Written evidence submitted by the Chief Scientific and Technology Adviser, Northern Ireland Executive (IGR0104)

Introduction

Professor Helen McCarthy was appointed as the Northern Ireland Executive’s first Chief Scientific and Technology Adviser (CSTA) in June 2024. Prof. McCarthy’s responsibilities include provision of high-quality independent advice to the NI Executive, co-ordinating a regional strategy on science and technology and chairing the newly formed NI Science & Technology Advisory Network.

Professor McCarthy holds the Chair of Nanomedicine in the School of Pharmacy at Queen’s University Belfast. Following 10 years of research on novel delivery systems for vaccines she spun out her technology into pHion Therapeutics, serving as CEO for 6 years and securing £10million in funding from Innovate UK. During this time, Professor McCarthy won INVENT NI and the All-Ireland Seedcorn Awards.

This submission is provided with the benefit of Professor McCarthy’s experience in academia and the commercialisation of research. However, it does not represent an official submission from the NI Executive or any individual Executive Department.

Professor McCarthy would be happy to attend the Committee in person to elaborate on the points made below.

Context

Northern Ireland (NI) faces a particularly challenging economic and societal context. NI lags behind the rest of the UK in a number of key economic measures including levels of productivity per person, wages and employment, economic inactivity, and reliance on the public purse. Many of the key levers needed to tackle these issues, including the tax system, regulatory requirements and standards are powers reserved to Westminster.

Despite the challenges, there is reason for optimism. Devolution provides significant control over regional business support, skills and innovation policy. There is also burgeoning potential for research and innovation to play a central role in economic growth, built upon the research excellence of our universities, the developed capability in commercialisation of research and a broader knowledge economy that punches well above its weight. Major investments, including several City and Local Growth Deals, present opportunities that can be capitalised upon over the coming years to drive genuine transformational change in the regional economy.

Research and innovation funding is a proven route to economic growth with organisations such as the OECD and World Bank, stating that national prosperity requires both the creation, application and dissemination of knowledge.

Successive UK Governments have recognised the importance of research and innovation to economic success in various strategies since 2017, citing the vital contribution of the UK’s world-class research base in generating the ideas and skills which lead to improved economic outcomes.

Northern Ireland is the only devolved region of the UK that has failed to strategically invest in regional research and development. Between 2010/11 and 2020/21, public sector spending in Northern Ireland on higher education, further education and industry skills fell by around one-third in real terms.  

Northern Ireland currently lags behind the rest of the UK, Ireland and Europe in key R&D investment metrics. NI Government expenditure on R&D is amongst the lowest in Europe – 26th out of 28 countries. In 2023, government invested £27.2m in R&D out of a regional spend of £1.1bn.[1]

Response

The UK Government provides support for research and innovation through central pots of funding administered by UKRI and its constituent Research Councils. However, UK-wide funding programmes are only effective if directed appropriately. To drive systemic change of the level required, it is critical that multiple sectors and stakeholders work in concert. Partnership-based models for regional cooperation facilitate a better understanding of challenges specific to the region, joint solutions and ensure that investments are targeted towards existing areas of strength and opportunity. In the case of NI, where there has been a dedicated regional presence / resource (e.g. Innovate UK Regional Managers or catapult presence) that has significantly helped ensure that there is better engagement with UK wide schemes and help tailor interventions. A practical example of this was the partnership approach adopted by UKRI and DSIT in delivering the Future Medicines Institute - a £55 million industry-led collaborative initiative aimed at advancing the region’s Precision Medicine sector.

It is important that interventions designed by UK-wide bodies such as UKRI take account of the differing capabilities of regional innovation ecosystems. For example, Business Expenditure in R&D (BERD) makes up over 75% of total Northern Ireland R&D spend, and 49% of that BERD investment is undertaken by SMEs giving Northern Ireland a relatively ‘wide but shallow’ R&D base compared to GB.

On the broader point of funding programmes, given the constrained public finances in NI, it is unlikely that additional funds can be made available in the short term to enhance existing programmes or fund new ones. Therefore, greater distribution of central government funds (UKRI) on a regional basis is a necessity. However, due to the devolution funding settlement any additional funds should be administered by UKRI, or equivalent UK-wide bodies, and ring-fenced for innovation capacity building initiatives. The expansion of the Connecting Capability Fund – administered by Research England – would be welcome. This Fund supports collaborative projects between higher education and commercial sectors forging technological, industrial and regional partnerships.

Early engagement by the UK Government and UKRI with the regions and devolved administrations on new funding programmes must be prioritised. This will ensure that devolution is harnessed to support innovation and will support alignment of support and impact. Unlocking investment at scale is important but the design of interventions is crucial. The experience of the Industrial Strategy Challenge Fund was that regions such as Northern Ireland, with fewer large R&D active companies and research institutions, struggled to build consortia (and therefore the match funding) of sufficient scale to be competitive. More recent phased competitions such as IUK’s Launchpads and Strength in Places enabled greater flexibility and were therefore more successful at supporting regional needs.

New funding programmes supporting innovation should have greater importance attached to generating a return on investment and meeting outcomes agreed at a regional level. To meet this requirement greater consideration must be given to the development of measurable economic outcomes to deliver value for money and economic growth. These measurable outcomes should be developed in consultation with key stakeholders – government, industry and academia – but the evaluation should be the responsibility of government agencies at the devolved level. This will provide a level of rigour to the evaluation process which may be currently absent.

Specific Recommendations

1. The UK Government must continue with implementation of the Independent Review of University Spin-out Companies and ensure that the devolved administrations, including NI, are coordinating implementation under their respective devolution frameworks. Of particular importance is to ensure that equity splits identified by TenU’s University Spin-out Investment Terms is set as the standard benchmark across the UK.

2. Proof of Concept (PoC) funds are essential for academic researchers to build confidence in commercial ventures before creating a spin-out company. The announcement by UKRI of £9m of PoC is to be welcomed. However, to ensure the development of new innovation ecosystems outside of the ‘Golden Triangle’, the Government and UKRI should consider funding dedicated PoC programmes in the devolved nations. These PoC programmes should be ringfenced as innovation support and aligned to strategic priorities identified at the regional / devolved nation level.

3. The Connecting Capability Fund should be extended to NI and administered by the Department for the Economy on similar lines to the Higher Education Innovation Fund.

4. In NI there is a lack of deep-tech knowledge and expertise. Spin-out companies do not have the same level of access to individuals with the experience of developing spin-outs to their full potential. The expansion of existing support structures to the devolved administrations should be expediated.
5. The UK Government should encourage and support the development of links between specialist venture capital funds and regions with burgeoning innovation strengths. An example to emulate would be the partnership between Epidarex Capital, four Scottish universities and the British Business Bank to establish a VC fund to support innovation derived life sciences companies.

6. For comparative reasons, the Committee should consider the innovation support programmes delivered by the Irish Government through Enterprise Ireland. Of note is the project funding of up €450,000.

25 January 2025