Ladies and Gentlemen I am delighted to have the opportunity to speak to you this evening on the eve of the Science Business Exhibition.
I am delighted because the Government's strategy for Science and Innovation is a key part of our strategy for industry and the economy, and because we have taken a number of key steps to fund properly our science and engineering base and use it to create wealth and improve the quality of our lives.
Firstly, we have made a substantial investment in our science and engineering base. As many of you will know, we have in this country a very outstanding record for scientific discovery, second only to the US, and ahead of France, Germany and Japan. A recent study by the Institute of Scientific Information in the USA showed that British research produced 13% of the world's top – that is, most cited – papers in 1998, as measured across a wide range of disciplines.
As a result, 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 quality of our innovation that fifteen out of the world's top 75 medicines were discovered and developed in Britain. But there are more industries that could benefit from the application of our science and engineering skills.
That is why the Government is committed to strengthening the UK science base. Over the course of this current Comprehensive Spending Review, the Science Budget will grow by an average of 10% a year in real terms, and will reach £2.9billion by 2005/2006, which compares with a figure of £1.3 billion in 1997/98.
As well as funding the science base, we also want to promote technology transfer from our knowledge base to the business sector by promoting links with business and by developing business skills among our most able young scientists and engineers.
The Government has initiated a number of schemes to encourage interactions between the science base and business. For example, University Challenge, which has introduced venture capital into universities. Science Enterprise Centres provide undergraduates and graduates in science and engineering with access to entrepreneurial skills. And the £140m Higher Education Innovation Fund provides funding to universities to encourage them to do knowledge transfer.
The exciting story that comes out of this is that 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 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 we actually have a pretty good entrepreneurial track record in this country.
The third element 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.
That is why, in the last two budgets, we have introduced tax credits on R&D expenditure for small and large companies.
In addition, to encourage greater levels of investment in small hi-tech companies, 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.
I believe that, in a world of global change, we have a major opportunity to use our scientific and technological skills to create wealth and competitive advantage in world markets. We can only compete against countries with much cheaper labour and raw materials by exploiting our knowledge, skills and creativity to generate high productivity, effective business processes and high value goods and services.
It is also critical that UK companies keep abreast of international developments in technology, and we are assisting companies, especially SMEs, to access these technologies and establish technology partnerships with overseas firms.
For example, we have doubled the number of International Technology Promoters – that's business people with experience of developing technology partnerships - and increased the number of technology missions abroad so business people can see for themselves the technological developments that are taking place in different countries.
In addition the Foreign and Commonwealth Office has also doubled the number of science and technology posts overseas. They, together with Trade Partners and the British Council, are there in the field helping UK companies succeed in international markets.
Just to give you another set of figures that I think are interesting. Last year OECD reported that in the ten years to 2000 the UK enjoyed an annual average growth rate of 7.9% in high tech exports, that we are highly competitive in that 34% of manufactured exports are in the high tech category, and that we are second only to the United States in our gross value added. Of Europe's 50 highest growth technology companies in 2002, according to Time Magazine, 21 are based in the UK. So we are in a strong position to exploit our science and technology, which the exhibition will also show.
My thanks to the Universities and the other exhibitors for their unstinting support for what I am sure will be an excellent event. I would also like to thank Sir Stephen Brown and his staff in British Trade International for organising these Science Business events.
We have in this country today enormous opportunities to use our skills in science and technology to create competitive advantage for our companies and increase our share of global markets.
I hope you will take the time to visit the exhibition tomorrow which will tell you what our universities, research institutes and contract research organisations are doing. It will demonstrate to you the huge opportunities for knowledge transfer in both domestic and international markets, and will show you what an exciting change has taken place in our universities in recent years and what enormous opportunities spring from that.
Thank you.
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