1. Role of Innovation in supporting UK and EU growth Chris North International Science and Innovation Unit Warsaw Innovation Conference 2 December 2010

2. 2 Presentation in two parts 1.UK national innovation policy trends 2.UK perspective on the European innovation policy agenda

3. 3 UK Government economic policy Reduce the deficit Encourage private sector led growth BIS is the UK Government department for growth, bringing together in one place policy linked to the ‘knowledge triangle’ (higher education, research and innovation)

4. Why the policy focus on innovation? Key determinant of productivity and growth/competitiveness post-crisis Need to ‘rebalance’ UK economy Innovation underpins development of new products, processes services and global markets Its role in tackling ‘grand challenges’ 4

5. Role of Government To set framework conditions which incentivise innovation (regulations, tax) To address market failures e.g. provision of finance to SMEs To nurture the research base – e.g. need for more PhDs To enable collaboration between academia and industry To join up supply and demand-side 5

6. UK strengths World class research (4 universities in world top 10) 1% of world population; 5% of world research spending; 8% of world research publications; 14% of world’s most cited papers; ‘Innovation leader’ (European Innovation Scoreboard 2010) Some research intensive sectors (pharma, aerospace) Top destination for inward R&D investment in Europe 6

7. 7 Number of R&D FDI Projects by Destination Country (2002-2006) United Kingdom France Germany Ireland Spain Sweden Finland Netherlands Attracting R&D investment from global business

8. UK Weaknesses Too few high growth, innovative companies with global reach Over-concentration of economic activity in financial services (City) Translating output from research base into high value products and services Overall investment in R&D lagging behind key competitors 8

9. UK Coalition Government innovation objectives To build an attractive environment for start-up technology firms (skills, open markets, tax, regulation) Invest in innovation infrastructure to commercialise technologies (modelled on Fraunhofer institutes in Germany) Encourage the demand side e.g. through Small Business Research Initiative 9

10. The Impacts of Research Improving public policy and public services; cultural and health capital Delivering highly skilled people to the labour market Improving the performance of existing businesses Attracting R&D investment from global business Creating new businesses Impact

11. Examples of UK Coalition Government initiatives Science budget protected over next 4 years Network of Technology and Innovation Centres Competitive corporate tax regime Review of Intellectual Property framework to make easier to protect and enforce IP Entrepreneur visa Technology Strategy Board investment Investment in fast broadband Better Regulation – “one in, one out” 11

12. UK Government announcements Blueprint for Technology launched by Prime Minister November 2010 (http://www.bis.gov.uk/assets/biscore/innovation/do cs/b/10-1234-blueprint-for-technology)http://www.bis.gov.uk/assets/biscore/innovation/do cs/b/10-1234-blueprint-for-technology Budget allocations to Research Councils and Technology Strategy Board to be decided shortly Innovation strategy due to be published spring 2011 12

13. 13 UK view on European research based innovation policy Europe 2020 - Smart growth, sustainable growth, inclusive growth. - ‘3% target’ Innovation Union - Will implement Europe 2020 – a ‘flagship initiative’ - Focus on grand challenges e.g. climate change - Competitiveness Council Conclusions – November 2010 - European Council (Heads of Government) debate – early 2011 European Research Area (ERA)/ Lisbon Treaty - R&D now explicitly a ‘strategic objective’ of the Union EU Financial Perspective (2014) - The budget for Framework Programme is the third largest

14. Innovation Union: Key themes Research a key element but many others too (design, business models, marketing etc) Single Market a powerful tool, e.g. services directive; but still no EU patent Standards-setting needs to become more efficient Access to finance a barrier to many firms Linking up all parts of the innovation chain (‘Research to retail’) Measurement 14

15. European Innovation Partnerships Aims To achieve better coordination between actors in the innovation chain and myriad national and EU financial support mechanisms Give the EU a competitive edge in growth of new global markets while helping address societal challenges Pilot EIP for ‘healthy and active ageing’ UK supports aims but has concerns about governance and funding aspects Need evaluation of pilot before rolling out to other sectors 15

16. EU Funding A confusing array of EU funding schemes support research and innovation (FP7, EIT, CIP, Joint Programming...) deters business Simplification agenda Efficient, well targeted spending essential in current fiscal climate Positioning of research and innovation in EU budget 2014 onwards? 16

17. Innovation Union: UK priorities Access to finance, especially for high growth innovative SMEs – role for EIB Group to help address deficit in Venture capital investment in EU and complement grant based schemes Stimulate public procurement, through networking between member state practitioners and support for national schemes (like SBRI) An EIP model which delivers real benefit 17

18. Innovation Union: UK concerns EU must add value not duplicate MS role Potential legislative approach to implementation of ERA (Framework directive?) Lack of clarity about implementation Tendency to ‘top down’ approach Urgent need to reduce red tape, especially for businesses (e.g. slow implementation of new European Institute for Innovation and Technology (EIT)/Knowledge and Innovation Communities) 18

19. Framework Programme 8: a key vehicle for delivering Innovation Union BIS currently conducting a public consultation Aim to publish a position paper early 2011 Commission orientation paper in February 2011 and online consultation leading to formal proposals end 2011 Negotiation between Council and European Parliament 2012/13 19

20. 20 What is the 'added value' of EU research versus national funding? Should the primary criterion for Framework funding continue to be excellence? What actions need to be taken to generate a step change in efficiency of FP management? Balance between addressing grand challenges, technology-driven research and curiosity-driven research (ERC)? How does the Framework Programme need to change to provide incentives for industrial participation? Should the bulk of FP funding continue to be allocated to collaborative projects, i.e. involving organisations from different Member States? Links between FP and Structural Funds? Key Questions

21. Conclusions All major countries now devoting high priority to innovation policy Key to our ability to compete successfully in the global knowledge economy Fundamental to achieving economic and social policy objectives Primary responsibility for supporting business innovation remains at national and regional level EU can play important complementary role 21

22. 22 Thank you Chris North chris.north@bis.gsi.gov.uk