Your Excellency, Ambassador Bergquist, Professor Allen, distinguished guests. I am delighted to welcome you to DTI and to have the opportunity to give the opening address at this "Vision and Venture" event.
"Vision and Venture" is intended to enhance the important relationship between the UK and Sweden by both enabling you to understand the ways in which each country promotes innovation, and by helping you to identify opportunities for international collaboration.
In addition to our guests from Sweden, I am encouraged to see the strong representation from policy makers in the Regional Development Agencies and other business intermediaries, industrial and research organisations, science parks, finance providers, and members of other Government Departments here today.
This is surely a reflection on the importance that we all place on innovation and international cooperation.
I want this afternoon to stress the importance that the UK Government places on the level of innovation in industry and describe some of the policies we have adapted to raise it.
Our first priority as a Government has been to strengthen our research base. As many of you will know, our record for scientific discovery is second only to the US.
A report from the Institute of Scientific Information in the US showed that in 1998 the UK produced 13% of the most cited scientific papers in the world. But in the decade before from 1988 – 1998 we did not invest enough in our science base.
In 1996/7 the science budget of our Research Councils stood at £1.3 billion. We raised that by 15% in our first three years in office and then in SR2000 added a further £725 million over three years, to boost research in key new areas, such as Genomics, E-Science and Basic Technology.
And in July this year, the 2002 Spending Review announced that the Science Budget will grow by an average of 10% a year in real terms to reach £2.9 billion by 2005/2006. This will help ensure that we are able to attract and retain high quality people and ensure that our science base remains world- class and properly equipped to carry out 21st century research.
As a result of our excellent record of scientific discovery, Britain is home to strong science-based industries such as aerospace and pharmaceuticals, as well as being a leading centre for opto-electronics, computer games and mobile telephone software and services. It is a remarkable tribute to the creativity of British science that fifteen out of the world's top 75 medicines were discovered and developed in Britain. But it is clear that many more industries could benefit from a higher rate of innovation.
We have, therefore, developed three sets of policies to raise the level of knowledge transfer and diffusion of science and technology into industry.
Firstly, we have introduced a number of schemes to encourage interactions between the science base and business. For example,
University Challenge
enables universities to establish seed funds in order to assist the creation of spin-out firms from our leading universities.
Science Enterprise Centres
enable universities to offer training in entrepreneurial skills to undergraduates and graduates in science and engineering;
And the new Higher Education Innovation Fund provides an additional stream of funding support that will build to around £90M a year by the middle of the decade to enable universities to work more coherently with their local business communities in offering new skills and knowledge as well as research and taught courses.
As a result a transformation is already taking place across the UK. There has been a real cultural change in our universities, as witnessed by rapid progress in generating businesses from the science base. 199 spin-off firms were created in 1999-2000, compared to 70 per annum on average in the previous 5 years.
When adjusted for their size, UK universities' exploitation performance is comparable with leading US universities. In fact, the UK sees one spin-off from every $8 million of research funding, whereas for the US that figure is only one spin-off per $50 million. So by international standards our universities are extremely entrepreneurial.
A further initiative is the setting-up of a network of Faraday Partnerships aimed at promoting improved interactions between the UK science, engineering and technology base and industry through the involvement of intermediate organisations which have strong connections with both industry (particularly SMEs) and with universities. Examples include Research and Technology Organisations (RTOs) or their analogues, universities, government agencies or private sector laboratories, but are not restricted to these organisations.
The key feature of the Partnerships is to promote better use of all the various public sector support mechanisms and build more coherent links to private sector support (e.g. into supply chains, collaborative partnerships etc) so that there is a continuum of "R&D" from idea to exploitation. They also all employ Technology Translators who work alongside potential participants in Faraday Partnership activities, understanding their technologies and business issues, and helping to solve current problems and develop new business opportunities.
A national network of 24 Faraday Partnerships has been established and fulfils the Government's commitment set out in its Science and Technology White Paper 2000. It covers a wide range of areas such as Technical Textiles, Automotive and Aerospace, Materials, Green Chemistry and Smart Optics.
It was back in 1998 that the DTI's Competitiveness White Paper first highlighted the potential contribution that clusters can make to the competitive advantage of specific regions or locations. It was decided that a change of gear was needed in the Government's approach to clusters policy and I was therefore asked to set up a high-level Clusters Policy Steering Group to identify barriers to the development and growth of clusters and to recommend appropriate new policy initiatives.
Clusters are extremely important for the UK's economic development. Research has shown that the concentration of companies and institutions operating in a particular field aids the growth of the organisations which are within them. And clusters are particularly important in knowledge-based sectors because the type of knowledge that creates competitive advantage often requires proximity in order to be effectively communicated.
It is not the Government's role to create clusters - they must be business-driven and, they can, and do, develop due to a variety of reasons - specialised demand, historical accident or the prior existence of related industries or institutions. Clusters arise from making the most of synergies across and between companies and academic and research institutes.
However, it is the role of Government to create the conditions to encourage the formation and growth of clusters, and we can ensure that national and regional priorities do not inadvertently place barriers to cluster development, and ensure that research and innovation support programmes building on existing strengths so as to work with the grain of cluster development.
As a result of the changes that have taken place in the business climate in recent years in the UK we are now getting more than our fair share of fast growth high tech businesses. Recently, Deloitte and Touche published a survey of the 500 fastest growing European companies - 150 are in the UK compared with 97 in France, 51 in Germany and 43 in Ireland.
Undoubtedly, the importance of the science park and incubator network has been a major factor in this growth. And here I want to pay tribute to our Chairman today, John Allen, who has been one of the key figures in building up our national science park capability through the UK Science Parks Association (UKSPA).
UKSPA, together with the UK Business Incubation, (UKBI), has been instrumental in making facilities available for academics and other entrepreneurs to establish spin-out or other new technology firms close to leading centres of excellence. Many of these firms are in the fields of biotechnology, IT and software, or e-business more generally.
The UK currently has around 220 business incubators, the second largest in the EU. The Government wants to see these further developed to include wider availability and access. That is why we established a special £75million fund to support loans to incubator developers to support sustainable projects that might not otherwise have gone ahead.
The second element in our policy is to establish a climate where business is encouraged to invest in R&D, and investors are encouraged to invest in small hi-tech enterprises. We have therefore introduced tax credits on R&D expenditure for small and large companies respectively, and capital gains tax on unlisted companies is now only 10% after holding the investment for two years. There are few other places in the world with such an attractive tax regime for hi-tech businesses.
But no matter how good we seek to be, the internationalization of research and development means that technology developments are global in nature. Let me illustrate the relative scale of activity: R& D expenditure in the OECD alone amounts to around £275 billion per annum and generates, each year, around 200,000 new patent registrations in the USA and Europe. When we compare this with UK figures of around £16 billion expenditure on R&D, and 9,000 patents per annum it is clear that UK companies need to keep abreast of international developments in technology.
The third element of our strategy is therefore designed to provide an environment, which enables business to become more aware of these international developments. In particular, we want to help firms, particularly SMEs, to access the latest technologies and to establish technology partnerships with overseas firms.
In order to give us a better understanding of the global changes in science and technology, our Foreign and Commonwealth Office has doubled the number of UK science and technology attachés overseas, and we are looking forward to the appointment of the officer in Stockholm.
We have also doubled the number of our International Technology Promoters to 16.
ITPs are business people who are tasked with developing technology partnerships between UK businesses and overseas organisations.
And we have introduced the state of the art "globalwatchonline" website which allows companies to access international science and technology information at a click of a mouse; together with increasing the number of technology missions and industrial secondments that we are supporting so that businesses can learn about leading edge technologies and practices overseas.
Our ambition is that the UK should be a hub of innovation in Europe – a country viewed by others as one which is at the leading edge of research and innovation in key hi-tech industries, and in the innovative application of technology in the service sectors.
I believe that we are achieving this goal but the challenge we face is to continue to improve our performance in an evolving European market.
The UK and Sweden are already strong partners in trade and in research collaboration. Last year the UK visible trade with Sweden stood at £6,033 million.
In the R&D arena there are currently 32 EUREKA industrial research and development projects underway between UK and Swedish partners and there are nearly 450 projects that involve UK and Swedish partners under the Framework 5 Programme. I want us to build on that firm base and strengthen the science and technology collaboration between our two countries.
I hope this afternoon that I have been able to demonstrate to our Swedish guests that the UK is a good place to do business in, and a good partner to do business with.
I am delighted to see such a strong mix of British and Swedish science and innovation organizations here today. I am sure that there is much that we can learn from each other and I am sure that the interactions between the UK and Swedish participants during the next two days are going to be extremely fruitful and beneficial to both Sweden and the UK.
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