Rebecca Endean UKRI Strategy Director Influencing the Future of Innovation Encouraging Innovation for a Better Future Rebecca Endean UKRI Strategy Director

UK Research and Innovation Rebecca Endean, UKRI Strategy Director 26th November 2018

Mission UK Research and Innovation: benefiting everyone through knowledge, talent, and ideas.

The Numbers UKRI has a combined budget of around £7bn per year 3,900 research and business grants issued every year 151 universities receiving research funding 38 institutes, laboratories, units, campuses and innovation catapults

Overall spend on Research and Development in the UK Total R&D expenditure in the UK was £33bn in 2016. The public sector funds over £9bn of this (28% of total). UKRI covers the majority of public R&D funding, standing at £7bn in 2018 but rising out to 2021/22. The government has allocated £7bn to the National Productivity Investment Fund (NPIF) over the period 2017/19 to 2021/22. UKRI has a key role in delivering this investment. £33bn Not the only player in the system. Together we make up majority of public spen There is also considerable expenditure by government direct - makes up 10 per cent of total concentrate in health and defence Government has invested in the system as key way of generating econ growth. And additional 7 billion over four years In the last year it will be over 2 billion higher. All private sector source make up 72 per cent Higher overseas and charity in the UK compared with other countries Source: ONS GERD (2016), UKRI Strategic Prospectus

Foreign direct investment (FDI) is a strong driver of R&D in the UK 1% increase in FDI is associated with a 0.8% increase in national R&D expenditure and a 0.4% increase in patenting activity. Non-UK sources account for about half of all business R&D within the UK – doubling from £5bn to £11bn since 2005. The UK held the third-highest quantity of inward FDI in the OECD in 2017 UK sourced BERD has grown from £8bn to £11bn since 2005, Nature of the industrial structure - lot of the r and d intensive firms in the UK are internationally mobile. Give reasons why firms locate in the UK - quality of the research base Very strong [1] The Effects of Foreign Direct Investment on R&D and Innovations: Panel Data Analysis for Developing Asian Countries, L. Erdal and İ Göçer, 2015 [2] UK business enterprise research and development, ONS, 2017 [3] FDI Stocks, OECD International Direct Investment Statistics, 2017 [4] The impact of Brexit on foreign investment in the UK, S. Dhingra et al, 2016

Working towards 2.4% The Government has committed to reaching: 2.4% of GDP investment in R&D by 2027 Reaching 3% in the longer term Additional £7bn by 2021/22 In 2015 UK’s expenditure on R&D represented 1.7% of GDP – below the OECD average R&D intensity of 2.4%.

A wide range of R&D competitor nations have targets The popularity of R&D intensity targets increased in the late 1990s and early 2000s, reaching 42 countries with an active R&D target in 2011. Other countries pursued non-target based R&D strategies. The vast majority of countries have experienced increasing R&D intensity since 2000 and the UK is towards the lower end of the spectrum in terms of the scale of increase achieved. Source: Carvalho (2017) Source: OECD MSTI database (Data extracted on 4 Nov 2018) 8

… although fourteen other countries have achieved an increase of the scale which the UK is aiming to achieve under 2.4% The 2.4% target implies increasing the UK’s R&D intensity by 0.7% points in 10 years. 14 countries have achieved at least a 0.7% points increase in R&D in recent years. Much of the increase in each case came through business-funded R&D. However, public investment has an important role to play, in leveraging additional private investment and ensuring the increase is sustainable. Source: OECD MSTI database (Data extracted on 4 Nov 2018) 9

Foundations to the Industrial Strategy

ISCF and the Grand Challenges AI & Data W1 Robotics for a safer world (£93m) W2 Audience of the future (£33m) W2 Next generation services (Pioneer £20m) W2 Quantum technology (Pioneer £20m) W3 Commercialising Quantum technology (£70m) W3 Manufacturing Made Smarter (£121m) Ageing Society W1 Medicines manufacturing (£188m) W2 Data to early diagnosis and precision medicine (£196m) W2 Healthy Ageing (£98m) Clean Growth W2 Prospering from the energy revolution (£102.5m) W2 Transforming construction (£170m) W2 Transforming food production (£90m) Future of Mobility W1 Faraday battery challenge (£246m) W3 Driving the electric future (£78m) Explain the mission based approached Bring together the strengths across ukri - research collaborative Outline Wave 3 – announcements in the budget were: • £121m for Made Smarter to support the transformation of manufacturing through digitally-enabled technologies, such as the Internet of Things and virtual reality • £78m for the Driving the electric future challenge (called the Stephenson Challenge in the Red Book), supporting innovation in electric motor technology, making vehicles lighter and more efficient than ever before • £70m from the Industrial Strategy Challenge Fund to support the development and commercialisation of quantum technologies Case Studies: Company: Oxford BioMedica Location: several locations in Oxfordshire, UK and employs more than 320 people Funding: £3m + £3m industry leverage Programme: Medicines Manufacturing Challenge Drop in: Oxford BioMedica’s “lentiviral” work on viral vector production for cell and gene therapies is developing life changing treatments for serious diseases. The funding has been used for critical capital equipment and new facility design services; increased development and growth momentum of their bioprocessing expertise; and increased throughput capacity to support partners’ development programmes. Early successes: Staff numbers are already increasing and an expected additional 100 jobs created in the next 12-18months; the ISCF project influenced the subsequent decision by the board to raise funds to support the planned expansion (£20.5m fundraise successful in Mar 2018); they are considering taking on additional partners given that their current capacity is 100% utilized by existing partners and for in-house projects Company: FundamentalVR Location: near Chancery Lane, London Funding: £402K Programme: Digital health technology catalyst Drop-in: Bringing the teaching of surgeons into the 21st century. Using virtual reality and realistic-feedback so that surgeons have more opportunities to train in a realistic environment, improving their experience and outcomes for their patients. Working with King’s College London, the ISCF means they can bring this new, affordable, technology to market faster, ahead of the competition.   Company: Ilika Technologies Location: Southampton Funding: £6m  (for whole consortium) Programme: Faraday Challenge Drop-in: Bringing the expertise and innovation from our world-leading motorsport industry to bear so that we can stop selling petrol and diesel cars in the UK by 2040. Ilika are working with McLaren and Warwick Manufacturing group to develop wholly new, high-power batteries, that will fully charge in 30 minutes. Institution: StoryFutures Academy Location: Beaconsfield Funding: £10m Programme: Audience of the Future Challenge – announced as part of CI sector deal Drop-in: Developing the next evolution of storytelling, through virtual, augmented and mixed reality. Producing cutting-edge creative training and research programmes with Royal Holloway University and internationally renowned companies such as Sony Interactive Entertainment, Sky and Imaginarium Studios who have just finished working on the latest Star Wars film, to continue to nurture the fantastic creative talent we have in the UK.   Institution: Faraday institution Location: Harwell, Oxfordshire Funding: £78m Programme: Faraday Battery challenge Drop-in: Working with seven of the top universities in the country and businesses that are at the cutting edge of R&D, the Faraday institution is helping to create the batteries that will power our local carbon future. They are already having some early successes, working on projects to extend battery life, make batteries easier to re-use and recycle, dramatically cutting down on the amount of Lithium required, and creating the next generation of solid-state batteries.  

Universities and innovation Estimates imply that doubling the number of universities per capita is associated with 4% higher future GDP per capita In 2016/17, universities led to the creation of 4452 companies, of which 4161 were started by graduates and 143 were spin-offs, designed around exploiting a new IP Collaborating with universities increases the probability that a firm will undertake new-to-the-market innovation by: 22% for small firms, and 21 % for medium and large firms. Companies in innovation networks (such as UKRI’s Knowledge Transfer Network) are 4.5 times more likely to be innovative, and 3 times more likely to enter an R&D collaboration. It’s a people sport…

People - Achieving 2.4% is as much about people as money Having the right skills in place will be crucial for the development of priority sectors Around 110,000 researchers work in industry Arithmetic 2 thirds increase Source : ONS, OECD

There are key shortages This is not just about researchers but also support staff like technicians, who account for almost a third of UK R&D personnel, and apprenticeships Half of businesses say there is a shortage of STEM graduates with highest annual shortages in engineering (20k), manufacturing (15k), computer science, and construction (12k). 700,000 STEM technicians may be required by 2024 to meet employer demand5 Source: 1 Engineering UK, 2017; 2 UKCES Survey 2015, using UK Labour Force Survey data; 3 Employer Skills Survey 2017 data 4 National Audit Office (2018), Delivering STEM skills for the economy; 5 Gatsby Charitable Foundation (2014), ‘Understanding the UK STEM technician workforce ‘; Employers also expect to see more demand for apprenticeships in the coming years.

Innovate UK funding intensity per capita in different areas of the UK Places £115m Strength in Places Fund Supporting regional growth by identifying and supporting areas of emerging R&D strength Growing the capacity of existing research excellence and high quality innovation across the country Innovate UK funding intensity per capita in different areas of the UK

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