Good morning Chairman, Ladies and Gentlemen.
I am delighted to be in Leeds to make the opening address at the 4th SME Conference, which the Commission has arranged and to welcome guests from such a wide range of countries. I am very happy that the UK is hosting this important event.
What I'd like to do today is talk about why we believe SMEs have a critical role to play in Framework Programme 6. But first let me put the UK situation in context.
This Government sees promotion of science as a key element in creating prosperity for all.
The 2002 Spending Review provided an outstanding settlement for science – and through that for British industry, British productivity and British prosperity.
Spending on science and research via the DTI Science Budget, and that is just part of the overall Government Science budget, will grow from around £2 billion in 2002/03 to £2.9 billion a year by 2005/06, an average annual increase of 10% in real terms. A substantial increase indeed.
While increased Government spending on research is important, it is not enough in itself. As many of you will be aware, the Barcelona European Council agreed that the EU should 'aim to approach' spending of 3% of GDP on R&D by 2010 - and two-thirds of this investment should come from the private sector.
We recognise that SMEs have a crucial role to play as a source of this investment. SMEs are a key part of the economy. Figures out last month showed that 95 per cent of businesses in all industries in the UK are SMEs and that for the first time in seven years the number of medium-sized firms had reached 27,000.
To further encourage R&D investment by SME's, the Government introduced in the 2000 Budget an R&D Tax Credit for SME's which offers a super-deduction of 150% on all qualifying R&D expenditure. In addition, in recognition that some SMEs undertaking R&D often face cash flow constraints, loss-making companies can obtain immediate benefit from the credit by converting it into a cash payment worth up to one quarter of the qualifying expenditure. The Inland Revenue have recently issued a single guide to both the SME and large business R&D tax credits.
We are also strengthening innovation in the regions. We have made over £150 million available to the Regional Development Agencies to support business incubation, clusters and economic development.
We have also encouraged knowledge transfer from universities to industry by introducing schemes such as University Challenge (which provides seed corn funding to universities), Science Enterprise Centres (which provide access to entrepreneurial skills to undergraduates and graduates in science and engineering), and the Higher Education Innovation Fund (which provides funding to universities to encourage them to do knowledge transfer).
Also we have the Small Business Research Initiative (SBRI), which is designed to increase the success of smaller businesses in obtaining contracts from Government bodies to conduct research and development. The Government Departments involved will aim to buy at least 2.5% of their R&D requirements or £50 million worth of Government research from smaller businesses. The Research Councils will move to meet the same targets over time.
In 1999/2000, there were 199 spin-offs from UK universities, compared with 70 a year on average in the previous five years. Per million dollars of research, this is better than even the performance in America. By comparison with the US, in 1999/2000, UK universities identified one spin-off firm for every £8.6m of research expenditure, Canadian universities in 1999 spun off one firm for every £13.9m, while in the US the ratio was one for every £53.1m.
But there is still much more that we need to do to connect SME's to our science and technology base.
In today's global economy, we cannot compete on the basis of low labour costs and cheap materials. We can only compete on the basis of our knowledge, skills and creativity.
The EU's Framework Programme 6 is a vital element in work to realise our ambitions. It's worth reminding ourselves that the Framework Programme is the EU's third largest spending programme. This is a clear indication of the importance Europe attaches to Science and Technology.
The UK has always played a leading role in the European Framework programmes. Indeed, under the current fifth Framework Programme, the UK is involved in over half of all projects funded, we coordinate almost a fifth of the projects and we have the highest number of participants overall in the programme.
SMEs have made a critical contribution. UK SMEs have participated in just over 10% of FP5 projects. Many of these SMEs have successful stories to tell. To give one example, Serotec Ltd. from Oxford which is a manufacturer and supplier of immunological reagents. Serotec participated in a project on developing improved procedures for detecting proteins. This led to the production of 5 new products for market including a pre-natal screening tool and an infertility marker and increased turnover $6m worldwide. These new medical diagnostic tools have improved medical health care, having a positive impact on patient care and resources.
UK Research and Technology Organisations have also participated strongly in Framework Programme, having participated in just over 10% of FP5 projects.
But we cannot take such successes for granted.
If Europe is to meet the technological and social challenges that this century will bring, and achieve the vision mapped out by European leaders at the Lisbon economic reform summit over two years ago - "that Europe should become the most dynamic knowledge based economy in the world by 2010" – then it must step up its efforts to build links and partnerships with the best scientists and science institutions, not only within Europe, but also with our partners and competitors across the globe. As a long-standing "champion" of enlargement, the UK Government particularly supports the active participation by Candidate countries in the European research programmes.
The vision of the European Research Area recognises that it is ever more important for us to think, work and collaborate beyond the confines of national boundaries if we are to meet these challenges.
It also recognises that in an increasingly competitive global environment, it is vital that we manage our research resources and capture the results in such a way that we keep pace with the best in the world.
We are pleased that under FP6 very significant funds have been earmarked for SMEs. 15% of the budget allocated to 7 priority thematic areas of research covered by FP6 is allocated for SMEs. In addition, another ?430m will be specifically set aside for activities involving SMES covering other areas of research. To help access this funding we will put in place a network of National Contact Points and a dedicated Helpline service.
We also particularly welcome the agreement to nearly double the proportion of funding dedicated to the mobility of European Researchers. This will mean that many more researchers will be able to develop their careers and work with teams of the highest excellence. It will make an important contribution to the development of a genuine European research community.
The role of SME's in the promotion of researcher mobility is crucially important and is explicitly recognised in FP6 . I would strongly encourage UK SMEs to take full advantage of the possibilities which these schemes offer them.
I also welcome the efforts of the Commission delivering substantial improvements in the management of the programmes. The aim must be to ensure that world-class scientific research goes hand in hand with world class administration.
FP6 provides an unrivalled opportunity for SMEs to tap into Europe's research community (and of course of financial aid) that will allow them to take advantage of the world class European research base. Now is the time to start forging contacts with potential partners, formulating research ideas and positioning your businesses so as to be able to make the most of the opportunities on offer. This will ensure that the UK SME community maintains the excellent record of participation in the Framework Programme, one of which we can be proud.
In this area, as in many others, we need to act boldly and put the UK at the heart of the European Research Area.
Thank you.
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