%) was generated in the East of England.
In terms of the number of FTE jobs supported, the University of Cambridge’s spending supported a total of 24,185 FTE jobs across the UK economy in 2020-21, of which 17,730 were located in the East of England, and the remaining 6,455 jobs were located throughout other regions of the UK.
The University’s activities have shown success in getting research to market, helping to create significant economic growth around Cambridge and across the UK, changing people’s lives for the better. Some of the depth and breadth of this influence is illustrated on the University’s UK impact map, highlighting examples of economic, health, social, environmental and other research impact.
ANNEX A - Transformational opportunity of a multi-sector innovation hub in Cambridge
1. Executive summary
Cambridge is the science superpower of Europe, with over 5,500 knowledge intensive businesses generating revenues in excess of £20bn per annum. Cambridge has the world’s highest concentration of academic entrepreneurs and 24 ‘Unicorns’ – companies with an exited value of $1bn. The University of Cambridge alone makes a total net economic impact on the UK economy of nearly £30 billion annually. Cambridge is also the fastest growing city in the UK. Across the Cambridge city region knowledge intensive sectors grew employment by 5.7% over the latest year of data (2021-22 to 2022-23), led by an 11.1% increase in life sciences. Growth in Cambridge is connected to growth in other regions and is also key to the growth of the economy as a whole.
Cambridge has bold ambition for future growth. Our aim is to generate in the next decade the same level of innovation output we produced over the last 25 years.
We cannot achieve this with a business-as-usual approach. A globally significant, multi-sector Innovation Hub is a critical enabler to unlock and accelerate this growth. Innovation Hubs have played this role in other leading innovation cities, for example, Boston, San Francisco, Paris. The Hub creates a location which has the critical mass and density of talent, entrepreneurs, capital and community to unlock the full potential of an ecosystem. In a digital world, the value of a physical space that builds community and networks the key components needed for innovation to translate to economic delivery should not be underestimated.
We expect the Hub to double the rate of unicorns produced, the amount of venture investment, and the number of new companies formed, in addition to attracting many global research and innovation intensive businesses to Cambridge and the UK.
Government intervention and support at an early stage is essential to unlock philanthropic and private capital and accelerate growth delivery. An Innovation Hub will act as a fundamental infrastructure asset to drive growth and activate Cambridge’s full potential to contribute to the UK economy.
Without the development of an Innovation Hub, we risk losing foreign investment that is currently attracted by international exemplars such as Station F in Paris and Lab Central in Boston. We will not have the convening place that will enable growth in venture funding, attraction of talent and to enable national level programming. Station F demonstrates what can be achieved, with over 100,000 visitors, 140+ deals and 1 billion euros raised by companies each year. We aim to replicate this level of impact by implementing proven and tested models of innovation growth in other countries.
2. The gap and opportunity
The gap: Cambridge is the innovation capital of the world; it has the highest concentration of both patents and academic entrepreneurs per capita nestled within an ecosystem with an unrivalled track record of converting innovation into businesses and economic growth. We can deliver more. Currently the UK does not have a visible innovation proposition to the national and international investment and enterprise community. The current, fragmented ecosystem is a significant barrier to investment and subsequent growth.
The opportunity: Innovate Cambridge, in partnership with business, universities and local government and supported by over 200 organisations, has the unprecedented mandate to deliver the innovation strategy for Cambridge. A central element of the strategy is the establishment of an Innovation Hub comparable in scale and influence to global leaders like Station F and Lab Central. A globally significant, multi-sector Innovation Hub would accelerate the capacity of Cambridge to grow new businesses and deliver frictionless innovation at scale by bringing to one place all the ingredients necessary for success – talent, science, innovation, capital, space, community and corporates.
3. Impact
Delivery of the Hub will create a national innovation asset that will be visible to the investment, talent and innovation community globally. It will elevate existing strengths and activities in Cambridge in addition to accelerating and introducing new opportunities. We expect similar impact and return to Station F in Paris which boasts 30 programmes, 140+ deals and 1 billion euros raised by companies per year. Station F is over 500,000 sq ft, hosts 1,000+ new start-ups and links to 300+ venture capital funds with many VC firms opening offices in Paris to access deal flow. In 2022, Station F hit President Macron’s target of ‘25 Unicorns by 2025’ three years early. Lab Central operates approximately 225,000 sq ft lab space in Boston, US hosting 125 start-ups. In 2022, Lab Central companies captured 21% of all Series A funding for biopharma in the US. Over the last decade, Lab Central has supported the creation of almost 6,400 new jobs and $18.4bn venture funding.
Benefits to the UK: An investment in Cambridge is an investment in the UK. Economic and employment growth, driven by innovation in Cambridge, will benefit regions across the UK. With the Innovation Hub serving as a gateway to Cambridge, it will foster connections to other cities creating a highly functioning UKwide innovation network. Innovate Cambridge has already established a city partnership with Manchester to link innovation hubs in each city which will increase networking, connectivity and flow of deals, venture capital investment and talent between the two cities. As we catalyse and support more companies to grow and scale, locations outside of Cambridge will be needed fuelling jobs and growth in other regions. A significant objective for the Hub will be the link to technical universities and further education colleges to break down barriers to opportunity.
4. Value Proposition
Current landscape: Cambridge is a hive of activity for innovation. There are over 100 sector-leading entrepreneurial support and accelerator programmes in addition to small scale spaces dispersed across the city. However, programmes are sub-optimal in size, fragmented and do not have the density and critical mass to attract the top global talent and capital in building businesses. Spaces are typically single sector (e.g. tech or life sciences), relatively small (up to 10,000 sq ft) in size, diluted across multiple sites and with different levels of wrap-around, business support.
Distinctiveness of the Innovation Hub: Our proposal is distinct in both the scale and breadth of what can be achieved. In partnership with universities, science parks, investors, industry and local government, the Innovation Hub will unite the activation of a world-class innovation ecosystem in a way that is visible to the world. The scale of programming enabled by the Hub will match international leaders such as Station F. The Hub will be multi-sector, support a regular flow of 100+ companies per year and ensure that Cambridge can produce Unicorns on a regular basis. There will be a focus on commercial growth, creating an environment that connects leading scientific innovation with top-tier capital and talent.
The Hub will be the starting home or the connecting location for many companies. It will not be a long-term residence for any company and as companies grow they will need to occupy space in the Science Parks and laboratory space being built at scale around Cambridge. The Hub will complement and support investment in new space and infrastructure and will act as an attractor to global businesses considering which country to base new research activities.
Location matters: A location close to the station is essential to maximise the link to Kings Cross and London and to attract talent, venture capital and international visitors to Cambridge.
Our proposal: A multi-sector 100,000-200,000 sq ft Innovation Hub fuelled by the academic and research excellence of the University of Cambridge and intimately linked to the technical and vocational expertise of Anglia Ruskin University, ARU Peterborough and further education colleges across the region. It will host multiple accelerator and entrepreneurship programs (e.g. Founders@Cam, Start Codon, Deep Tech labs), high-growth and high-potential tech and life science companies, venture capital firms, and professional services. Additionally, it will provide space for national funding agencies and their activities (e.g. iCURE, Innovate UK investor partnerships, Science and Technology Venture Capital Fellows).
Our Innovation Hub will provide:
5. Why do we need Government support?
Government support is essential for success. The proposal for an Innovation Hub is not simply a real estate venture that can be financed solely through private capital; it represents a vital piece of national innovation infrastructure. To ensure its focus on fostering the growth of deep tech companies, government funding is needed. Without an early cornerstone investment from the Government, it will be difficult to attract philanthropic and private capital, significantly lowering the project's chances of success and slowing its progress.
Many of the factors that are critical to unlock the economic growth potential of the Innovation Hub are not revenue generating, for example long term mission alignment, programming, innovation activation, accelerators and community space. An ambitious collaborative public-private partnership with local and national government, business, developers and academic institutions is needed to ensure that space is used for the strategic mission in addition to operating sustainably through commercial letting.
This model is the genesis behind Lab Central and Greentown Labs in Cambridge MA and also the long term sustainability of Station F.
Revenue and model: We will generate income from flexible leases for co-working office and lab space, anchor tenants, strategic partnerships, membership fees, events and sponsorship. Companies will go through a competitive process to be based at the Hub for up to 2 years and will have the option to apply again to extend for an additional year (maximum 3 years).
6. The Ask
We estimate costs of approximately £200m to build the Innovation Hub. For the model to deliver the potential described, our expectation is for 25-30% of the building to be focussed on non-revenue generating, mission focussed activities. We are asking for a partnership with Government to develop the full business case and co-design an appropriate government, philanthropic and private capital model. See appendix 1 for more information.
7. The Need
The need is evidenced by the impact these hubs have made in other cities. Station F is the most visited place in Paris, second only to the Louvre. Cambridge has a stated plan to deliver in the next decade what has been delivered in the last 25 years. To do this we need to disrupt how talent and capital is attracted to the UK and deployed to enable high growth companies to succeed and grow in the UK. The central Innovation Hub needs to:
a. Be a national flagship project which shows a public commitment from the UK to putting in place required innovation infrastructure to enable the growth of deep tech companies.
b. Define the ambition of the city and demonstrate how the innovation engine of Cambridge can deliver national economic growth.
c. Support the development of a critical mass of high growth companies and provide a programme of innovation activities and business support at scale to remain globally competitive.
d. Attract global investment and talent.
e. Meet demand for space for high risk/high reward innovation and remove barriers to growth.
8. Drawing on existing strengths in Cambridge
Innovate Cambridge has a track record of working with the Cambridge ecosystem. Through the Innovation Strategy, co-developed with academia, business and local government, we are working in partnership with 200 organisations signed up to the innovation charter. We will collaborate with these organisations to provide expertise, advice and partnership for the Innovation Hub. They include:
24 January 2025
[1] https://resume.io/blog/which-colleges-produce-the-most-founders