Written evidence submitted by Plexal (IGR0091)
1. How does the Government drive research and innovation in our regions?
How effective are the government’s policies in supporting the innovation ecosystem across the UK’s nations and regions, particularly through commercialisation initiatives?
Commercialisation initiatives such as 5G testbeds and trials were insufficiently focused on commercial outcome and as a result, momentum and impacts have not been sustained. Given funding constraints, the UK now needs to ‘pick winners’ to ensure that our core industries remain viable, and our best prospects are supported.
An asset-based approach is needed: we should allow regions to become centres of excellence for particular subject matter domains and allow them to take national primacy. This would de-duplicate and ensure return on investment and regional commitment to growth.
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?
Government spend is most effective as a catalyst to mobilise growth through the relocation of an anchor institution. That anchor institution then needs to deeply engage with, shape, and grow, an innovation ecosystem around it with key partners within its region. This bidirectional engagement is crucial in achieving a multiplier on investment.
Regional anchors do need to deeply consider their approach to procurement and supply chains to drive economic growth and support innovative solutions to grand challenges. Procurement of innovative solutions can bring risk to anchor institutions, particularly those in the public sector. More mechanisms to ‘de-risk’ the innovation process and procure solutions around a challenge-led approach should be embedded into frameworks, as well as opportunities for SMEs and entrepreneurs to enter supply chains they would traditionally be ‘locked out’ from. Pairing a Central Government planned investment (for example a laboratory, a hub, a skills academy) with Local Government capital can then enable a combined amount of risk capital to entice the private sector to materially engage.
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?
The UK’s role in setting international standards is crucial to unlock a market for UK based SMEs to scale into. SMEs lack the resources to participate effectively in international standards setting, but this facility can be provided by a collective intermediary.
The UK can take a more dynamic approach to incentivising company by targeted taxation. Free economic zones have not yet achieved the wholesale uptake required to make them effective at scale. Standardisation between zones will encourage trade between them. The concept of the AI Growth Zone noted in the AI Opportunities Action Plan can be harnessed to create centres of excellence across a whole series of priority technology areas that can support growth.
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.
The UK is the third largest tech economy globally, meaning that it punches significantly above its weight. However in order to compete with and maintain position against the largest two global tech economies (the US and China) requires a much more concerted orchestration of capital, infrastructure and intellectual property management. Notably we should not just consider venture capital which is a specific form of capital relevant to high growth businesses that choose to dilute control, but also the injection of other forms of capital including regional pensions fund capital, and the investment of government entities via co-creation activity.
Spin outs typically suffer by being ‘technology push’ businesses that have not necessarily identified a clear business problem to solve. Additionally, academic founders often do not have the necessary commercial experience or ambitions to grow a rapidly scaling technology business. As a result Plexal has shaped its support around the commercialisation of deep technology, particularly focusing on the adoption gap around Technology Readiness Levels 4-7.
In response to this need, Plexal has augmented the delivery of Innovate UK spin out activity through programmes like Cyber ASAP which focuses on commercialisation and engagement of industry to pull technology development through clear demand signals. The UK consistently references and relies upon its Academic sector as stimulating new companies through IP. The statistics suggest that this is in no way enough. We should be looking more at applied research where we can crowd around private sector investment, and ensure IP becomes a product that can be sold, exported and adopted rapidly to enable growth.
2. How does research and innovation in our regions drive growth and prosperity in those regions?
Our regions are home to some world leading research hubs. Research and innovation activities in these regions can solve some complex and current challenges faced by society. It is important that outputs from R&D activities do not remain within an university environment or confined to an academic paper, but through curation of partnerships between industry, academia and the public sector we can create the environment for research and innovation to ‘spin out’, either through promoting patents, supporting emerging companies and stimulating growth and prosperity.
However there is a need to align governance, partnership structure, and benefits realisation plans to incentivise, drive and evolve value adding interventions.
How effective are regional innovation hubs and clusters in supporting regional growth and prosperity for local communities?
Regional innovation hubs and clusters have had mixed results. However working at the bleeding edge of this field for the last decade has provided insight that is relatively unique.
To ensure (actual, measurable) growth and (targeted, achieved) prosperity, we need an accountable structure that links the business case of investing to the benefits realisation. This model must ensure that all activities are performed to the highest standard and driven through live operation. All too often, focus is reduced post capital investment, meaning the operating structure to ensure benefits realisation is no longer present.
Would unlocking investment at scale for innovative science and technology companies support regional growth, and how could this be done?
Plexal is a live example delivering impact at a regional. Based on the Queen Elizabeth Olympic Park, in 2012, we set out on a noble mission to support the UK Government’s effort to drive social regeneration following the investment made to deliver the Olympic Games in London. The strategy that was formed created Here East, a 1.2m sqft innovation campus for the technology and creative sectors. Here East has been a compelling success, driving over 10,200 jobs and injecting £751m annual impact into the national economy. Plexal, borne of the Here East vision with the support of our founders Delancey, has created a business that has three overlapping endeavours:
Plexal recently conducted an impact report, which considered the economic and social impact of the investment, activities and partnerships delivered by Plexal over the last 7 years.
One of the key findings of the report was the importance of investing in innovation programmes. Research found that Plexal contributed £731m to the UK economy, which is six times the economic impact (£426m) that Plexal could have generated as an office space alone, and for every £1 of government spend, £13.74 is contributed to the UK economy.
Since 2017, Plexal has delivered the following types of commercial partnerships: Core Programme Participants (438 companies that have taken part in programmes), office memberships (613 companies that have taken up desk space), and wider participation through an innovation project.
Should there be region-specific innovation and growth policies, and what should local government’s role be in this?
Alignment between different stakeholders is crucial and difficult. Large institutional investments that drive devolution require active participation from central government agencies to drive strategic national objectives and local government to drive regional economic development. However their inputs and benefits need to be clearly segmented in order to ensure clarity of ownership and avoid double counting. As an example, many business cases driving regional investment are predicated on growing SMEs in the same region. However while the benefits of e.g. national security and regional growth are important outcomes that may overlap, they are distinct, and need to be treated as such.
Devolution plays an important role in driving a sector based approach to growing innovation clusters, identifying assets, and taking a gap analysis based view to pair viable opportunity with addressable gap. Regional Growth Plans – will need to demonstrate what the real, significant, globally differentiators are for each region – and an outward looking, combinatorial approach is needed to avoid regions competing with each other.
3. How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from?
What more can be done to ensure that innovation investments deliver tangible outcomes for both local and national economies, in terms of productivity and growth, and how should this be assessed?
It is necessary to assess innovation investments in terms of their delivery of 1) Faster product development and adoption; 2) Greater and more efficient allocation of capital from a broader range of sources; 3) Alignment of skills development to meet changing industry demand; and 4) Effectiveness at addressing key customer problems.
To what extent do Catapults support technology diffusion, and drive both national and regional growth?
The role of the catapults includes market shaping, stimulation, and de-risking innovation for the market. The function sets out to bring market demand and supply together to address key technology challenges. However catapults represent several different offers that can be difficult to understand at a regional level. Additionally, there is a need for cluster ‘conveners’ to have ‘skin in the game’ via risk and reward structures that incentivise supernormal returns, as opposed to delivering an activity-based consultancy with transactional incentives. There is a gap in the market for a new type of convener that is embedded in delivery, owns benefits, and commits fully to delivering outcomes.
How well are universities and businesses coordinating efforts to develop and commercialise research, including the role of spin-outs and collaborative R&D projects?
Initiatives like the place-based impact accelerator are an important step forward. However there is often still fundamental misalignment between research push and industry pull. This equation is not a linear push-pull – it is the complex and multidirectional interaction between multiple actors in a rapidly evolving marketplace. Hence we believe private-private partnership is needed to drive commercialisation, with carefully aligned incentives that motivate each actor in the ecosystem.
25 January 2025