Commercialising ideas in the Arc
As a nation, we have earned a reputation for often failing to capitalise on our originality and commercialise our ideas.
The United Kingdom was the first country to fan the flames of the Industrial Revolution and, to this day, we are a nation known for our inventions and innovations. But we have also earned a reputation for often failing to capitalise on our originality and commercialise our ideas.
For example, in 1935, the Air Ministry department of UK government famously refused to pay £5 to renew the turbojet-engine patent of Frank Whittle, RAF inventor and future Air Commodore. This setback was compounded because public financiers and conventional banks of the time deemed speculative proposals with no immediate value to be untouchable. It was left to the investment partnership O.T. Falk & Partners and steam turbine specialists British Thomson-Houston to fund a first prototype. But it was too late. When the Air Ministry finally expressed interest, the patent for world’s first jet-powered aircraft had been filed in Germany.
This failure to back new ideas is reflected in my own experience as a young research scientist in Oxford in the early 1980s working in the group of the now Nobel Laureate, John Goodenough on the first reversible lithium-ion batteries. After the 1980 invention in Oxford, AERE Harwell led the innovation of these batteries through the 1980s but struggled to find UK partners for commercialisation. The patent was finally licensed to the SONY Corporation which drove the early dominance of Japan, and not the UK, in the digital world of personal electronics.
Painfully similar stories of uncertainty play out across many home-grown innovations, including early medical treatments, social care, maritime technologies, wind turbines and rail infrastructure, where promising creativity has been stifled by late decision-making and an apprehension to invest in early-stage concepts.
Today, the UK is again at a critical juncture in several of its most exceptional industries. In both the consistency of UK investment and the strategic allocation of funds, it is clear that the history of relatively agnostic relationships with innovations is, in aeronautical parlance, holding back the thrusters and creating unnecessary drag. According to the trade body ADS, the UK’s R&D funding in 2019 amounted to just 5% of annual revenues, relative to 8% in Germany and 11% in France.
The UK has proven to be resiliently world-leading in its scientific output: in 2020 the Global Innovation Index, compiled by Cornell University, INSEAD and the UN, ranked the UK as first globally for the quality of its scientific publications and second for the scientific innovation of its universities. The same index scores Cambridge and Oxford as ‘the world’s most science- and technology-intensive clusters’ in the international top 100. This dramatically contrasts with the UK’s historical lack of success in translating this leading position to the capture and commercialisation of knowledge capital. This has resulted in numerous missed opportunities for economic growth and development at a national level and, with its concentration of invention and innovation, is particularly apparent within the Oxford-Cambridge Arc.
Dealroom.co analysis of European venture capital (VC) places the UK fourth (€1,112) for funding per capita, significantly higher than France (€470), Germany (€440) and Spain (€204). VC investors deployed a record £11.8bn in the first half of 2021, equating to the total sum raised in 2020. This is highly encouraging (and undoubtedly why the UK is the European destination for global investment in emerging technology classifications like Deeptech, Healthtech, Energytech, Fintech and education technology) but this sentiment must be backed and financially supported by government. We cannot expect to reach every emerging breakthrough and carve out a clear commercial advantage if early-stage commitment to innovation is not replicated by the public sector.
How is government supporting innovation?
Investment into new ideas is increasing. UK Research and Innovation (UKRI), founded in 2018, invests in cross-disciplinary R&D and has awarded over 4,000 research and innovation applications and fellowships in the period 2020-21, amounting to a commitment of £3.1bn. This funding has been essential to the UK tech start-up and scale-up ecosystem which Tech Nation reports to now value $585bn, more than double the next most valuable ecosystem, Germany, at $291bn.
The UK Innovation Strategy also promises an increase in annual public investment in R&D to £22bn, skills programmes, ring-fenced finance for innovation infrastructure projects, and intellectual property education, among other incentives introduced including R&D tax relief, Research and Development Expenditure Credits, and a historically unique enhanced ‘superdeduction’ equal to 130% of capital expenditure on plant and machinery.
Together with the Life Sciences Strategy and the recently published AI Strategy, the Government is clearly demonstrating a commitment to ease the obstacles to commercialisation in emerging and potentially extremely valuable sectors economically and societally. As the statistics suggest, there is an impetus to become a “Global Britain” that nurtures, celebrates and internationalises our competitive advantages. The concern on the horizon, is whether that intent manifests itself in a way that is comprehensive.
What can we learn from?
The issue circles back to the UK’s approach to funding, and the extent to which public expenditure complements and uplifts private investment. Within the UK Innovation Strategy, the Government seeks to commit to a £10m ‘innovation seed fund’ to meet early-stage patient capital requirements, which is a proportionally small sum to catalyse and commercialise emerging ideas.
Navigating away from the fallacy of sunk costs is another barrier which public decision-makers must overcome, the shadow of which lingers in the form of historically poor and scattergun financing as was apparent by analogy in the aviation industry. There is much to be learned from academic institutions within the Arc in this respect, particularly Oxford and Cambridge whose total value of spinouts amounts to over £10bn, with a raised-to-value ratio of £3.1bn and £1.3bn respectively. Both ancient universities have vast and accessible investment frameworks offering funding, consultancy and business advice, formally and through campus initiatives. In Cambridge, for example, the Office for Translational Research and its Enterprise initiative offer mentorship and contacts, while at the other end of the Arc, the Oxford Seed Fund, Enterprising Oxford, IDEA and entrepreneurship networks create a loose coalition of support networks. These structures buttress the crucial foundations and growth stages of start-up companies, enabling innovators to develop their research and technical ability into a commercial enterprise.
There are many examples where this formula for incubation and growth has been proven, including NoBACZ Healthcare whose success in turn represents a significant success of the commercialisation of research in Oxford-Cambridge Arc and the proper utilisation of its existing knowledge capital. Its story also demonstrates how tied current investment and infrastructure is to the universities within the Oxford-Cambridge Arc. Without initial access to the infrastructure and funding provided by the University and its Cambridge Enterprise initiative, NoBACZ would have faced the difficult prospect of relying on a range of diffuse government schemes such as the Enterprise Management Incentive, the Future Fund, or the Medicines and Diagnostics Manufacturing Transformation Fund.
Equally, with the availability of R&D labs around Cambridge standing at just 4% at the end of 2019, access to University labs and facilities was a significant advantage for NoBACZ. But unless 20 million sq ft of new lab and office space is built within the Oxford-Cambridge Arc over the next two decades, new start-ups and spinouts will struggle to access the necessary infrastructure for both R&D and future growth outside of the university structure. The scarcity of non-academic laboratory space risks throttling start-ups and spinouts, as does the high cost of rent, which in Oxford, Cambridge and Milton Keynes have skyrocketed by 74%, 32% and 28% respectively. Currently, without the physical infrastructure to support it, non-academic research and development will struggle to access the facilities necessary in the Oxford-Cambridge Arc without significant further development.
‘Breaking through’ fundamentally relies on active government participation in the growth and evolution of the Arc as a regional ecosystem of world-leading innovation. This means more than money; it means a multi-dimensional commitment to nurturing existing capital within the region to ensure that we take seriously and seize each spark of commercialisable innovation for the benefit of our collective social prosperity. That leads me to my final comments where I will return to my first words on aviation and mention my own personal take on the future of flight.
The biggest challenge facing aviation today is decarbonisation of the industry. Achieving ‘net-zero’ flying using carbon-free fuels on a global scale is the only guaranteed way to achieve this and it is our aim and our ambition. We are a handful of science and engineering colleagues at UKRI-STFC National Facilities at the Rutherford Appleton Laboratory and Reaction Engines at Culham Science Centre. We have done the numbers, completed the initial demonstration phase, spun out a company and are taking the first steps towards commercialisation. Hopefully, with a following financial wind, this will take off.
Get in touch
Professor Bill David FRS, STFC
Professor of Energy Materials Chemistry and Senior Fellow