Another type of rebalancing

Our goal is to drive economic growth based on innovation.  Growth mostly comes from doing something new, and often requires new knowledge to minimise risk.  We have recently changed our funding rules to encourage more interaction between SMEs and the research base, but it doesn’t seem to be widely known!

Being a public agency comes with a whole bunch of rules, some of which are obviously sensible and some of which are inherited from our previous existence (when they were probably sensible for that set of circumstances).  And, of course, rules develop and change over time.  One set of rules we operate under is called “state aid” rules.  They are a set of European rules that are designed to stop individual countries supporting companies based within it and enabling them to gain an unfair advantage over companies operating in other countries.

When we were set up in 2007, we inherited what is called a “state aid exemption” which set the way we could support UK based companies.  There were many parts to this exemption, but one important one was that we could not fund projects for more than 50% of the total costs (technically, we can fund at 75% for very early stage work and only 25% for late stage work, but the bulk of what we do falls under the 50% definition!).  Another important factor to remember is that the Collaborative Research and Development Grants were a linear descendant of the old LINK grants, which were specifically designed to support interaction between larger companies and the research base.  Within these collaborations, we were allowed to support 100% of costs in universities, 50% of costs in large companies and 60% of costs in small and medium sized companies.  However, if a company wanted to work with a university on a project costing £200k, and (for example) their project was split equally between the two organisations, then the university could claim their £100k but the company could not claim anything because the cap on project funding (50%) cut in.  Many larger companies thought this cost was acceptable, but most smaller companies we talked to were put off working with universities because they got no support for their part of the project!  Given that our research base is among the most powerful in the world, we were effectively denying supported access to it for smaller companies.

Earlier this year, our inherited state aid exemption ran out and was replaced with a more general “block exemption”.  This enabled us to look again at what we wanted to achieve and so we changed our rules.  We were able to do away with the “project funding cap” of 50%.  We kept the funding allowance of 100% for research organisations (which along with universities now includes many research and technology organisations (RTOs) that supply research services), 50% for large companies and 60% for smaller and medium sized companies.  However, since our primary purpose is to support economic growth, which happens in companies not the supply side of the ecosystem, we expect that in collaborations that involve the research base that at least 70% of project costs will be in the companies.

However, there are some competitions that are specifically designed to encourage engagement with the research base (the Biomedical Catalyst is a good example), and in these competitions, we only require at least 50% of project costs to be in the companies.  This variation will be clearly specified in the competition scope document.

This change came into effect for competitions launched after the 1st October and was described on our web site and in competition briefings, but we still find people applying for the wrong amounts.

It is interesting to reflect on how we communicate to companies the fact that this change is meant to help them.  If we had issued a press release, we are sure most journalists would not have been interested.  We have put it out through the Knowledge Transfer Networks and on _connect, but that only reaches people who already know us.  It is on our website and in our briefings.  However, our challenge is to get SMEs who have never worked with us to understand that it should now be easier to work with universities and RTOs.


Last updated on Monday 03 December 2012 at 21:37

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  • David Bott|24/01/13 at 9:08 AM


    We aim to please! :-)

    You are right that universities get 100% of "allowable" cost, which are 80% of their actual costs - a rule that reflects their dual funding mechanism. Other RTOs can also claim 100% of their costs in delivering the project.


    Tim Holt|21/01/13 at 2:38 PM

    Dear David,
    It is truly welcome that the State Aid rules under which the TSB have operated have been revised and relaxed. The State Aid rules were designed to provide a level playing field for competition within the EU at a time when it was thought that the main competition for companies in the EU was from other companies in the EU. That is no longer the case and today companies find themselves competing with companies located in countries outwith the EU who don’t have state aid rules. Companies from the Far East, especially, enjoy a far greater influx of aid from their governments, some of these companies are fully funded for example, which does cause issues when trying to compete with them. In addition to these Far Eastern companies, the USA has mechanisms in place to support company innovation to a greater extent than we have here in the EU under these State Aid rules. I also know that some EU countries have a more “relaxed” approach to State Aid than is often found in the UK. All of which makes it important for the EU and UK Government to urgently review the State Aid rules, and their application, in the light of these issues. Companies in the UK aren’t asking for special treatment from Government, just an agreement that State Aid rules, as they are currently framed, don’t support EU/UK companies as was the intention and that the playing field is a global one, not just an European one.

    While I am here. You say in your article that Universities are 100% funded under TSB projects. As you know, the Universities only get 80% of their full economic costs under TSB rules. The 100% figure is often quoted which does often cause confusion with industrial partners, so, in my opinion, it would be best if the 80% figure was more prominently and consistently shown in TSB literature.

    Julian Spence|18/01/13 at 5:55 PM

    This sounds very useful for getting SMEs into being innovative - with the option of getting affordable and radical (manufacturing) research developed. A challenge is, now, to get SMEs appreciating not just that they can develop/use advanced manufacturing but that they are the best and natural place for such radical innovation; making winners - not just backing the favourites.

    Mairi Wickett|17/01/13 at 5:09 PM

    Dear David, I have just read through your comments and it is wonderful to hear that you are behind new innovation,we have an exciting new patent ed technology which is capable of collecting all 6 degress of motion, ie all natural occurring motional energy and turning it into power (which can be stored and used as and when needed. We have just met up with A&P Shipping (through KTN networking) and we plan to put together an amazing consortium in order to provide a solution for energy harvesting in all sea vessel. The WITT transmission will collect all pitch and roll, and also has the advantage of being used as ballast, all this energy can be collected. A&P Md Pater Child immediately saw the potential and they are keen to be the lead, we have appointments with Supacat and Xtrac next week (also 2 universities Exeter & Plymouth) to be part of the consortium each bringing their unique skills. WITT's could be fitted in all vessels taking all motion and turning it into power! WITT's can be built from cm to metres and see great job opportunities for the South West. I hope I am not overloading you with information but we have a global product for energy harvesting from human, animal, vehicle, water, sea river or tidal, and even WIND (small flat packed 'dragonflies' Please visit our website to view short video clips. Thank you for such an interesting article.

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