Introduction

This is the response of the Birmingham Science City (BSC) Alliance to the Green Paper “Building Our Industrial Strategy” (https://beisgovuk.citizenspace.com/strategy/industrial-strategy/supporting_documents/buildingourindustrialstrategygreenpaper.pdf).

Birmingham Science City (BSC) is an Alliance of public, private and university stakeholders working together to stimulate and promote science and technology driven innovation in the West Midlands (http://www.birminghamsciencecity.co.uk/).  This response has been compiled following extensive consultation via a BSC Board discussion, a consultation event with BEIS and about 40 members of the BSC Alliance, and via a blog and social media activity.

This process results in a robust West Midlands response from an innovation perspective – not just focusing on pillar 1, but also on other pillars that interact strongly with innovation.

Draft general comments on the Industrial Strategy

  • The creation of a UK Industrial Strategy is welcome as it acknowledges that there are major issues in the UK economy that require strategic actions with long term impact, and BEIS’s efforts to engage around this Green Paper are appreciated.
  • In particular the goal of addressing disparities in productivity across the country is applauded.
  • There is a lack of longer term outlook or proposals, however, with the paper concentrating on tactical, short term approaches and focusing excessively on current market trends, including immediate responses to Brexit, rather than considering global competition and how wealth creation is likely to change into the 2020s. The youth of the West Midlands population gives us a particular opportunity to think innovatively and long-term
  • The 10 Pillars provide a good structure for analysis and action, providing a framework within which business, local government, public sector, universities and others can contribute.
  • The importance placed on science and innovation is particularly welcome, not just in pillar 1, but as a cross-cutting theme interacting across numerous pillars.
  • We welcome the commitment to work closely with key local agencies and businesses to drive inclusive growth across the country. This will allow understanding of variation in local conditions, and enable flex and shifts in balance of interventions according to loc al needs.  It will also require appropriate flow of responsibility and resources to regions.
  • There needs to be a stronger focus on manufacturing if the objective is to really change UK productivity – the West Midlands is strongly positioned to lead a drive towards innovation to improve manufacturing productivity, through adoption of existing and emerging technologies.
  • Science and Innovation Audits (SIAs) should strongly influence delivery of the Industrial Strategy as they evidence strength and opportunity in places – including the Midland Engine SIA (https://www.midlandsengine.org/our-five-themes/innovation/) and the supplementary West Midlands SIA (Framework at http://www.birminghamsciencecity.co.uk/groups-and-networks/advisory-and-steering-groups-2/wmca-innovation-working-group/). However, by definition SIAs tend to be backward looking and it is also important to look forward to opportunities to exploit emerging knowledge, technologies and markets.

Draft comments on Pillar 1 – Investing in Science, Research and Innovation

  • Much of this section is to be welcomed, but the perspective is limited as it consistently implies a linear system (with all new knowledge and technologies originating in universities). The reality is a much more complex ecosystem with knowledge and know-how flowing in multiple directions.
  • Universities are undoubtedly critical originators of ideas and technologies, but the following types of organisations also generate new ideas and technologies (as well as exploiting them): business R&D and intrapreneurship, public and third sector, translational organisations (including Catapult Centres which are barely mentioned), cross-sector innovation etc. Therefore encouragement and support for exploitation of all sources of new ideas is important.
  • Universities also do more than just generate ideas and technologies. They can act as catalysts and support to stimulate others to exploit knowledge and collaborate, the Midlands Engine and West Midlands Science and Innovation Audits provide many good examples.
  • Business investment in R&D is clearly a UK weakness that needs to be addressed. Therefore actions such as the review of tax incentives (though noting many start ups are too small to pay tax), and a focus on demand-led innovation are welcomed, including the possibility of extending SBRI, of business-led ‘RPIFs’ and the launch of the Industrial Strategy Challenge Fund.
  • Work is needed with local authorities and combined authorities, to develop local incentives to innovate as well as national.
  • Serious effort is required to increase the inclination or capacity of businesses to innovate. Some of this may be linked to skills and leadership, but some of it may be local promotion and brokerage to help business to understand and access one organisation’s challenge being their business opportunity. Also consider schemes that help companies working with the Knowledge Base, eg joint PhDs or a postgraduate equivalent of Degree Apprenticeships, to provide research leadership skills into a firm.
  • We should not be tempted only to consider ‘big things’ – for example enhancing innovation in supply chains or supporting small companies with needs for digital and innovation skills may have greater impact on business innovation in the longer term.
  • Local innovation ecosystems are all different– each with its own barriers to adoption of innovation, which can be deeply systemic, taking time to understand and change. It is hard, but essential, to sell this sort of support/ intervention to government as the outcomes underpin and enable more effective innovation, rather than cause it directly.
  • The Industrial Strategy Challenge Fund (ISCF) is welcome, but we offer the following comments:
    • Some of the proposed ISCF priorities are challenge-led, but others are very technology led and the details sound more research than challenge driven
    • In developing a place-based angle to ISCF it seems clear that the evidence of Science and Innovation Audits should be used, but Innovate UK also needs to go further in understanding local innovation ecosystems and adapting to their needs
    • Thought needs to be given not just to funding themes, but also to the funding means. For example, can it help to address the systemic issue of lack of development phase funding by business after initial public research funding, and be constructed to simplify the connections between phases of investment to smooth path, with gradually less public intervention as move towards market. ISCF should also not be too risk averse – innovation naturally carries a higher risk of failure
    • It is not clear the extend to which access to ISCF is restricted to business – business-led is appropriate, but universities may be important partners in challenge-led activity
    • It should maintain flexibility to respond to cross-cutting themes and new economic opportunities
    • It should recognise the facilitative role of Social Science research in the introduction of new technologies and business models
    • What happens after 2021? Assurance of longevity of ISCF (and ability to carry finance from one year to the next) would have huge impact on deliverability.
  • The emphasis on survival as well as creation of university spin-outs is important, but not all science and technology start-ups are university spin-outs so this objective should be widened. Some of the excellent support offered by the diverse range of members of the UK Science Park Alliance (UKSPA) should be considered and further supported.
  • Funding for innovative businesses to start and grow is always a challenge, but with different pinch-points in different geographies. For example, in Midlands the new Midlands Engine Investment Fund will help hugely with loan and equity under £500k, but angel funding is still very short as it is concentrated in the South East.
  • It is recognised that strengths, weaknesses and opportunities in science and innovation vary across the country, and the Science and Innovation Audits have been very helpful in providing local evidence for action and investment. Thus it is inappropriate to simply seek to replicate without taking account of local conditions and organisations.
  • The work started with the SIAs needs to be continued nationally and locally – for example, the West Midlands Combined Authority (WMCA) has conducted a supplementary, detailed SIA http://www.birminghamsciencecity.co.uk/groups-and-networks/advisory-and-steering-groups-2/wmca-innovation-working-group/ to the Midlands Engine SIA.  This can be used to shape/ influence the following:
    • The WMCA Productivity and Skills Commission chapter on innovation
    • Material for attracting inward investment
    • Catalysis of significant new innovation projects targeting local or national (ISCF) funds
  • European Structural Funds will end in 2020.  These have been extensively used in business support activities around innovation at a local level to good effect. A UK replacement would be welcome but must recognise regional economic weakness, allow local decisions to be made based on local need, and seek to reduce the administrative and bureaucratic burden.
  • Likewise, accesses to European Research funds, and the international collaborations at scale that these enable, have been a critical component of the UK R&D success. Cross-party commitment to remaining part of the European Research Area and Horizon 2020 Programme must be sought as soon as possible, to maintain confidence in UK partners.

Draft Comments on other Pillars with respect to innovation

Developing Skills

  • Clearly critical – low skills is a real challenge in the West Midlands. Brexit is a huge threat as free mobility of skilled technical people and their dependents (with freedom to work) to provide scarce skills, as determined by employers, is essential for any industrial strategy to work.
  • We welcome the strong emphasis on STEM skills, and on technical education, though the paper fails to mention creative skills and critical higher skills that are known bottle-necks to industrial development, such as training in design, systems engineering, coding etc. However, care should be taken not to artificially separate technical and academic education – it should be recognised that a considerable amount of vocational education is already delivered through higher education providers (e.g. Nursing, Education and Engineering).
  • As digital and emerging technologies are likely to revolutionise work in the coming years, along with more cross-sector working, provision must be made to enable continuous learning, fast and flexible learning, and adaptation of the workforce if the UK is to remain competitive. This may include the need for new professional institutions or incentives for businesses to train.

Upgrading infrastructure

  • This affords opportunities for innovation that are not mentioned, for example by application of systems integration to overcoming transportation challenges or innovative sustainable construction – areas of strength recognised in the West Midlands SIA.
  • Consistency and upgrading of digital infrastructure is essential on an ongoing basis if the UK is to continue to compete as a ‘Tech Nation’.
  • Energy infrastructure is also critical and is currently a constraint to growth of manufacturing in some places, including parts of the West Midlands – relaxation of regulation to allow innovative, local energy solutions is urged.

Supporting Businesses to start and grow

  • This needs to have a strong connection to pillar 1, and to include science and technology businesses and their particular needs, such as proof of concept funding.
  • The work of the Science Parks and similar organisations in incubating and growing science and technology businesses should be acknowledged and supported.

Improving Procurement

  • We are delighted to see the emphasis on stimulating innovation through procurement, including the extension of SBRI and driving changes in conservative public sector procurement practices, as BSC has long been an advocate of this as one approach to demand-led innovation.
  • However, the Paper should go further to consider how government procurement can be used to fosters innovation to deliver value for money/ reform in public services, for example by considering a directed innovation approach along the lines of DARPA, or encouragement of co-creation of solution between public services, innovative business and universities).
  • Private sector procurement can also drive innovation, in effect OEMS can be custodians of innovation across their supply chains, but only a few adopt this stance. How can we engender this type of approach more widely?

Encouraging trade and inward investment

  • This section is very imbalanced with relatively little on inward investment.
  • The Science and Innovation Audits give strong evidence to be used to promote investment from science and technology businesses into the UK that should be exploited.

Delivering affordable energy and clean growth

  • The investments in energy innovation are welcome.
  • More freedom should be allowed for local energy demands to be met with local, innovative solutions, as above.

Cultivating world-leading sectors

  • A focus on sector deals and emerging sectors may be effective if a long-term view is taken and includes the whole supply/ value chain, and allows for new entrants from innovative start-ups.
  • The Science and Innovation Audits may be helpful in mapping sector or market strengths in different regions, and we would welcome place based sector deals.
  • Care should be taken with sector definitions and strengths though, for example SIC codes are notoriously narrow and also some ‘big things’ can cut across traditional sectors, such as batteries, so market strengths may be a more useful term.
  • Attention needs also to be paid to enabling competencies, as we found in the Midlands Engine and West Midlands Science and Innovation Audits. These are strengths that can have impact across markets/ sectors, can encourage cross-sector innovation and can build flexibility and resilience in local economies.

Driving growth across the whole country

  • This is fundamental to the rationale for having an industrial strategy, so every pillar should consider the local dimension.
  • This requires genuine, long-term, two-way engagement and exchange of central government and local structures, evidence and strategic plans, and the resources and freedom to operate. The way HS2 has been allowed to operate is a good model.
  • Sufficient responsiveness needs to be maintained to adapt to changes, such as in demographics and in business/ economic models (eg how do we share wealth created largely by robots?)

Creating the right institutions to bring together institutions and place

  • Although this is a natural extension of the previous pillar, it only deals with new structures and does not address whether current structures are wrong or inadequate.  Science and Innovation Audits might help to understand existing institutions in the innovation space.
  • New local institutions will only be effective if they are granted sufficient authority and resource to operate.
  • We would also like to see this pillar extended to include support for networks and alliances that work across and between existing and new institutions to enable and catalyse collaborative approaches, and cross-sector and cross-organisational learning and innovation.
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