The evidence shows there is no coherent UK innovation policy and the government does not have adequate mechanisms in place to leverage academic research into economic benefits, according to a report from the Parliamentary Science and Technology Committee published yesterday (13 March).
The chair of the Committee Andrew Miller MP, said, “The UK’s university and science sector is a global success, but the challenge for government is how that world class academic research can be translated into commercial activity.”
Whilst the Science and Technology Committee is encouraged by the work being carried out by the UK innovation agency - the Technology Strategy Board - entrepreneurs are still being badly let down by a lack of access to financial support and by a system that often forces them to sell out to private equity investors, or larger foreign companies, in order to get ideas off the ground.
“UK technology companies and entrepreneurs are effectively being forced to seek private equity investment,” Miller said. “This means that our small companies are too often bought up by larger overseas companies before they can develop into the medium-sized enterprises that would produce substantial jobs and wealth in the UK.”
The Select Committee reached its conclusions after a number of hearings with expert witnesses and receiving 200 pages of written evidence from bodies ranging from universities and research charities, to industry groups and multinationals including BP and Novartis.
Patient source of capital
Lack of access to finance is a major obstacle to the commercialisation of technology in the UK, with regulation to de-risk pension funds inadvertently closing off a patient source of capital for firms that need time to develop technologies.
Meanwhile, government grant funding that is designed to help technologies over the valley death – progressing them from the raw state in which they emerge from universities to something that is ready for commercialisation - is often highly bureaucratic to apply for and does not provide adequate funding to see ideas through to commercialisation.
Despite government schemes and pressure to encourage bank lending to small businesses, the Committee noted that banks often require entrepreneurs to provide family homes as security to obtain these loans. Miller said that while equity investments have a place, “Too many companies are forced into over-reliance on this route because other types of funding are unavailable.” Pension funds used to be a source of patient capital for firms that needed time to bridge the so-called ‘valley of death’ and get new technologies to market, but regulation has changed the way they operate and restricted this sort of finance.
Don’t sell up
Miller called on the government to look at how it can provide the infrastructure to support innovation by ensuring small technology firms have access to finance, facilities and advice. There needs to be a coherent strategy across the whole of UK industry to provide business with confidence in where they might expect government support for the medium and long term - whether through fiscal policies or R&D funding.
The report urges the government to change the financial framework to incentivise more smaller companies to grow further independently, rather than sell out. The government needs to make choices in terms of which sectors to prioritise when assisting R&D investment.
Public procurement - particularly in the areas of health and defence - should also be used to nurture technological innovation and support small and medium sized companies. Procurement decisions need to take into account issues other than simply cost.
In particular, MPs on the Science and Technology Committee believe it is critical for the future of bioscience that a significant proportion of the National Health Service procurement budget is accessible by small, innovative companies.
“The UK has terrific potential in its technology sector and science base, but small and medium sized businesses need better support to commercialise their ideas and get them to market,” Miller concluded.
http://www.publications.parliament.uk/pa/cm201213/cmselect/cmsctech/348/34802.htm
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