Sir Peter Williams
Chairman Engineering and Technology Board and Chairman National Physical Laboratory
"It is nevertheless this link between science, engineering and technology (SET), R&D, and wealth creation, which is often a pre-requisite for success."
In 1988, I chaired a small group, drawn from the then Innovation Advisory Board of the Department of Trade and Industry, charged with the implementation of a number of measures to highlight innovation in British industry. This is a very familiar theme today, but in the late 1980’s, it was novel. By far the most enduring output of this exercise remains the UK R&D Scoreboard.
Only in the 1980’s did the UK finally adopt a standard for reporting Research and
Development in companies’ accounts, adapting the already existing SSAP13. Seeking
a means to highlight the importance of R&D to growth and innovation in business,
our group decided to recommend the adoption of a simple ‘league table’ approach
showing both UK and international companies’ published R&D expenses (an idea
derived from the US journal ‘Business Week’). Since extended both in scope (to include
value added and capital expenditure) and to cover a much larger number of companies,
the Scoreboard has provided a revealing insight into the vitality of British industry.
It has also benchmarked our performance against the ‘best of breed’ around the world.
R&D, of course, is only one indicator of innovative activity within a company
– and if the ‘DotCom’ boom taught us anything, it is that technology and investment
success are not guaranteed bedfellows. However, it is financial success which manager
and investor alike both seek – not scientific achievement. The latter remains largely
the province of government (and private) financed research within the science base.
It is nevertheless this link between science, engineering and technology (SET),
R&D, and wealth creation, which is often a prerequisite for success, as shown
in a recent study led by the Engineering and Technology Board in partnership with
the Royal Society and the Royal Academy of Engineering1. It is encouraging that
SET intensive Small Caps and spin-outs emerging from our universities have provided
one of the fastest growing investment sectors2, with the FTSE SmallCap index out-performing
the FTSE 100 since market recovery commenced in early 2003.
Among the larger companies, there have been significant changes in the landscape
since the launch of the Scoreboard. For example, ‘Lombard’ in the Financial Times
observed on the occasion of the 20th anniversary of the FTSE 100 Index earlier this
year3, that just four ‘engineering’ (sic) companies now survive in the FTSE 100
– Vodafone as a new entrant, Rolls Royce as a re-entrant, BAE Systems and (at that
time) GKN.
Significantly, the Scoreboard shows that this select quartet, together with Unilever,
Shell and BP remain amongst the UK’s top R&D investors. Many of the FTSE 100
companies also have high R&D intensities (R&D as % sales) and these include
BAE Systems, Rolls Royce, GSK, AstraZeneca and Sage. In particular, the correlation
between the UK’s pre-eminent position in the R&D intense bioscience based industries
and world leading research within the science base is unambiguous, with companies
such as GSK and AstraZeneca. SET based companies as a whole contribute well over
a quarter of UK GDP value added1,4.
However, continuing success can only be guaranteed with an adequate supply of SET
professionals from our universities and colleges. Here the trends are deeply concerning,
with enrolment in the physical sciences and engineering in long term decline at
both ‘A’ level and university and well trained technicians in short supply.
Yet of the 2.5 million SET professionals active within the UK economy, less than
half are actively engaged in traditional SET related sectors – the balance underpin
everything from financial and public services to the utilities upon which we all
rely4. No fewer than 24 of the FTSE 100 companies are led by science or engineering
graduates, the largest single professional group in the index. The most popular
destination for physics graduates is manufacturing industry5 and financial services
remain entirely dependent on mathematical skills. The long term competitiveness
of the UK economy as a whole, not just SET based companies, will be diminished if
these trends in the output of SET professionals are not reversed.
We can of course seek in the UK to survive in an economy propped up by illusory
gains in property or one in which we are increasingly dependent on imported science
and technology; alternatively we can compete successfully as the above examples
show in 21st century global markets via the new industries of the future.
Happily, the Government’s recent Spending Review 2004 seeks to address these issues
and places SET centre stage in the national economy – a very welcome development.
It is now up to the private sector to respond and the UK R&D Scoreboard will
remain an accurate barometer of this and of the nation’s appetite for innovation.
