Written evidence from Innovate UK (ISG 28)

 

  1. Innovate UK is the UK’s innovation agency, a non-departmental public body sponsored by BEIS.  It is the prime channel through which the Government incentivises innovation in business.  Innovate UK is business-led.  Our governing board and executive team is comprised of experienced business innovators and experts.  We work with people, companies and partner organisations to find and drive the science and technology innovations that will increase productivity and exports and grow the UK economy.

 

  1. We are working to:

 

  1. In line with our strategy[1] we operate across Government and advise on polices which relate to technology, innovation and knowledge transfer.  We also support Government departments to become more efficient by supporting them in developing innovative solutions through harnessing the creativity that businesses can offer.

 

  1. Innovate UK was established in July 2007 (as the Technology Strategy Board). We have invested over £1.8 billion in innovation, and have helped more than 7,600 innovative companies in projects estimated to add up to £13.1 billion to the UK economy and created an average of 7 jobs per company we have worked with. Our investment over the last 9 years has meant that every £1 invested has returned up to £7.3 GVA to the economy and created 55,000 jobs. The private sector more than matches that investment, doubling the power of public sector money. We work with nearly every University in the UK to stimulate the commercialisation of leading-edge academic research and innovation.

 

  1. Innovate UK welcomes the Committee’s inquiry into The Government’s approach to Industrial Strategy.  Set out below is our response to the questions raised by the Committee.

 

 

 

 

  1. What does the Government mean by industrial strategy, and what does the private sector want from one?

 

  1. The new cross-government focus on the economy and Industrial Strategy, together with the formation of UK Research and Innovation, creates an unprecedented opportunity to ensure we draw on talents and resources from right across the UK, in ambitious collaborations designed to capitalise on the global opportunities of the future. To make this a reality we will need an ‘innovation led Industrial Strategy”.  Our competitor nations are spending more on research and development and have ambitions to do more, an innovation led industrial strategy will enable us to focus on key challenges and areas of strength2.

 

  1. Innovation is at the heart of any modern industrial strategy.

 

  1. However, a focus on research, science and innovation, especially for an innovation led industrial strategy, should not just be a focus on research and academic institutions. Business-led innovation is central to the successful transformation of our economy, in fact 50% of productivity growth derives from business-led innovation[2]. It keeps established industrial strengths competitive and nurtures new disruptive technologies and industries. It is a key agent of change, which can accelerate economic growth, anchor investment in the UK, generate exports and deliver a step change in our productivity. It is our view that innovation should be absolutely central to the industrial strategy, and an economy that works for all.

 

  1. Innovate UK is finalising a new four year Strategy which is focussed on strategic high growth sector opportunities for the UK. It builds on our world-class research excellence and seeks to strengthen comparative advantage of the UK by building on strengths throughout the UK. There is also a focus on building new sectors and supply chains where the UK is positioned to take the lead in emerging areas like the internet of things or quantum technologies.

 

  1. Innovate UK already delivers a significant part of the existing industrial sector strategies, including establishing the successful Catapult network in part a response to many of the industrial strategies; delivering the funding programmes of the Aerospace Technology Institute[3] and the Advanced Propulsion Centre (automotive sector)[4]; and, establishing four specific Agri-tech centres[5] in conjunction with business.

 

  1. Industrial strategies ensure focused investment, bring together supply chains and academia, vertically and horizontally, to rise to the global challenges faced by an industry in order to sustain, grow and prosper to become a world leading exporter. Innovation funding drives strategic collaborations between SMEs, Universities, RTOs and large multi-nationals like no other mechanism can.

 

  1. Businesses tell us that investing for the long-term and setting long-term policy helps create the confidence within which business can invest. This is particularly true for investing in research and development (R&D) which in itself is a risky investment.  Long-term policy stability not only helps R&D, it also has a positive impact on capital investment and investment in skills development. 

 

  1. Businesses also tell us that industrial strategy must be a whole of Government Industrial Strategy leveraging all the potential from across Whitehall and not just be seen as a role for the BEIS Department. All the economic ministries have a role to play including those in Scotland, Wales and Northern Ireland.

 

  1. Creating a future vision and roadmaps to realise the future are incredibly important.  For example, in the UK we are on the cusp of major change in the automotive sector. Electric and autonomous vehicles powered by ever more stable and powerful battery solutions will mean jobs and prosperity for the UK. These electric vehicles can also be connected to the UK energy system, helping to power homes and take electricity when the grid is best able to supply and meet our climate change targets.  So, an investment in automotive will spill over into energy.  Autonomous vehicles will enable far greater levels of personal productivity and logistics and congestion smoothing.  The UK is well placed to realise a significant position in this sector but it will require continued investment both in fundamental science and throughout the technology readiness levels to market introduction. Similar strategies, investing in future technologies are needed in all sectors.

 

  1. How interventionist in the free market should Government be in implementing an industrial strategy, for example in preventing foreign takeovers of UK companies?

 

  1. We look to those more expert to respond to this question.

 

  1. What lessons can be learnt from:

 

• Previous governments' industrial strategies?

 

  1. Our view is that a future industrial strategy should be “innovation led” based on our strengths of using research and innovation to accelerate business growth.  Previous industrial strategies have been developed in partnership between government and industry to focus and help drive innovation in sectors best placed to have the greatest impact, in delivering a sustainable high-performing economy, creating new businesses, vibrant markets and skilled employment. Innovate UK has been involved in 9 of the 11 sectors that were emphasised in the previous approach to industrial strategy[6]. Our activities in supporting these industrial strategies are highlighted below.

 

Transportation

 

  1. Transportation forms a significant part of the Government’s Industrial Strategy 2010 – 2015 and the Catapult centres are a critical part of the innovation and technology infrastructure. The High Value Manufacturing Catapult and its seven individual centres, has been a particular success for the transport sector, specifically the aerospace and automotive industries, providing a network of skills and expertise across the UK drawing research out of universities into businesses maximising the impact from public sector investment.

 

  1. The wider Catapult family also offers a great opportunity for innovation in automotive and aerospace with the Transport Systems, Satellite Applications, Digital and Future Cities Catapults exploring the potential of connected and autonomous transport systems, their impact on our lives and the creation of new global markets.

 

  1. For the UK to build on the recent success in terms of foreign direct investment (FDI) and exports from sectors such as automotive and aerospace, it is vital that government and industry work together at sector level to identify the best opportunities, seize them and to focus on key challenges, and tackle them together.

 

Automotive

 

  1. The 2013 Automotive industrial strategy[7] has been key to accelerating innovation, productivity and exports. The strategy is central for the sector. It:

 

 

  1. Through the collaboration between industry and Government the coordination has generated a string of high impact outputs:

 

 

  1. The cornerstone of the strategy has been the £230 million Government investment since 2007 in the Low Carbon Vehicles Innovation Platform (LCVIP), involving Innovate UK, DfT, BEIS, and EPSRC. This has provided a single, globally recognised fund to de-risk industry investment in the UK, taking innovation from research through to proven concepts ready for industrialisation.

 

  1. The hugely successful LCVIP, delivered by Innovate UK, has to date created a portfolio of c220 projects that have generated follow on private investment at a multiple of 5 times the original grant. The recent impact review demonstrates a return on public investment of over 10:1, many thousands of jobs and SME success stories[8].

 

  1. The Advanced Propulsion Centre (APC) was formed in 2013 and is a £1 billion, ten-year commitment between government and the automotive industry to invest in the later stages of innovation than the LCVIP. The 2013 industrial strategy launched the APC to position the UK as a centre of excellence for low carbon propulsion development and production.  Innovate UK delivers the funding competitions and projects for the APC.

 

Aerospace

 

  1. The 2013 aerospace strategy Lifting Off: implementing the strategic vision for UK aerospace[9] was developed jointly with business through the Aerospace Growth Partnership (AGP), established in 2010. It built on the Strategic Vision for Aerospace[10] published at the Farnborough Air Show in July 2012.

 

  1. The strategy implemented a shared Government and industry vision for the aerospace sector, so important to the UK for the huge employment, growth success and potential and very high productivity and exports.

 

  1. “It is estimated that there will be global demand for 27,000 new passenger aircraft, worth around $3.7 trillion, by 2030. The UK has the second largest aerospace sector in the world and we are well placed to compete for this new business[11]”.

 

  1. Through the collaboration between industry and Government the AGP has generated a string of high-impact outputs:

 

 

  1. The strategy deliberately aimed to achieve a more balanced national economy by supporting our world class aerospace sector. A collaboration between Government and business created the Aerospace Technology Institute (ATI) to support the R&D investment that is crucial for maintaining an internationally competitive industry driven by strong and sustainable private sector led growth. The long-term commitment to government support gives industry the long-term stability it needs to develop and commercialise aircraft technologies in the UK. This represented a Government and industry joint investment of £3.9bn over ten years.

 

  1. Innovate UK manages the Aerospace Technology Institute (ATI) strategically directed funding. At the end of 2015/16 the portfolio value – the funding commitment total of ‘live’ ATI projects combined with new offers is over £700m matched by industry. The Innovate UK portfolio including private sector investment in these projects is set to grow beyond to £2bn by 2020.

 

Agricultural technology

 

  1. The 2013 Agri-tech industrial strategy secured £160m of new public funding to accelerate innovation and drive growth. Its purpose is to ensure:

 

“that the UK becomes a world leader in agricultural technology, innovation and sustainability; exploits opportunities to develop and adopt new and existing technologies, products and services to increase productivity; and thereby contributes to global food security and international development[12].”

 

  1. The strategy is central for the sector. It:

 

 

  1. Through the Agri-tech strategy translation of academic research to agricultural practice has improved[13]. Key to this has been the £70 million Government investment in an Agri-tech Catalyst, involving Innovate UK, DFID and BBSRC. This provides a single fund for projects, taking innovation all the way from the laboratory, the farm, the producer to the market. This also includes £10 million to deliver international development objectives. This has to date created a portfolio of c120 projects that have generated £58.4million of match funding from the private sector. A further round of the Catalyst supporting DfID approved projects is yet to commence[14].

 

  1. Additionally, as a result of the strategy, four world-beating Centres for Agricultural Innovation have been created to support, develop, adopt and exploit new technologies and processes (£90 million)[15]. They include:

 

 

  1. Capital Investment in both the Agri-tech Catalyst and these Centres is ongoing and will be completed by end of 2018/19 financial year.

 

  1. Whilst creating strong innovative advances in the sector, the Agri-tech Strategy could have taken a more holistic approach encompassing the whole supply-chain, including the UK’s world-class manufacturers of food and drink and retailers. Since the publication of the Agri-tech strategy the Agri-tech Leadership Council has now transformed into the AgriFood Technology Council broadening and renewing the remit of the strategy to embrace the whole AgriFood supply chain. Through this more integrated approach the Agri-tech sector is now better placed to innovate and respond to consumer demand for safe, high-quality, nutritious food of known provenance.

 

Construction

 

  1. Construction in the UK is a £105bn industry employing over 3m people, it is larger than aerospace, automotive and energy combined, but construction productivity has flat lined since the 1990’s[16].

 

  1. The Industrial Strategies for Construction: Government Construction Strategy (GCS) (2011, revised 2016[17]) and the Construction 2025 (2013[18]) documents set out a vision, mission and targets for the industry. These included reducing the cost of Government construction projects by £2-£3bn per annum targeting 50% increase in exports, 50% reduction in time, 33% reduction in cost and 50% reduction in emissions.

 

  1. Key to the 2011 GCS was a mandate that by April 2016 all centrally procured construction projects must comply with a set of digital information standards known as Building Information Modelling or “BIM Level 2”. With Government acting as a lead customer (procuring over 40% of all construction output), all of the supply side of the industry was encouraged to adopt the digital BIM strategy. The work was led by an industry-government partnership known as the BIM Task Group. The BIM Task Group undertook the development of the standards, methodologies and education of the UK industry, accelerating the UK ahead of overseas competition. This also created a new market for digitally oriented products and services ranging from sensors, internet of things and 3D modelling to virtual reality, geospatial mapping and robotics.

 

  1. These strategies were central in driving a transformation of the UK construction industry’s productivity and the acceleration of UK construction technology to become world-leading. They inspired a new generation of graduates, start-ups and SME’s into the industry as evidenced by over 800 SME innovation programmes funded by Innovate UK’s Built Environment Platform. According to GCS 2016; BIM has already contributed to £3bn in cost savings achieved in 2011-15.

 

  1. Thanks to the industrial strategies, the UK is now the recognised world leader of BIM development. In 2014, HMG won the contract to lead the EU BIM Strategy and EU Task Group. Through FCO the UK BIM Task Group runs multiple international development projects to teach other Governments how to transform their domestic markets including Brazil, Chile and China, which will lead to export opportunities for UK companies.

 

Digital Economy

 

  1. We are currently awaiting the announcement of the Government’s Digital Strategy.

 

  1. An Industrial Strategy for this area needs both to support the development and growth of digital businesses while also encouraging and supporting traditional sectors to take up digital technologies much more rapidly.

 

  1. Digital solutions, more than any other, have the ability to compete on a global stage from their first conception. For UK businesses to compete they need to be given the same level of access to customers as those from other countries. Across Europe the digital single market was offering this opportunity, however with Brexit this access has been thrown into doubt and the UK needs to ensure that negotiations deliver continued access.

 

  1. The global nature of this area also means that digital skills and know-how are very mobile. Our Universities are world leaders in key areas such as machine learning and data science. However, while these skills are picked up by UK industry, all too often, as these businesses begin to gain traction, they are acquired by the US giants – for example, Google’s acquisition of machine learning leaders Deep Mind and Oxford spin out Dark Blue Labs. Our Industrial Strategy needs to find ways of retaining these key skills and building world leaders.

 

  1. Digital technologies emerge more rapidly than those of other sectors and our Industrial Strategy needs to be agile to cope with this. Key technologies – such as machine learning, virtual and augmented reality and distributed ledgers - that are having impact today were not even recognised as being important three years ago when the Information Economy Strategy was written. For this reason, our support to this industry needs to ensure the rapid transition of ideas between the research base and industry and between technology suppliers and lead customers.

 

 

 

 

 

 

 

 

 

Life sciences

 

  1. Government initiatives such as the Life Science Strategy[19], NHS Innovation Strategy[20] and Innovation and Research Strategy[21] provide important support for the commercialisation of world-leading UK capability in life sciences. The Government’s long-term strategic goal is for the UK to be the best place in the world to develop and launch innovative medicines, technologies and diagnostics, in doing so contributing to economic growth and productivity, reduced NHS costs and improved patient outcomes. The Strategy for the UK life sciences industry was launched in 2011 with a focus on making the UK a world-leading place for life sciences investment[22]. The strategy aimed to provide an unrivalled ecosystem that brings together business, researchers, clinicians and patients to translate discovery into clinical use for medical innovation within the NHS.

 

  1. Global markets for medical technology and biotechnology are growing. The global medical device technologies market is projected to grow at a compound annual growth rate of 5.5% from $412bn in 2013 to reach a value of $539bn by 2018[23]. Even faster growing is the global biologic therapeutic drugs market, which is projected to increase in value from $200bn in 2013 at a compound annual growth rate of 10.6% to reach $387bn by 2019[24]. One driver for these markets is increasing per-capita health spending – over the ten year period from 2003-2013, per-capita health spending in the UK rose by $1,148, and similar increases can be seen in other developed countries[25]. Another market driver is the growth of the older population – according to the UN, the global proportion of people aged 60 years or over will increase from 1.7 per cent in 2013 to 21.1 per cent by 2050[26].

 

  1. Forming a significant part of the Government’s Industrial Strategy 2010 - 20156, the Catapult centres are a critical part of the UK’s support infrastructure, with a remit to enable the success of industry and drive economic growth. The health care Catapults (Cell and Gene Therapy, Precision Medicine and Medicines Discovery) along with the National Biologics Manufacturing Centre under the High Value Manufacturing Catapult, provide a network of skills and expertise across the UK to support businesses and maximise the UK’s potential. The broader Catapult family also offers a great opportunity for innovation in health and life sciences with the Digital and Future Cities Catapults exploring the urbanisation of health and wellbeing and the creation of new markets.

 

  1. The need for better translation from the UK’s excellent science base gave rise to the Biomedical Catalyst (BMC) programme.  Operated jointly by the Medical Research Council and Innovate UK and focused on SMEs, the BMC aims to deliver a high growth pipeline of innovative companies capable of tapping into a global healthcare market. So far, £250m has been awarded to 186 companies and 132 university ventures. Portfolio companies’ subsequent fund raising and licensing fees etc. exceed £1bn.

 

Nuclear

 

  1. The nuclear industrial strategy[27] published in 2013, has proved to be extremely important in addressing the future nuclear power priorities for government and industry to partner and address. It brought together all relevant key stakeholders in the nuclear energy supply chain to highlight an action plan for the UK. 

 

  1. The strategy aspired to provide further opportunities for economic growth and job creation by generating:

 

 

  1. Since the publication of the Industrial Strategy, industry has produced a review of the Civil Nuclear R&D Landscape[28], a Nuclear R&D Roadmap[29], a Long-term Nuclear Energy strategy[30] and a Nuclear Industrial Vision Statement[31]. These outputs and evidence have been pulled together by the Nuclear Innovation and Research Advisory Board (NIRAB) to produce a budgeted R&D programme which has formed the basis of the government’s current £250m nuclear R&D programme.

 

  1. As members of NIRAB Innovate UK focussed on the nuclear innovation priorities and recommended delivery mechanisms for the UK’s R&D programme. Working with other funding bodies (former DECC, EPSRC and NDA) Innovate UK is delivering co-funded focussed programme to foster key nuclear technologies to address the strategy’s key objectives.

 

Offshore wind

 

  1. The industrial strategy for offshore wind[32] called for industry and government to collaborate to build the supply chain in the UK delivering jobs, exports and securing offshore wind as a central part of the UK’s long-term electricity mix. Such collaboration enhanced cross-government relationships in the sector (Innovate UK, UKTI, BIS and DECC) and focussed objectives. The strategy provided confidence and direction to businesses working in the sector; accelerating innovation and industrial thinking on low carbon energy generation.

 

  1. As mentioned in the industrial strategy, Innovate UK established the Offshore Renewable Energy Catapult to bridge the gap between academia, businesses, research and government, enabling UK businesses to innovate, grow and succeed. Innovation is a key route to making offshore wind cost-competitive. The Catapult has helped deliver the industrial strategy in this sector, by successfully encouraging industry to collaborate, to work with the UK’s excellent research base, to develop and test new technologies and innovations for offshore energy generation.

 

  1. Whilst valuable in providing convergence in the sector, we feel that this strategy didn’t fundamentally change the direction of the sector but augmented it. The strategy could have consulted more with industry and created stronger public/private sector relationships to increase innovation and industrial capability. It would have been beneficial to establish longer-term goals supported by long-term funding, this would not only have created greater certainty, but would have given stronger industrial ownership of the strategy and had a greater long-term impact.

 

Oil and Gas

 

  1. Since the Oil and Gas Industrial Strategy[33] was issued in 2013, changes in policy and structure of the sector have primarily been driven by the collapse in oil price from >$100/barrel to ~$35/barrel. This has led to a number of interventions not foreseen by the strategy e.g. fiscal intervention by Government to support the sector, the establishment of an independent Oil & Gas Authority and the setting up of a Technology Leadership Board. The strategy stimulated much thinking in the sector, a result of this the Aberdeen City Deal, UK and Scottish Government are establishing an Oil & Gas Technology Innovation Centre[34] with £180m of public funding.

 

  1. The strategy provided a focus on for the sector. It identified the need for a coordinated sector approach to Innovation and challenge led programmes. It also recognised the need for the sector to learn lessons from other sectors and the importance of skills and training. The strategy played a part in initiating the Wood review of the UK continental shelf oil and gas recovery[35], specifically looking at how economic recovery could be maximised. The recommendations of the Wood review have formed the basis for establishing the Oil and Gas Association and also the Oil and Gas Technology Leadership Board (which includes senior management from all major Oil and Gas supply chain companies and Government).

 

  1. Innovate UK, played a part in the initial development of the industrial strategy and sits on the Technology Leadership Board, prioritising innovation within the sector and importantly advising on how the oil and gas sector should connect with existing businesses or Centres of Excellence (for example Catapults).  This is important as this facilitates much cross-disciplinary learning of other related sectors and technologies (e.g. nuclear decommissioning, robotics, digital and high value manufacturing).

 

 

  1. The biggest impact on developing and growing sectors generally comes from those countries which have a consistent long-term approach to supporting a sector and a clear vision of what they want to achieve. Successful European and international strategies have taken a joined-up approach, which encompasses the elements needed to support the industrial strategy, including R&D and innovation, skills, finance, regulation, planning, trade and inward investment and policy development. We reinforce that Research & Innovation alone need to be within a broader context of better finance and regulation.

 

  1. From an R&D and innovation perspective, this often means building on academic and industrial strengths and creating long-term roadmaps charting out how the sector is likely to develop over a 10-20 year horizon and the technology requirements (and other requirements such as skills) over that period. 

 

  1. One good example of a holistic approach is Denmark’s Government has set a strategy to help create and drive forward the wind energy sector. Born from a need to decrease dependence on other countries for energy and to combat climate change, the Danish Government focused its energy policy more on wind power and put in place funding for R&D, fiscal incentives such as capital cost subsidies and feed-in- tariffs, as well as streamlining planning applications for wind turbines, reducing the hurdles for innovative companies.  All of these elements if put in place as part of a consistent and long-term approach provide business with the confidence to invest for the future.

 

  1. Another would be in Germany, Industry 4.0 provides a focal point and an umbrella under which a range of innovative business activities can then sit and be aligned. As with Germany’s Fraunhofer institutes, this creates a long-term commitment to a clear strategy and stable framework. Having that single focus also increases the recognition and impact on a global stage, creating a leadership position. Germany’s institute of technology, the Fraunhofer Gesellschaft; its science institutes Max Planck Gesellschaft were created after the second world war and have been the powerhouse of science and innovation in Germany supporting key sectors such as automotive, materials, engineering, aerospace, enabling these sectors to export worldwide from a strong manufacturing base. Funding is well spent when applied to an industrial challenge with clear objectives.

 

  1. In a similar vein the American Grand Challenges approach creates a framework for bringing together government, industry and academia to join forces around a key sector priority, providing a direction for the research and development needed to achieve long-term goals[36].  

 

  1. Countries such as Taiwan and South Korea have also successfully targeted the development of sectors, backed it with the necessary investment and long-term approach, including putting in place the capability in terms of skills, knowledge and equipment to support the sector.  The Industrial Technology Research Institute (ITRI) in Taiwan and the Electronics and Telecommunications Research Institute (ETRI) in South Korea (similar to the Catapult centres in the UK) are good examples where industrial strategies have facilitated sector development through long-term investment in technology and innovation centres.  Additionally, these centres aim to operate ahead of where business is investing, keep the sector at the leading-edge.  South Korea is the global leader in flat screen technology just as Japan is the leader in lithium ion batteries, the science for this technology was invented in Oxford but unfortunately, like other revolutionary technologies, not commercialised in the UK. Any new industrial strategy should seek to maximize the commercial outcome of our Research and Innovation.

 

 

  1. What tensions exist between the objectives of an industrial strategy and the objectives of other policies, and how should the Government address these tensions?

 

  1. This is a question for Government rather than its agencies.  In setting an innovation led industrial strategy Government should make decisions, balance objectives and decide appropriate level of support, but economic evidence is clear that an investment in R&D will also lead to investment in capital and skills.

 

  1. What are the pros and cons of an industrial strategy adopting a sectoral approach?

 

  1. Sectors are a natural way of creating economic growth or improving productivity since sectors and companies within them may have common challenges, opportunities and developing strategies for sectors are a natural means of creating wealth. Sectors are known entities often with common technologies, customers and suppliers. A sector based industrial strategy could be used to drive multiple industries and businesses forward, overcoming shared challenges through open, collaborative research and innovation. Innovate UK has reorganised itself into four broad sector groupings reflecting the fact that companies also see themselves in sectors.  Innovate UK has organised into:

 

 

  1. The counter-argument is that sectors are typically defined by what already exists and therefore could lead to siloed thinking.  Defining an innovation led industrial strategy by sector could also lead to empowerment of incumbent businesses within the chosen sectors, hindering new entrants and companies with an ambition to scale.  We must be mindful that growth often occurs at the interface between technologies. The Innovate UK new simplified competition structure offers a broad open way for businesses to find support regardless of sector or specific technology choices.  Innovate UK seeks to find solutions to innovation challenges. However, we also run an ‘open’ competition to ensure to support high quality innovation from any company, in any area of the UK economy at any time. This recognises that exciting innovation from high-growth potential companies may come from areas that we are not currently focussed on.

 

 

  1. Investing in success would be the definition we would use. Success often comes from unexpected sources, and should be given the opportunity to flourish unhindered by top-down decisions of incumbents, including Government and agencies. Innovate UK’s approach has long been to pick technologies at the forefront of innovation, or set the challenge and allow the best to emerge, rather than pick the winners. Peer review followed by support for growth is a strong recipe for success in many innovation agencies, together with providing the conditions that enable the winners to become global leaders.

 

  1. Government is in a position to look at the bigger picture and understand where the strategically important challenges are, where public support can catalyse private investment and activity to find solutions. This more mission-oriented approach should resist deciding what the solution is, but instead set out what the challenges are and break these challenges into smaller manageable activities.  For example what is the Health System of the Future, what is the most optimal Hospital of the Future; what is the Energy System of the Future, how will we move from the current system to next generation energy systems and what are the steps along the way? What innovation is needed for upgrading existing cities to be city designs of the future, how will energy, transport, satellites, housing and infrastructure innovate to meet growing demand? Much is said about the fourth industrial revolution but what are the innovative steps along the way to a digitally enabled manufacturing sector?

 

 

  1. This should depend entirely on what the objectives of the industrial strategy are and at this stage it is too early to form a view. However early thoughts would be focussed on economic growth, the potential to export and to create inward investment which is a UK strength, importantly looking to the future for each of the sectors and the advantage it could bring to the UK. At Innovate UK we are looking at new projects and technologies where there is great research excellence; where we have leading businesses, large, medium and small ready to exploit the market; that the market opportunity is large and global; and the timing is right for public sector intervention.

 

 

  1. This depends somewhat on what is meant by “propping up”. Subsidising uncompetitive industries to keep them afloat will at times be critical to maintain employment and output in the short-term, but in the medium and long-term if these businesses do not invest and importantly innovate, this is liable to be damaging for the UK’s productivity and competitiveness. Where innovation can leapfrog to a more competitive industry (e.g. automotive) can be very cost effective and generate jobs.

 

  1. However, working with such industries to drive innovation – either to increase productivity and global competitiveness or to help the industry to evolve to meet new markets or challenges – has the potential to yield significant benefits. Finding new applications for old materials, equipment, skills, processes, and knowledge often defines what innovation is. Supporting traditional industries to continue using their raw materials in the same way is unlikely to have long-term gain, but supporting them to find new means of using those materials, or combining them with others, is one key to driving successful innovation.

 

 

  1. Productivity performance in the UK is a sound objective but not sufficient.  We must look to the industries of the future too.

 

  1. One strong driver would be to have a mission or challenge based approach, defining what the most important challenges facing the country are and mapping out what needs to be done to resolve them all the way from fundamental science to market introduction. This could be a policy choice which enables actors from multiple sectors to work in a common direction for the highest societal benefit.

 

 

 

 

  1. Should the industrial strategy have a geographical emphasis?

 

 

  1. Innovate UK believes that an industrial strategy should have a strong geographical aspect.

 

  1. The government has set out a clear ambition to ensure that commercial and industrial success is experienced in all parts of the country.

 

  1. Innovate UK is a great example of supporting economic growth away from London and the South East. Analysis of Innovate UK’s investments show that we are supporting great innovation wherever it is. We are helping to lift innovators across the UK to compete on an equal footing globally; whether they are in Scotland, the North East, or elsewhere they are supported to compete as successfully as an innovator in London.

 

  1. The BIS analysis of public research and innovation expenditure shows that, on a per capita basis, Innovate UK has invested to stimulate economic growth right across the UK: London receives less investment that the UK average (£7 v £7.6); highest is the North East (£27.9), then the South West (£15.2), then East Midlands £9.7); with Scotland receiving the same level as the South East (9.5/head)[37]. This is illustrated in the map of Innovate UK investments since 2008 (see below).

 

 

https://innovateuk.blog.gov.uk/wp-content/uploads/sites/153/2015/12/Innovation-map-screenshot-v2.jpg

 

 

  1. To achieve an integrated end-to-end innovation ecosystem we need to make strong connections between UK innovators and research, between UK innovators and private sector funding, and between UK innovators and regional priorities.  We need to align the funding investments Government makes in those strategies at a regional and national level.

 

  1. The importance of ‘place’ was highlighted in the Government document ‘our plan for Growth: science and innovation’[38]. Following from this lead, Innovate UK now has in place a team of Regional Managers to understand and build on the intersections between regional priorities and UK excellence[39]. 

 

  1. The regions now have a much better understanding of their priorities. A great deal of work has gone in to understanding regional strengths, through development of local economic plans focused on Smart Specialisation and more recently through Science and Innovation Audits. What is now required is an approach through which the regions can direct investment in their priorities whilst retaining connection to national priorities.

 

  1. In the latest round of the Biomedical Catalyst[40], Innovate UK has worked closely with Scottish Enterprise to establish a simple but effective way to ensure that we can build on the intersection of UK excellence with the specific smart specialisations and economic priorities of Scotland.

 

  1. The approach recognises that far more companies pass the independently assessed quality threshold set for Innovate UK competitions than Innovate UK is able to invest in.  The new approach then enables Scottish Enterprise to then invest in those projects, according to its regional priorities, which are above the quality threshold but unfunded by Innovate UK. The Innovate UK competition structures therefore offer a proven platform, which can be used to combine UK excellence with regional priorities. We aim to roll this approach out to all regions and funding partners.

 

 

Dr Ruth McKernan, CBE

Chief Executive

26 September 2016

 

[1] ‘Concept to Commercialisation:  A strategy for business innovation, 2011-2015’. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/360620/Concept_to_Commercialisation_-_A_Strategy_for_Business_Innovation_2011-2015.pdf

[2] Allas, T, (2014) Insights from international benchmarking of the UK science and innovation system. https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking

[3] http://www.ati.org.uk/

[4] http://www.apcuk.co.uk/

[5] https://agritech.blog.gov.uk/2016/02/11/centres-for-agricultural-innovation-launching-in-2016/

[6] https://www.gov.uk/government/publications/2010-to-2015-government-policy-industrial-strategy/2010-to-2015-government-policy-industrial-strategy

[7] https://www.gov.uk/government/publications/driving-success-uk-automotive-strategy-for-growth-and-sustainability

[8]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/458740/CO089__LCV_IP_SEP15_Brochure_FINAL.pdf

[9]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/142625/Lifting_off_implementing_the_strategic_vision_for_UK_aerospace.pdf

[10] https://www.gov.uk/government/publications/aerospace-growth-partnership-a-strategic-vision-for-uk-aerospace

[11]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/142625/Lifting_off_implementing_the_strategic_vision_for_UK_aerospace.pdf

[12] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/227259/9643-BIS-UK_Agri_Tech_Strategy_Accessible.pdf

[13] https://innovateuk.blog.gov.uk/2016/04/07/agriculture-takes-centre-stage/

[14] https://www.gov.uk/government/publications/agri-tech-catalyst-innovation-funding-in-developing-countries

[15] https://www.gov.uk/government/publications/centres-for-agricultural-innovation/centres-for-agricultural-innovation

[16]http://www.ons.gov.uk/businessindustryandtrade/constructionindustry/bulletins/outputintheconstructionindustry/previousReleases

[17] https://www.gov.uk/government/publications/government-construction-strategy-2016-2020

[18] https://www.gov.uk/government/publications/construction-2025-strategy

[19] Department for Business, Innovation and Skills (2011). Strategy for UK Life Sciences.www.bis.gov.uk/assets/biscore/innovation/docs/s/11-1429-strategy-for-uk-life-sciences.pdf

[20] Department of Health (2011). Innovation Health and Wealth, Accelerating Adoption and Diffusion in the NHS. www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_131784.pdf

[21] Department for Business, Innovation and Skills (2011). Innovation and Research Strategy for Growth.

www.bis.gov.uk/assets/biscore/innovation/docs/i/11-1387-innovation-and-research-strategy-for-growth.pdf

[22] Strategy for UK life sciences: one year on

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/36684/12-1346-strategy-for-uk-life-sciences-one-year-on.pdf

[23] Medical Devices: Technologies and Global Markets, BCC Research, Sep 2014

[24] Biologic Therapeutic Drugs: Technologies & Global Markets, BCC Research, Jan 2015

[25] Global Health Expenditure database, World Health Organisation

[26] World Population Ageing 2013, United Nations

[27] https://www.gov.uk/government/publications/nuclear-industrial-strategy-the-uks-nuclear-future

[28] https://www.gov.uk/government/publications/civil-nuclear-research-and-development-landscape-in-the-uk-a-review

[29] https://www.gov.uk/government/publications/nuclear-energy-research-and-development-roadmap-future-pathways

[30] https://www.gov.uk/government/publications/long-term-nuclear-energy-strategy

[31] https://www.gov.uk/government/publications/nuclear-industrial-vision-statement

[32] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/243987/bis-13-1092-offshore-wind-industrial-strategy.pdf

[33] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/175480/bis-13-748-uk-oil-and-gas-industrial-strategy.pdf

[34] http://www.ogic.co.uk/

[35] https://www.gov.uk/government/groups/wood-review-implementation-team

[36] http://www.nano.gov/sites/default/files/pub_resource/federal-vision-for-nanotech-inspired-future-computing-grand-challenge.pdf

[37] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/437447/bis-15-350-Public-expenditure-on-research-and-innovation-2013-14.pdf

[38] https://www.gov.uk/government/publications/our-plan-for-growth-science-and-innovation

[39] https://innovateuk.blog.gov.uk/2016/05/19/to-the-regions-and-beyond/

[40] https://www.gov.uk/government/publications/funding-competition-biomedical-catalyst-2016