The UK university sector is currently a net beneficiary of EU research funding, but with the country set to leave the EU following the June 2016 referendum, the future of science and innovation funding is now uncertain. At a higher education conference organised by Westminster Forum Projects – a company that runs cross-party public policy events – speakers such as Faye Taylor, head of programs at University Alliance, an association of 20 institutions in Wales and England, cited the Industrial Strategy Challenge Fund as a reason to be cautiously optimistic.
Industrial Strategy Challenge Fund, which the government unveiled in November 2016, aims to capitalise on the UK’s research strengths in areas such as artificial intelligence and biotechnology. The fund is expected to provide £2bn ($2.5bn) in additional R&D investments per year by the end of the current parliament in 2020.
At the Westminster Higher Education Forum, which brought together researchers, executives, legal experts and members of parliament to discuss the future of innovation in the UK, Taylor said that although the June 23 vote revealed clear divisions across society, there were reasons to be hopeful about the resilience of the innovation economy after Brexit. She said universities in Teesside and south Wales had successfully attracted new businesses following the decline of the steel and coal-mining industries in their regions.
Tim Hart, managing consultant at Oxford University’s knowledge transfer consultancy Isis Enterprise, stressed the importance of the Newton Fund, an initiative supplying a total of £735m in research funding between 2014 and 2021. Managed by the UK government’s Department of Business, Energy and Industrial Strategy, which is responsible for ensuring the nation remains at the leading edge of science, research and innovation, the Newton Fund is delivered through 15 UK partners in collaboration with 16 partner countries.
Hart also pointed out that since entrepreneurs tended to rise to the occasion in times of change, the challenges posed by Brexit were likely to result in innovative projects, an idea supported by Rebecca Lumsden, head of science policy at the Association of the British Pharmaceutical Industry, a trade organisation. Lumsden emphasised the importance of focusing on the opportunities that changes such as Brexit would bring.
These opportunities might well be plentiful – the UK is currently one of the largest biotech clusters in the world, despite relatively small amounts of state investment in the past. The minimal spend on research councils had brought in many global investments, Lumsden said, adding she was confident that these inflows would not simply disappear come March 2019, when the UK is expected to leave the EU.
Lagging in knowledge transfer and patents
Although there are state and local funds in place to support science and technology research, Kevin Baughan, chief development officer at innovation agency Innovate UK, warned that businesses in the UK were not taking an active role in tapping into this body of research. Technology fuelled itself, constantly building on previous discoveries, and for the country to continue to thrive, knowledge transfer between universities and corporations needed to increase, Baughan said.
James Cross, a patent attorney and partner at law firm Maucher Jenkins, presented statistics showing that the UK is far behind other European nations in terms of patent filing. There are factors that skew the number, Cross acknowledged. One is that Sweden-based telecoms equipment manufacturer Ericsson is a prolific patent filer, and another is that UK-based research funded by a foreign company counts towards that other country’s total number of patents, not the UK’s.
Still, taking those mitigating circumstances into account, the European Patent Office’s annual report from March 2016 shows that the UK is a laggard. The issue, Cross said, was that UK policy did not address patent development. Initiatives such as Patent Box – a policy that offers a 10% reduction in corporation tax for income earned through patents – mainly benefited large multinationals rather than startups.
John Maguire, chief financial officer at Intelligent Energy, a fuel cell technology spinout of Loughborough University, observed that Patent Box was of no use to early-stage companies that were not yet generating a profit.
Lou-Davina Stouffs, research and program manager at Innovation Growth Lab, a global centre set up to test new approaches to support economic growth, said there was a lack of research into which innovation policies worked and which did not, an industry-wide problem in the UK.
She said that for the most part, the government’s innovation policy had not changed over the years, and where it had, there was no evidence the changes had produced positive results. Despite efforts in sectors such as fintech to create regulatory sandboxes that allowed entrepreneurs to test new technologies, the results were not analysed and reviewed, so nobody knew how effective those sandboxes were, or how they could be improved.
The challenge of replacing EU funding
Martin Szomszor, consultant data scientist at research software producer Digital Science, noted that the EU was the most frequent research partner in the UK’s international network, and collaboration with Germany and France was increasing at a faster rate than cooperation with the US.
Proximity was an important factor for collaboration, Szomszor said, as having partners in neighbouring time zones simplified communication, and collaborations often followed after researchers met at local conferences.
Szomszor also pointed out that the UK was a net beneficiary when it came to research funding – the country received €1.98bn ($2.1bn) more than it contributes from Horizon 2020, the largest EU research and innovation program to date with nearly €80bn of funding spread over seven years, from its launch in 2014 to 2020.
Indeed, when it came to collaboration with countries such as Spain, Portugal and the Netherlands, these nations essentially paid the UK for research cooperation, Szomszor said.
The importance of global supply chains
Simon Andrews, executive director at research organisation Fraunhofer UK, argued that the benefits of EU funding programs such as Horizon 2020 were not limited to the capital alone – a key advantage was that they embedded the UK in global supply chains that underpin the innovation economy.
This point was easily overlooked as the UK had relied on assumptions about the nation’s economic superiority for too long, Andrews noted. “I am sick to the teeth of hearing that the UK is the world’s fifth-largest economy,” he said.
The figures often cited by those who voted in favour of leaving the EU suggested the UK made up 10% of the world economy and 30% of the European economy, but these numbers are several decades old, Andrews said. In 2017, the UK accounted for only 3% of the world economy and 17% of the European economy, he said.
Building a successful innovation ecosystem would take significantly longer than the two years UK had once it activated Article 50 of the Lisbon Treaty and began exit negotiations, Andrews said. After all, he said, it took Germany 60 years to build an innovation-fostering environment, and it would not be possible for the UK to create its own independent ecosystem through a quick policy fix.
The reason it was so difficult for countries to cultivate flourishing startups on their own was that innovation depended in part on global supply chains, Andrews argued. He cited an investigation published in MIT Technology Review, which examined whether it would be possible to make the iPhone from scratch in the US using local materials only. The answer was no, because the US lacked some of the essential minerals, such as coltan, a metal ore refined for use in capacitors.
Holding on to overseas talent
International capital, research and inputs are not the only critical factors in the UK innovation economy, of course – talent from overseas matters as well.
Stephen Metcalfe, a Conservative member of the UK parliament for South Basildon and East Thurrock and chairman of the House of Commons’ science and technology committee, spoke in favour of allowing EU researchers already living in the UK to remain. EU researchers should in future be exempt from immigration controls, he said, and warned that getting Brexit wrong would hurt scientific progress. Although Metcalfe voiced support for allowing EU researchers to remain in the UK after Brexit, it is notable that a week after the conference he, along with 331 other MPs, voted against an amendment protecting the rights of EU citizens already legally resident in the UK to stay in the country.
Nonetheless, the fact remains that ensuring access to skilled labour matters to British business leaders – it topped the list of concerns in a survey conducted in February by market research company Ipsos Mori. More than half, or 54%, of FTSE 500 business leaders surveyed, cited movement of labour as a key concern, compared with 47% who chose securing access to the single market, and 16% who chose passport rights as their main worries. The survey also revealed that the vote to leave the EU had had a negative impact on more than half, or 58%, of the UK’s largest businesses, and two-thirds of respondents said they anticipated a more negative business outcome in the next 12 months.
All this adds up to a monumental public policy challenge for the UK government, one that extends far beyond the already thorny issue of supporting science and innovation at home without EU help.