UK inward investment report 07/08 - research and development

The expertise of world-renowned scientists; immediate access to leading research institutions with cutting-edge technology; a robust system of protecting intellectual property; and a wide range of tax support and incentives. These are just some of the factors that combine to make the UK second only to the USA as an international base for R&D.

As business underpins wealth creation, so R&D underpins business. There are well-established links between R&D intensity and sales growth, wealth creation efficiency and market value. Alongside operations and strategic decision-making, companies continue to regard investment in R&D as a key factor determining future success.

In the UK, R&D is booming. Investment by UK firms has risen by 9 per cent to a total of £21 billion, with the largest 75 R&D investors based in the UK increasing their spend by an impressive 12 per cent. The UK’s top 75 firms outstripped their global competitors, increasing their profits by 32 per cent (twice as fast as the world’s top 1,250 companies) and growing their R&D faster than the global average of 10 per cent.

A global programme

Since 2004 the UK Government has had an ambitious target of increasing R&D spending to 2.5 per cent of GDP by 2014. UK Trade & Investment’s R&D Programme sits within this broader objective, devoting its energies and expertise to persuading a targeted list of major overseas companies to undertake more R&D in the UK, thereby strengthening the economy’s position as a global R&D hub.

UK Trade & Investment has a team of R&D specialists – experts in technologies and industry areas. Each has first-hand knowledge of the UK’s R&D system, and all operate on a confidential, one-to-one working basis with international companies. Acting as a support and single point of contact they access the full range of R&D resources in the UK on their clients’ behalf, including the world-renowned expertise of the universities, private and public sector research organisations, the research councils and transfer knowledge networks. They provide up-to-date information on the latest R&D policies, initiatives and opportunities that are being introduced by national and regional government organisations across the UK.

Although establishing R&D projects is a lengthy process that can take many years, since its launch the R&D Programme has already helped to win 21 new projects for the UK: a major Japanese motor manufacturer has invested a massive £20 million to develop and design a new range of light utility vehicle; a Canadian aerospace company has identified a precision laser manufacturing technique for a UK company that led to an initial £30,000 R&D contract; a US drugs company is making a fund in regenerative medicine; and a US automotive giant made an R&D investment of £2.5 million following consultancy by UK Trade & Investment staff in its home city of Chicago.

As the global trend for companies to outsource their R&D capability continues unabated, increasing numbers of companies seeking the flexibility, expertise and talent that specialist R&D companies can offer are coming to the UK.

Targeting high-value investors

A major feature of UK Trade & Investment’s R&D Programme is its 76 virtual teams, assembled from across government and partner organisations, which target high-value companies overseas. Working closely with home and overseas-based colleagues in UK Trade & Investment, the Department for Business, Enterprise & Regulatory Reform, the seven UK research councils, the devolved administrations and regional development agencies, the FCO Science and Innovation Network and other bodies, they develop a clear understanding of target companies’ business objectives and then create tailored propositions to help them link to the best sources of UK R&D expertise. Propositions can involve inward investment, partnerships with companies or research institutions, contract research or supply chain relationships.

The technology giant Lockheed Martin is one of a select number of global high-technology players working with UK Trade & Investment (through one of UK Trade & Investment’s dedicated virtual teams) to identify cutting-edge technologies in the UK that have potential business development opportunities that would help meet Lockheed Martin’s technology needs and support the growth of the UK’s R&D base. As an existing investor in the UK and a world leader in aerospace and electronics, Lockheed Martin is attracted to the UK by its world-class expertise in areas such as advanced materials, specialist coatings and nanotechnology.

American Axle & Manufacturing (AAM) is the world leader in the design, engineering and manufacture of driveline and drive-train systems for trucks, 4WD vehicles and cars. Global success in this highly competitive field depends on the early adoption of leading-edge manufacturing techniques. AAM used the UK Trade & Investment R&D Programme to identify specialist welding techniques developed by a leading UK research centre.

Each of the virtual teams includes at least one of UK Trade & Investment’s R&D specialists, recently recruited for their expertise in life science, information technology, electronics and communications, performance engineering, materials and environmental or energy technologies, as well as for their commercial experience of working in the key trading blocs of North America, Europe, the Middle East and Asia-Pacific. Distinguished in academia as well as business, the specialists bring past experience of working in or with global players such as GEC-Marconi, QinetiQ, BP and AEA Technology.

Academic excellence

The UK’s high-tech universities have an established reputation as a hotbed for innovative excellence, and are the key to the UK’s R&D strength. With the top six universities in Europe, UK universities are the leading academic participants in many European programmes, providing the means to tap into global networks on the back of their research excellence.

UK universities are highly experienced in working closely with all parts of the private sector to undertake leading-edge R&D projects. University College London, for example, recently developed a new biomaterial using nanotechnology, for use in bypass grafts, transplants and plastic surgery.

Working closely with academia are the UK’s seven research councils, which together invest around £2.8 billion in the full spectrum of academic disciplines, from astronomy to the arts. Funded by the Government, the councils play an increasingly important role in its technology strategy, while funds are also made available by the Higher Education Funding Council to support exploitation of the results.

UK Trade & Investment’s R&D Programme also taps into the work of the Technology Strategy Board, a body established by the UK Government to promote, support and invest in technology research, development and commercialisation through collaboration between companies and universities. Since 2004 the Technology Strategy Board has supported around 700 projects in new and emerging technologies across 40 technology areas, with a combined business and government investment of over £1 billion.

The Technology Strategy Board’s 22 knowledge transfer networks, independent but supported bodies dedicated to increasing knowledge transfer of technology into UK-based businesses, are proving highly effective in improving the UK’s innovation performance still further.

Forming global partnerships

The Global Partnerships Programme is a UK Trade & Investment initiative that is making waves. Created to broker partnerships between the most innovative overseas technology-led companies and centres of excellence and their UK peers, Global Partnerships provides a free service that establishes contacts with UK players, assesses the intended partnership, judges the level of value added for the UK and helps businesses reduce risk and shorten time to market.

Since its inception in 2003 the Global Partnerships Programme has notched up considerable successes in helping co-develop new products or technologies in areas as diverse and wide-ranging as environmental technologies, fuel management systems and food processing.

Israeli biotech company ProtAb, for example, was quickly partnered with Antitope, a Cambridge based company, to work on a therapeutic approach to the treatment of autoimmune diseases; Canadian waste disposal expert Sanexen was linked up with West Midlands-based decontamination specialist Envirotreat, following a service described by Sanexen as “priceless”; and New Zealand engineering company Pivotal has been introduced to some 20 UK organisations – including nine universities, two centres of excellence and leading motor industry players – and the recently established Pivotal Hydrogen Demonstration Board includes ten of these organisations.

Looking outward

While the primary focus of UK Trade & Investment’s R&D Programme is inward investment, it also has an important outward element. This assists innovative UK-based companies to conduct business overseas, through UK Trade & Investment trade development mechanisms, with a view to increasing their R&D levels back at home.

During the period 2007-2008 this element has undertaken a number of activities such as assisting companies to compete on a global stage through knowledge and technology transfer activities. For example, helping Orla Protein Technologies, a university spin-out in the North-East, to commercialise its technology platform for a new generation of hand-held remote medical diagnostic devices.

Support has also been provided to organisations to develop commercial/academic partnerships in the nanosciences as well as market UK R&D/innovation expertise abroad. Key activities include:

• NanoForum 2007, a pre-eminent activity which has catalysed licence agreements between a number of UK-based organisations and foreign companies in the emerging Nano-sciences field.

• A recent Biofuels Conference in Houston which highlighted UK’s strengths in the bio-energy arena, helped to position the UK as a key player in this field while support for a Swiss Plastic Electronics mission to the UK enabled Plastic Logic (Cambridge-based world leaders in the field) to discuss collaboration opportunities with Ciba Speciality Chemicals.

• The Soft Landings Zone (SLZ) Programme, which is currently focused on the East and West Midlands but looks likely to develop across England, is managed by Coventry University Enterprises. It uses Coventry’s network of British incubator offices within science parks in 20 high-growth markets around the world to provide a comprehensive package of practical assistance covering everything from office space to advice on legal, financial and cultural issues. Over 46 UK companies are already benefiting from the SLZ, and its reciprocal service for foreign-owned companies is heavily subscribed, with links into the UK’s science parks proving a particularly strong draw.

Government thinking

In the UK, tax credits and capital allowances are generous, with large companies and smaller companies entitled to a deduction of their current spending on qualifying R&D of 30 per cent and 75 per cent respectively, in addition to the normal 100 per cent deduction.

In its March 2008 White Paper, “Innovation Nation”, the UK Government set out its plans for supporting the UK’s world-class research base as a crucial part of its “innovation ecosystem”. Recognising the increasing internationalisation of R&D, it committed itself to making the UK one of the most attractive places in the world for mobile R&D-intensive businesses by “unlocking talent at all levels, by investing in research and in the exploitation of knowledge and by using regulation, public procurement and public services to shape the market for innovative solutions.” The R&D Programme will continue to play its part to increase the amount of R&D carried out in the UK.