Written evidence submitted by BAE Systems plc (BER0003)

 

 

Q1: How effectively is R&D funding administered through current funding streams and mechanisms such as the Industrial Strategy Challenge Fund?

  1. Through our interactions with UKRI, primarily the Engineering and Physical Sciences Research Council (EPSRC), we are aware of the different ways government funds R&D in the UK. Research councils such as the EPSRC, are effective and efficient in the way they allocate their core budgets to academia, through either responsive mode or managed calls. We are a strategic industry partner with EPSRC, and this has provided us with the opportunity to influence EPSRC’s methodology to align it with industry’s needs. A good example of this is the Prosperity Partnership. 
  2. Innovate UK also effectively supports higher TRL activities, across which academia and industry, predominantly via calls. We operate closely, as partners, of components of the High Value Manufacturing Centre. This has provided access to
    1. production scale testing for advanced manufacture methods such as additive layer manufacture at the Manufacturing Technology Centre,
    2. cobotic manufacture and technology for the factory of the future with the Advanced Manufacturing Research Centre,
    3. Robotic carbon fibre placement for composite structures including wings, at the National Composite Centre.
  3. BAE Systems welcomes the opportunity of engaging in the government’s £ 4.7 billion investment in R&D via the Industrial Strategy Challenge Fund (ISCF). More advanced notice and structured participation during the Tranche I and II ISCF activities, as well as a more open and less predetermined scope of enquiry, would have improved the outcomes.
  4. For the ISCF in the tranche III activities, the enthusiasm of industry to be involved was highlighted by the > 250 Expressions of Interest (EoI) which oversubscribed the available funding by a factor of 12. This suggests that an increased level of available investment could lead to ever-greater innovation with industry.
  5. However, it should be noted that the fast pace at which responses to the ISCF wave III challenges are being sought makes it difficult for industry to respond effectively. Further, it is important that funding is not spread too widely through the community to the point where this becomes subcritical, and so impacts quality and ability to exploit.

Q2: How should funding Strategy find an informed balance between?

 

  1. Research Councils/disciplines/cross-disciplinary Work - We can see significant advantages in enhancing the cross council/cross disciplinary research, through the improved interaction/integration that is taking place under UKRI. Examples such as: digital manufacturing I4.0, use of novel materials and the transition of AI into different domains. These all highlight the need to undertake cross disciplinary work. Such initiatives must maintain the linkages with industry in these activities, to ensure the focus of the research is not lost and critically the routes to market impact are still viable.
  2. Research and Innovation - We fully support the government’s investment in research through the universities to increase the body of knowledge in the UK. There is the opportunity to increase support for innovation but this should not be at the expense of the support to the current research base upon which this innovation relies.
  3. Our observation is that the UK produces many spin out companies but struggles to support them as they scale and grow. We would argue that large business (especially in the areas of manufacturing, aerospace and defence) have an important and complimentary role here in providing “patience capital” to give long term support to SME’s to accelerate and scale their business. An example of this is BAE Systems’ support to Reaction Engines Limited where in 2015 we provided £20m investment and took a 20% stake in the business. This subsequently allowed Reaction Engines to attract further support (on a smaller scale) from Boeing and Rolls-Royce.
  4. Technology can take over 5 years to get to market.  Large business can take a longer term perspective and have a role to play, if incentivised by Government.
  5. Block Funding, response mode and direct funding -  the UK prides itself on the excellence of its research, and in order to achieve this, a range of funding options need to be available to support the innovation ecosystem, and each has a role  to play in the development cycle.
  6. The golden Triangle and the rest of the UK – The universities in the golden triangle are world leading. Additionally, we note that the University body across the UK is internationally leading, and BAE Systems has chosen to develop its Strategic University Partnership with 5 universities:
  1. These have been chosen based on excellence, their record of accomplishment working with industry, and place (their location to our centres of business). The regional agenda is very important to our R&D strategy, and in building up our supply chain. This is illustrated in the Oxford Economic report on BAE Systems.   (https://www.baesystems.com/en-uk/article/bae-systems--a-hub-of-british-industry)
  2. Global Challenges and national or other strategic priorities – We see defence, security and aerospace playing an important role contributing to the UK prosperity agenda and supporting the different regions in the UK. Having a vibrant research community that supports this is an essential element. At the moment, Innovate UK and ATI has too great a civil focus. A process that encourages greater participation from the defence and security sector would add benefit.

Q3: What bearing do actors such as research discipline and geographical location have on assumptions of public/private sector funding mix.

  1. BAE Systems funds and collaborates on research across a large number of disciplines that reflect the diverse nature of our products. Disciplines range from Computational Fluid dynamics, Materials, Artificial Intelligence, manufacturing, novel sensors, laser technology to name a few. Our funding balance reflects the maturity of the technology increasing where we look to integrate the technology into our products. However, as described above, we do fund University applied research, often in conjunction with the Research Councils and Innovate UK. This is focused on the High Value Manufacturing Catapult and our strategic Universities.

Q4: How effective are levers (e.g. R&D tax credits, innovate Loans and grants) for encouraging Innovation.

  1. We have no evidence on the use of innovate loans (run by Innovate UK).  However, BAE Systems does utilise R&D tax credits, and it is something that we value.
  2. There is evidence that the Innovate UK and ATI grant funding mechanism stimulates research and innovation, as our Electronic Systems business based at Rochester (which produces a lot of civil technology) engages in research consortia funded by Innovate and ATI grants.

 

 

September 2018