Planning for Brexit: safeguarding innovation

In March, the Science and Technology select committee set out its views on the priorities for the science and innovation sector in future negotiations with the EU. It echoed the main recommendations from the CBI’s Collaborate to Innovate report. And at the heart of both lies the argument that the UK’s leadership position in science and innovation cannot be taken for granted.

“The UK’s science and innovation sector is in a strong position as the UK enters the Brexit negotiations. The UK is home to four of the world’s top ten universities and the government has committed to raising funding by £4.7bn by 2021,” said Committee Chair Norman Lamb MP. “But a concerning lack of clarity remains over access to funding, association with regulatory bodies, and immigration policies.”

As yet, the government has not clarified whether the UK will be involved in Framework Programme 9 (FP9) – the EU’s next flagship research funding programme, which will replace the successful Horizon 2020.

Under Horizon 2020, the UK is placed second only to Germany in the number of project participants and share of funding. It is the scale of many of the projects and the collaboration each entails that would be particularly hard to replicate. And as an indication of the depth of its current involvement, the UK has received €3.9bn worth of funding since 2015, with UK businesses receiving €780m of that. Within that, a wide variety of companies have benefitted: manufacturers have received 36 per cent and research-intensive sectors, 39 per cent, while SMEs have accounted for a massive 65 per cent.

A small business success

Take Lindhurst Engineering as an example – a small business looking to diversify to secure future growth, with designs for an anaerobic digestion system small enough to allow farms and other small firms to process their own waste.

With help from what was then the Technology Strategy Board (and now Innovate UK), the company carried out a feasibility study and built a scale model, tested on cow slurry. But Horizon 2020 funding meant it could set up units with partners across Europe trialling different waste products – ice cream waste in Spain, vegetable matter in the Republic of Ireland and mixed animal slurries in Denmark. In the UK, one unit was set up at a small holding, another at a microbrewery. Two years later, Lindhurst is ready to commercialise the product.

Asked about the difference Horizon 2020 funding has made, Managing Director Martin Rigley is clear: “We’d have stopped. The project wouldn’t have moved any further forwards without it. It was our only option.”

The collaboration has also opened doors to the European market, which might not have been there otherwise – significantly, its first sale is likely to be from Spain.

Research intensive innovation

At the other end of the scale, andin response to a Wellcome Trust consultation on the topic, GlaxoSmithKline credits the formal funding programmes, such as Horizon 2020, as playing “a particularly critical role in facilitating pre-competitive and public health research” by bringing parties from different sectors together, in both EU member states and other participating countries.

GSK itself is working with partners, through current Horizon 2020 projects, to discover new drugs to combat growing antibiotic resistance, as well as to tackle HIV/AIDs, tuberculous and malaria in Africa, for example.

Confidence knock

Uncertainty around access to future funding is already hitting businesses. Chris McDonald, Chief Executive of the Materials Processing Institute said the SMEs that typically use his facilities were already cutting their research plans under the assumption they won’t get grants. He also said that companies were having to spend far more time reassuring European partners that they remained committed to working with them.

Wider concerns are also reflected in the latest figures from BEIS, which when compared with October 2016, show that UK businesses have fallen from the second highest recipients of Horizon 2020 funding in the EU – to fifth overall.

But current concerns are about far more than funding – as ultimately that could be replaced.

As GSK says: “The most important aspect of scientific research and collaboration is the ability to conduct the best science. That means being able to research in the best places, with the right people, and the right funding and oversight to address the scientific question at hand.”

And one of the UK’s top research universities agrees. UCL has won more than 400 Horizon 2020 projects – a total of nearly €260m – since 2014, and nearly 200 grants from the European Research Council (ERC) too.

“These grants are not just about the funding but about the prestige, mobility of people and the networking,” says Uta Staiger, Pro-Vice Provost for Europe and Executive Director of the UCL European Institute.

“The ERC fellowships for early career researchers, intermediate and advanced awards in particular create an ecosystem that is highly favourable for the best research taking place at UK universities. Were we to lose access to the ERC, until attractive domestic funds and opportunities for international collaboration came into place, recruiting and retaining top scholars in their field would become more challenging.”

Access to skills

And there is no denying that the UK has benefitted from attracting the top scientific talent. A good example of this is the Russian-born Sir Kostya Novoselov who has worked at the University of Manchester since 2001. He was awarded the Nobel Prize in 2010 for his work with graphene – the super-strength, ultra-thin material that could revolutionise transport, medicine, energy and electronics.

Manchester is now home to the National Graphene Institute, which received a third of its funding from the European Regional Development Fund. Individual research projects at the institute have been supported by both the UK Research Councils and the ERC. And the European Commission’s Graphene Flagship has pledged €1bn over a coordinated 10- year research plan.

At the end of February, Novoselov raised his concerns about what will happen to research funding after Brexit in an interview with the BBC. He also argued that the UK needed to be much more proactive in supporting technology companies if it wanted to compete with China.

Damaging the tech sector's potential

But this international competitiveness also relies on access to skills, says Nokia’s UK and Ireland CEO Cormac Whelan – and the lack of clarity on immigration post Brexit threatens that. He refers to the latest mobile communication developments and the government’s declared ambition to make the UK the 5G test bed centre for the world.

“You can’t do that with just UK people,” he says. And if limits are placed on freedom of movement, he believes other countries will beat the UK on reputation and become the “go to place” for cutting-edge innovation instead.

The same would be true if Brexit results in any barriers to data sharing.

“We are a data-driven economy, and our success is underpinned by our ability to move that data cross-border,” said Julian David, CEO of techUK, which has published a report on the issue.

Although the UK currently conforms to EU data standards, with the Global Data Protection Regulation coming into force in May, on Brexit the EU will have to deem the UK’s regime “adequate” before data flows can continue. Any divergence puts this under threat.

Although the government has highlighted the potential for greater innovation in technology if we had a more liberal data regime, firms doubt much innovation could be done if the UK is “digitally isolated”, particularly when new ideas in fintech or health, for example, require insights from a huge amount of data – from a larger population than lives in the UK.

Regulatory divergence

The CBI recently published a new report, Smooth Operations, outlining where businesses want to stay close to EU rules and regulations and where they want to diverge. From architects to zoos, it reveals the regulatory needs of 23 industry and service sectors, of which 18 prefer convergence or alignment for the majority of regulation that matters. Data sharing is one area where divergence carries costs – in this case restricting innovation.

UCL’s Dr Staiger also mentions many regulations in science that would need to be transferred from the EU on Brexit, which would require substantial administrative support and scientific advice.

Along with data and information sharing, she also points to the recognition of product standards, chemical registrations, clinical trials and intellectual property rights.

Small businesses in particular could struggle to cope with two product standard regimes, says Mike Plaut, CBI Wales Chairman and Managing Director of Northmace, a designer and manufacturer of products for hotel rooms.

And as a smaller manufacturer, Aston Martin CEO Andy Palmer, believes the luxury car maker could also lose out if influence over European regulations wanes, which it “undoubtedly” will post Brexit, he says.

Likewise, at smart energy company GEO, Patrick Caiger-Smith, the CEO, is concerned about how the UK can continue to influence European regulation, when the way energy markets are set up and the interconnectors between countries mean there’s a lot of overlap.

He points to the latest Energy Efficiency Directive currently being formulated in Brussels, which will have some “big targets for 2030”.

“It’s a perfect example of one which we really ought to be adopting nationally. The goals and the intent are so fitting for what we need in this country. But we may not – more for ideological than policy reasons.”

Although he also says that independent regulation could mean the UK is in the vanguard of testing out new ideas, Caiger-Smith believes the nature of the energy sector and national investment levels could lead the EU to become more protectionist in its stance.

And although he is determined that as an innovative SME, GEO will adapt to whatever regulations and circumstances are thrown at it, question marks hang over the future of its development base in Romania “if tariffs or other barriers come into play and add to the business costs”.

Securing a "win-win"

“Cooperation on science and innovation is a ‘win-win’ for the UK and the EU,” said Norman Lamb, announcing the select committee recommendations. “It is crucial that the government acts swiftly. If it fails to do so both sides could suffer considerably as a result.”

If the government states its intention to associate to FP9 it will reassure businesses that vital networks will be maintained – and that would be a base for new partnerships to flourish.