Lord Sainsbury of Turville

TECHNOLOGY PROGRAMME AUTUMN 2005 COMPETITION LAUNCH

I would like to set the scene for today; why innovation is such a priority, the role that technology has to play and what we are doing to encourage collaboration at both a strategic and operational level.

At no time since the Industrial Revolution has the restructuring of global economic activity been so great, with Asia moving from the fringes of the new world economic order to the centre; and at no point has the speed of technological change been so fast and pervasive.

In 1980 less than one tenth of the manufacturing exports come from the developing world, but today it is almost 30% and in twenty years time the figure will probably be 50%. Today China is producing 70% of the world’s photocopiers, 50% of cameras, 40% of microwaves and 25% of textiles.

As recent events have shown there are still countries in Europe that think that protectionism in one form or another is the way to tackle global competition. But realistically the only way that developed countries are going to be able to survive and prosper in this new global economy, and compete against countries like China which have 5% of our wages, is by moving into high value added areas, and this means a greater emphasis on science and technology.

In Britain we have some very innovative industries: aerospace, pharmaceuticals and financial industries account for a higher proportion of our national wealth than anywhere else in the world; we have the world's second largest pharmaceutical and bioscience industries, employing 3 million people with a turnover of £45 billion; and we have great strength in the creative industries, earning £11.5 billion per annum from exports. However, at the national level, our innovation performance is no better than average.

As a government we don’t think we should try and manage the competitive process. We do, however, believe that governments should create the best possible conditions for companies to innovate and grow, and that means investing in the assets companies draw on in competing, and building the institutions for advanced competition. We have, therefore, made major policy changes in three areas.

When the present Government came into power in 1997 it was after a period when science and innovation had received very little political attention and had been badly under-funded. That is why our first priority as a Government was to fund properly the science and technology base.

In 1997/98 when the current Government came to power, the science budget was £1.3 billion. As a result of substantial increases in a number of spending reviews, the science budget will have more than doubled in real terms to £3.4 billion by 2007/8. This currently includes £500 million a year for the renewal of scientific facilities in universities, and we now produce a 15-year roadmap for large facilities so we can provide our world-class scientists with a world-class scientific infrastructure.

The Government has also set itself ambitious goals for the future in a 10 year Science and Innovation framework. The Government’s long-term objective for the UK economy is to increase the level of knowledge intensity in the UK as measured by the ratio of R&D across the economy to national gross domestic product, from its current level of around 1.9 per cent to 2.5 per cent by around 2014. If achieved, this would put the UK in a position to secure a leading place among the major European countries and substantially close the gap between the UK and the USA, the best performing, innovation-driven major economy.

A second major objective of the Government has been to increase the amount of knowledge transfer from our science and engineering base. This has been a great weakness of the UK’s innovation system in the past, and the Government has introduced a number of schemes to improve our performance. These have included: University Challenge, which provided universities with seed corn funds; Science Enterprise Centres which have provided access to entrepreneurial skills to science and engineering undergraduates and graduates, and the Higher Education Innovation Fund which provides incentives for universities to transfer knowledge to the economy.

These programmes have been very successful in stimulating more knowledge transfer from universities in terms of licensing, patents, spin-off companies and contract work for industry. To take two figures, the market value of university spinouts floated on the Stock Market in 2004 was £604 million, £100 million more than the Government’s total investment in Knowledge Transfer to date. Today 24,000 science and engineering students are receiving enterprise training, whereas the figure in 1998/99 was 3,000.

A third major objective for the Government has been to encourage more applied or user-driven research, as an increase in it is essential if we are to reach our goal of total public and private research reaching 2.5 per cent of GDP by 2014.
To help us achieve this objective we set out in the Innovation Report “Competing in the Global Economy: the Innovation Challenge”, which we published in December 2003, our plans for a Technology Strategy Programme.

We have allocated £320m over three years to this Technology Strategy, and have set up an industry-led Technology Strategy Board to manage it. We have also introduced R&D tax credits for small and large companies to incentivise them to do more research and these are now worth £600m per year to businesses. And we have developed 17 Knowledge Transfer Networks. These are intermediate organisations which act as a link between universities in key areas of technology, such as bioprocessing, grid computing, medical devices and healthcare, and photonics. With industry we are also looking at setting up new ones in Cybersecurity and Biometrics, the Modern Built Environment, Electronics and Imaging.

You will hear more shortly from Graham Spittle, Chairman of the Technology Strategy Board, about the work they have been doing and their plans for the future. But I would like to take this opportunity to say how pleased I am with the progress of the Board’s work. I would also urge you to use this occasion to input into their plans. I agree with Graham that it is still taking too long to process and assess grants that allow the research to commence, and this is an area where I would like to work closely with you.

What has the Technology Programme achieved in its first years? Since the first competition in nanotechnology in February 2004, the Programme has announced 5 competitions for over £300m of funding in 33 specific technology areas. This includes the latest £63m competition that I announced last month and which opens today. I am also pleased that the Research Councils are now participating in the programme and committing funds to projects. This autumn’s competition now includes a joint application process and joint assessment for projects seeking their funding.

At the beginning of this year, I announced the results of the April 2004 competition and I am now able to announce the outcome of last November’s competition. Of the £100m allocated to technology areas as diverse as optoelectronics, waste management, bio-based industrial products and energy, over 160 projects are going forward, equating to around £96m of funding.

One of these collaborative R&D projects, led by Innovene Ltd, is dealing with contamination removal and product separation within the waste plastics recycling value chain. Graham Rice will be explaining more about this £1.3m project this afternoon along with five of the April 2004 successful projects.

But these are just six of the 90 or so projects that are already up and running. Already over 20 from the November 2004 competition have started and around 117 applicants in the April 2005 competition have just been informed that their full proposals will proceed to formal offers.

Just last week, one of the supported projects to develop more environmentally friendly engines was announced as winner of the Safety and Technology category at the 2005 Autocar awards.

The number of projects supported is significant but the value of those projects is even more so. Nearly 380 projects with total costs of over £370m are receiving Technology Programme support of £168m. More importantly, this represents a business investment in technological innovation of over £200m.

This Autumn’s £63m competition addresses eight more important technology areas, including low carbon and oil & gas energy technologies, regenerative medicine, advanced materials, data and content storage, electrical power systems, land remediation and sustainable products.

All of these technologies represent exciting areas of research that can help secure for the UK competitive positions in key areas of technology in the new knowledge economy.

Another key theme of the Innovation Report was the need to support the rate of regional innovation. The Report proposed a series of steps that the regions and Central Government should take, working closely together, to make the best use of the resources available.

This collaboration is already bearing fruit within the development of the Technology Strategy. The regions are represented on the Board and have been active in ensuring that regional priorities align with the national policy.

Science and Industry Councils are being established in all the regions, and delegates attending the regional information days that follow this launch will have an opportunity to hear from some of these as well as from the regional bodies as to how they are supporting innovation in their regions. And I understand that we are expecting over 1000 delegates to attend this series of events.

Collaboration is a key part of all our programmes. Whether it is at the strategic level in the development of the Technology Strategy, within the business-led collaborative R&D projects or in joining up diverse organisations through the Knowledge Transfer Networks, it is vital for the UK’s continued success in innovation.

UK science is a major national asset and we in Government are determined to support the exploitation of it into innovative products and services to create the wealth, jobs and quality of life for all that we all want to see. As a progressive government we want to maintain a dynamic market economy, but we are also making the public goods investments in education and science, which are so essential to a knowledge-driven economy.

That is why we have developed and delivered on a strategy to strengthen the science and engineering base, to increase knowledge transfer and to incentivise user-driven research, and I would encourage all of you to play your part in making the UK one of the best places in the world for science and innovation.