Welcome to this, the first public session of our Select Committee inquiry on innovation, growth and the regions. At this time growth is the key ambition of Government. We see concerns expressed with regard to business confidence and the growth outlook for the country. The Government, and I think everybody in this Committee, believe that sustainable long-term growth comes from innovation, particularly driving and growing small companies and scaling up companies. If you think about what both Google and Facebook have in common, they are both spin-outs. One was an academic spin-out, and the other, Facebook, was a student spin-out. Closer to home, we obviously have Oxford Instruments, a fantastic spin-out from Oxford University. Indeed, our first showcase innovator, AMLo Biosciences, was a spin-out from Newcastle University. With that in mind, the Committee is really interested to hear about how innovation can drive growth in regional economies. That is why I am particularly pleased to welcome our first panel, who will speak to us about the relationship between innovation, universities and spin-outs. I ask each of the panel in turn, going from my left with Dr David McBeth, to my right, to introduce themselves and make any very brief opening comments. Just say why you are here, and then I will open up the questions from the Committee.

I am vice-principal for enterprise and economic transformation at the University of Dundee. Dundee is a reasonably small, but quite research intensive, university, in the fourth largest city in Scotland. We are very good at biological sciences. One of your members is an alumna of that process. We have had a lot of economic impact as a result of our biological sciences, particularly in relation to spin-out companies where, in 2023, we were named No. 1 in the UK by Altavista Ventures for a performance with spin-outs. However, my job title includes economic transformation, and the subtext is that, although we are very good at that within the university, the city itself is a small city with multiple deprivations and a huge amount of inequality. We have been trying, and will continue to try, to play our part as far as growing the economy and the health and wellbeing of our city is concerned, but we feel that there are a few things that the UK and Scottish Governments could do to assist with that. Hopefully, I will get a chance to say that later.

I am Professor Irene Tracey. I am vice-chancellor at the University of Oxford. I have been an academic there for most of my career. I am a neuroscientist and scientist by background. I am delighted to be here, so thank you very much for the invitation and the opportunity to speak. This is something that is very close to all of our universities’ hearts in the context of what we see as the potential of what we can offer and how we can serve the country in driving economic growth and prosperity through the innovation that we create and the spin-out opportunities. I was asked by the previous Government to co-chair a report on how we can drive economic growth for the country though the university sector, through innovation and spin-out. That is now one year old. I am sure that we will get into the detail of that, but the purpose of it, which is as relevant to this Government as to the previous Government, was the realisation that there is a lot more that we could do in this space. If we could get the whole pipeline connected, we will be off to the races, so to speak. I am currently obviously in charge of the University of Oxford, which has had a terrific legacy, as you mentioned before, in the context of wanting both to do this and to inculcate a cultural change in entrepreneurship, within the university and for the sector. It is very much work in partnership and collaboration to see how we can, as a global-leading university, also contribute to helping set some of the templates and take the learnings that we have been through to other universities. Again, that was part of the spin-out review. Personally, I am still trying to license a spin-out of one of my own discoveries, so I am very close to this space, even as vice-chancellor. I am very happy to be here.

Good morning. My name is Ash Tiwari. I am deputy vice-president for innovation at the University of Sheffield. I am also the Airbus and Royal Academy of Engineering professor in digital manufacturing, so I hold a position at the university that is jointly funded by Airbus. There are four points I want to highlight from the perspective of the University of Sheffield. The first is that innovation is one of the key pillars of the university’s activities alongside research and education. Within that, one of the key strengths we have are our translation innovation centres. For example—

Is this your opening?

Yes. That is one of the key activities we have there. Coming to spin-outs, one of the main activities we have seen recently is the commercialisation journey that we launched. We have now started seeing results out of that—

We will get to that subject, Professor. The Committee is very keen to highlight those issues as we open our questioning. I am going to start with a couple of questions to Professor Tracey. As you said, you were commissioned to do a review looking at universities’ contribution to growth, spin-outs and scale-up factors. Your review had 10 recommendations, I think.

No, 11.

Sorry, 11 recommendations. As you say, it is one year on since the publication of that spin-out review. How would you assess the progress in implementing those recommendations? Obviously, we don’t want to go through all 11 recommendations. Perhaps you could highlight a couple where you feel there has been significant progress, and perhaps others where we have not made as much progress as you would have liked.

I would be delighted to. All 11 recommendations were accepted by the Government. We were immediately well serviced and supported by Research England, Universities UK and the Russell Group in taking the recommendations, having been approved, and fast-tracking their implementation across the university sector. Just last month we had a celebration, if you like, of one year on. I am delighted to report that Research England, which has been tracking this and is hugely supportive in the implementation, is following the analysis. We now have 50 universities having implemented most of the recommendations, particularly the recommendations around the equity deal. That is the actual commercial deal that you are implementing, and the recommendations we made around lab-based work and what that would look like in a 10% to 25% equity split. There are other things around the commercial deal. One of the things that we wanted to highlight in the review is that there has been a slight obsession around the equity split. One has to look at the whole commercial deal. That is the more important thing to look at. It is pushing the university sector a little bit to think about a more standardised template for what the commercial deal should look like, both for lab-based work and for software, where there would be a smaller return for the university at 10%. That was a key recommendation and a very challenging one, I would say, for the university sector to adopt, just because of the need for them to recoup money to put back in and reinvest. They have embraced it. I think the timing was perfect for the review and the report. Everybody was ready to embrace a more common set of ways of working together and willingness to accept more common templates about how the commercial deals should look, so that you could fast-track and get on with the spin-out rather than having lengthy discussions and arguments that might take six months to a year and would end up where you began. All the things that we put in around the commercial deal have been readily embraced and are being implemented, frankly, far quicker than we would have imagined in our wildest dreams. One of the other things we were very keen to pursue—I will highlight two of them—was the fact that for many of our regions, if you don’t have a large academic institution with a huge amount of spin-out turnover to generate the economies to run your own tech transfer office, it would be much better to have a regional one-stop shop, where you would have high-quality signposting to the legal services that you needed for intellectual property; for accessing venture capital money; for thinking about access to the talent pool to run your company; and for working with local authorities and planning. Rather than every university having to create that themselves, they should work together and set up a regional Government-funded one-stop shop. Research England have been supporting that model, again with funding, with a couple of pilots that they will finish this spring. They will learn from the pilots and, hopefully, we will be able to roll out that model so that more places across the whole of the UK can benefit in realising their intellectual property without having to go through the enormous effort and, frankly, financial cost of setting up their own tech transfer office. Even in a place like Oxford, with 30 companies a year being spun out, you just about need that to wash your face running it. That regional one-step shop model has been piloted. It is looking pretty good. Another thing to highlight is a registry. It is very hard to get the data to know how many companies we are spinning out, what the deal terms are, how it is going, how many have collapsed, how many are doing very well or how many have left the UK and grown in the US, missing all the opportunity to invest that money back into the UK. Again, Research England has been developing a registry, which we hope quite soon will be more public, with a dashboard, so it will be much easier for all of you to track just how we are looking and how we compare internationally in that regard. Those are just a few things I would highlight. High funding is key. I think we would all stress the importance of the Higher Education Innovation Fund from Research England. Obviously, I am going to say this; it would be remiss of me not to. It will be really important to maintain, and in fact increase, high funding, particularly at this point in time with the challenges for many universities in terms of their finances. That is the key funding pot that allows us to, as I call it, keep the show on the road. As a scientist, and having one of the clinical neurosciences departments, we miss a lot of value added to some of the ideas because there just are not the pots of money to take it that extra step along the journey, so that you have something really exciting to patent and then you are off and running. That is a really important piece of funding that I would like to emphasise at the outset.

Thank you very much, Professor Tracey. There is a lot in what you have said, and it is great to hear that progress is being made. Your review came out just following the review that the Labour Opposition commissioned from Lord Jim O’Neill. There was also a review from the 10 universities, which set out guidelines specifically for the equity stakes. It is fantastic to hear that such progress has been made. Can I dig a little bit deeper? You have given a generalised view across the country. You spoke about a pilot that was taking place, but you didn’t say where. Are there regional disparities in the speed with which this is being implemented? Specifically on the equity stakes, there have been examples of universities demanding 30% or 40% equity stakes. As you indicated in your response, there are complexities because the level of equity stake can reflect the level of support and future investment that the university is going to do. Having the in-a-box, start-up guidelines where those barriers to spin-outs happen can really speed up the process. You have given quite a positive assessment of how universities are doing on this. Is that the case in every university across the country? Could you specifically talk about the culture in universities—I’m sorry this is a long question—and the technology transfer offices coming together on a regional basis? That is fantastic, but I know how difficult universities can find talking to each other, never mind working with each other. Can you give us a bit more detail on the regional aspects, not only in Oxford?

I am happy to unpack. Most of my comments were more general for across the country and not just Oxford specific, just to make that very clear. For the data on how regionally variable it will become, I urge you to go to Research England. They are gathering that data, and they will be able to give you the granularity of those 50 universities and at what pace they have been able to—

Which 50 universities?

Which 50 universities and what pace. Who was straight out of the gate already at the deal terms that we already had recommended; who had implemented them within a six-month timeframe; who was within a year; and who is on track to do it. Some of the reasons for the delays will be governance models and taking it through the particular university’s governance structures. You cannot do things just like that. Obviously, you have a whole governance structure running a public university. There are factors that will contribute to why there will be variance across that. There will also be cultural changes for some of those universities, where they have had an equity stake, where they have to persuade and socialise the idea that in the long run it is better to have a more competitive commercial deal because you are probably going to get more business and more investment with that. That will take time to socialise. What I can say is that, in the discussions in generating the report, we felt that we were pushing against an open door for people being willing to adopt the USIT guidelines and then be pushed for the software. I didn’t sense any particular regional challenge with people recognising the parameters we were working towards, which were to push a little bit more on the software and to adopt the USIT guidelines already on the 10% to 25% equity deal. Again, there is complexity with the commercial deal because, of course, there is diluted and undiluted. This is the great difference. That is why we put in the annexe worked examples to say that for most universities that have been at this for quite a long time, by comparison with MIT, Stanford or wherever, we are actually already at the same level. It is just that we have a difference in the diluted and undiluted. We worked out and showed the algorithm that you would end up with the same sort of outcome. There is a lot of mythology that we were busting in the report as well that it was really important to bust. Maybe go to Research England to get the specifics about the implementation for the regions and which ones were straight out of the gate and already there and which ones were mid. There are 50, so I won’t go through it now. They have the database looking at who is implementing them going forward. Again, UUK and the Russell Group will be able to give you that detail. When you interpret that, please do not think that, because somebody is slow or going to implement it in two years, it is because they do not want to. Often, it is a combination of factors. They have to get everybody on side, and they have to go through their governance structures. The impression I want to leave you with is the willingness with which people want to embrace this. They could recognise, watching the universities that have been in it for 20 or 30 years, that they ended up with this level of commercial deal and therefore there was probably something in it, in which case they have to get there, but it might take a different amount of time for different regions to get there, for a host of different factors.

That is very interesting. I will bring in Kit in a moment. One of the recommendations of Lord Jim O’Neill’s report, which I know was accepted by Labour in opposition, was a dashboard of spin-outs. It does not sound as if that is in place.

In the Research England registry there is a dashboard being created.

It is being created?

Absolutely.

We should perhaps note how quickly that is going to be in place, the progress being made and how we can easily spot the regional variations.

You asked about culture. Something else that we were very clear to put into the report is how everybody, right from a PhD student through to seasoned faculty, can create an entrepreneurial culture within our university sector. Again, different universities will be at a different part of that journey. We made a recommendation that UKRI-funded PhDs should be given an opportunity to take a portion of their PhD time to go and work in a spin-out or with a venture capital firm so that they could get a sense of what it is like to do that. Again, that is something that we will need to track and see how well it is being implemented. I think most of us could speak about the importance of inculcating that cultural entrepreneurship at the undergraduate and graduate level. It is something that we are all working hard on.

You mentioned the undergraduate level. Obviously, Facebook would affect the spin-out at the undergraduate level. You talked about inculcating a culture from PhD upwards, but it has also to come in at the undergraduate entrepreneurial—

We are doing lots of things. Many of us are doing things in Oxford. We are doing a lot of different things around the undergraduate level to give them opportunities. In fact, one of our colleges is opening up one of its houses to be an entrepreneurship centre so that we can provide mentorship. We have been pushing diversity very much. One of the interesting things that we highlighted that will make Britain unique and different from just another me-too silicon valley or Kendall Square is that we are really good at the creative arts. We are really good at the humanities. A lot of our faculty want to generate social entrepreneurship that makes an impact, not necessarily economically, although I know the focus is the economic impact. We should not underestimate how we can create a British innovation ecosystem that will be built on British values and give us something that is unique in this world and, I think, far better than anything that is out there. If we get that right, it will be extraordinary what we could achieve in this country. It would have the value of deep depth in humanities and creative arts, all the way through to life sciences and tech. I have some very specific things that we need your help with. We feel that our pipeline is going well. What kills me with all these companies we generate is that just when they are ready to go big and good, return the investment to the country and keep the talent pool here to generate more talent pool to run more companies, they leave because of access to capital, planning restrictions and the talent pool. Those are the three things I cannot really control very much. That is where we need the Government to help. If you can do your bit of the pipeline, and we bring it together with ours, we really are in a very strong place.

Thank you. We have real interest in this. Kit and then Emily.

Forgive me if I slightly play catch-up on what you have explained, Professor. You covered a lot of areas. You have agreed effectively a kind of template equity split for, basically, the incubation of early-stage companies. That is basically for people who are incubating an idea to continue to use your facilities and rely on the university. Does it necessarily involve any kind of equity injection into the business?

It does. At the very early stage you are often doing it through a Research Council-funded project. At that point you have an idea, and you think you might want to develop more value in that. There are some funds for that. That is where high funding comes in really helpful. There is some UKRI funding. You might get a bit of angel investment, but generally you are still doing that in the lab and the department. You build value in that, and you then protect the intellectual property. At that point you have two places to go. The review was focused on spin-outs, but a huge percentage of what we also do is license. Quite often, you don’t want to create a company. I am probably not going to create a company for my patent. I am probably going to license it to one of the big corporations because that is the more effective way to make impact. As an academic, you want to make impact through your research as quickly as possible. Sometimes the licensing route is the way to go.

You effectively agree a split of what is going to come, if the thing either spins out or becomes licensed.

Yes. At that point you have a royalty route for the licence and selling the intellectual property, or often venture capital money will come in to give some seed funding to help spin out the company and start to create it. Then, of course, you are into that series—

At that stage, you are shifting the negotiation up the value chain. You agree to some form of dilution at that stage.

In the UK—the difference between the UK and the USA—generally we will have a diluted option. There will be a non-diluted option in the US. At that point, the commercial deal and having a more standardised template of a frame of reference is what we have been recommending, so that you do not spend a long time waiting to spin out the company because you are having a negotiation with the VC funds. What we have recommended for the more biological life sciences is between the 10% and 20%. Again, there will be a whole host of factors. The review is very clear: don’t get hung up on the equity split, because there is more around the commercial deal than just the equity split. It is around who is going to run the company. It is around other funds that might come in and out at that point. That is what we recommended for more laboratory-based sciences because at the point you have the VC money. You generally might still be in the university bit, in an incubator hub or in a BioEscalator or something like that, which we have all built to facilitate that, but then when you are solo and independent and are off and running, that is when, for the growth of the company, we need help in the regions because that is when you need to plan really quickly. You cannot wait three years when you are trying to compete to build a drug.

I understand. I have a couple of questions. Obviously, your template deal that you have agreed has a range of values. How likely is it that universities are effectively going to compete for finite amounts of investment money by varying the equity splits? Dundee might say, “Well, we’ll take only 10%,” whereas Oxford might say, “We want 20%.” As a VC, I am going to make a value adjustment between different technologies. The second question I have is about the role of captive equity pools. I have always been very struck by the success of Imperial Ventures. They have their own captive equity pool which they can invest on certain terms. Do any of you have that? Rather than relying on Treasury annual funding for this funding, would you rather have some endowment captive equity pool which became self-sustaining?

David wants to comment on the other bit. For a venture capitalist, they are coming in because they are investing in the idea and the intellectual property. It is not as if we have an IP, and you have exactly the same IP. It does not work like that in science. There will be a particular thing they are interested in because that is the thing they are excited about. There are never options. It is not like buying a sweater in two different places. It is very specific to what they are interested in and what that university has generated in terms of a discovery, a biologic or a technology. You are never in that position. They are not saying, “I’m going off to Dundee and do it there.” They either want to invest in that idea or they do not. Then you are in that range of discussion with a whole host of factors around it. We have Oxford Science Enterprises. We have an investment pot that builds our companies in Oxford. We created that 10 years ago. It has been hugely successful with multiple billions of capital coming in to support it. I think most places—Midlands Mindforge, Northern Gritstone or SETsquared—are all doing a similar model of having a pot for the growth bit, but you have to have something to translate and grow. It all starts in the lab. It all starts with the intellectual property that comes in the university part of it.

Let’s hear from Dr McBeth and Professor Tiwari.

There are a few things that Irene said that I strongly endorse, particularly the most recent things that she said there. One of the points I would make is that generating a tied pool of funding, whether that is from a venture fund or otherwise, can be a blessing and a curse. Ultimately, it is something that has to be managed. It has to have its own rulebook, and it has to have its own views about the deal flow that it sees. Most universities produce a relatively modest amount of deal flow for spin-out company opportunities. Quite often, having a university-specific fund is not the best way to grow your spin-out activity. My opinion is that the best way to grow your spin-out activity is to take deals on their own merits and have really good relations with as many investors as possible, and let the market in most cases decide what the appropriate set of terms is for a given opportunity, while working within the framework that Irene and colleagues have described. I have a couple of quick things that I want to get in. HEIF is very important. HEIF is only available in England. In Scotland it is the Knowledge Exchange and Innovation Fund. It is funded at approximately one third or less of the level of HEIF. That makes Scottish institutions not as well provisioned when it comes to the early pre-incubation stage for businesses. KEIF is a devolved thing. I know that devolved business is not part of the business of this Committee, but by the same token there are a number of things that are available in England that have helped the English scene be more competitive that we do not have an analogue for in Scotland. If the UK Government really want to promote growth through all devolved nations and regions, there are things like the Connecting Capabilities Fund, which has been available in England for a number of years via Research England, and university enterprise zones via Research England. If the UK Government want all regions, including the devolved nations, to be successful, we need to try to promote those. I absolutely commend these schemes: HEIF great; Connecting Capabilities Fund great; university enterprise zones okay, but only if you are in England. It is really important for people working in Scotland, especially in regions where spin-outs make up such a relatively high proportion of the growth businesses in the region, which they do in our region.

Thank you. We will consider how we can take those points forward. Now, let’s hear from Sheffield.

At the University of Sheffield, around five years ago we started on a commercialisation journey that basically puts the innovator at the heart of the process. There are two kinds of funding sources that underpin that. There is early stage, pre-stage, pre-seed funding that we use in a flexible way. Sometimes it is used to go alongside venture capitalist funding. Sometimes it is used just to support early-stage companies with cash flows. That is primarily funded by HEIF, which underpins the importance of that. We have actually seen a very positive correlation between university funding at that early stage and the number of spin-outs coming out. Just to give you an idea, around £150,000 is the amount funded into companies when they come out, by the university primarily, through HEIF and internal sources. That puts us into quite a good position. Now we have around eight to 10 spin-outs coming out per year, which is significantly more than we had a few years ago, which was one or two. That is the impact of that. The second point I want to highlight is the importance of collaboration. Northern Gritstone was formed as a joint collaboration between Sheffield, Leeds and Manchester funded through the Research England Connected Capabilities Fund. That provides the second stage of funding, when companies are ready to grow to a stage when tens of millions of pounds are required. They come in at that stage. The two funds, separately, have important roles in the ecosystem to grow those organisations.

We need to move on. We have a lot of interest from Emily, George and Lauren, and then Adam will look at regional work.

I want to pick up on something you said, Professor Tracey, on how there is a real opportunity around our spin-outs having British values and innovating things that create solutions for the UK population. We know that many universities are overly exposed and overly reliant on Chinese funds. How much risk—this is a question to all of you—is there for those universities in protecting that IP and having it exploited on a regional basis here in the UK rather than that happening in China? How concerned should the Government and the Committee be by this activity? What can we do to ensure that we see that innovation happening in the UK rather than elsewhere, like China?

That is a big question. I could talk for hours on that because it is a very broad topic. First of all, we really welcome our international students. They are hugely important to us, both in the cultural breadth they bring for the experience of our UK students and in the soft power it brings. Those students come to Britain, they spend some time here and generally have a really good time and they go back to their country and often end up being quite influential leaders or running companies. They have a very early, informed impression of the UK. Universities play a hugely important role in that soft diplomacy and that soft power. We should not underestimate that. Different universities have different financial dependencies on students, which might play out at an undergraduate or a graduate level. That is the other thing to stress; there is a slight nuance in difference. If you take Oxford, we are actually a very British undergraduate university. We are 80% UK students, but we are 70% international at graduate level. A big chunk of those will be Chinese students. I do not worry about the IP for that bit. There is a path that I often say we have to walk in terms of our concerns, which are valid, between paranoia and naivety. If we are too paranoid we will miss opportunities, and if we are too naive we will miss opportunities. We all have to work on that bell curve together. Where we get beaten is the speed of actually developing the company and growing it. We should not get overly obsessed about the IP bit. I have not witnessed any problem myself in my local university. David, you might want to comment on that in terms of losing IP or being concerned in the context of students taking that IP and running it in China. Where we will miss out is the speed at which we do not grow our companies and hold on to them in the UK. Sometimes we get overly obsessed about the IP issue, when the spotlight should be on speed to translation and impact. That is where we are going to win. That is where the emphasis is, and that is where we are held back from being really unleashed because of the stops that we hit. Then seeing our companies walk off—

Let’s hear from Dr McBeth and the Professor briefly on this very important issue and then we will move on to regional growth.

I totally agree with Irene about codified IP, such as patents. I don’t think that having Chinese students, including Chinese postgraduates, is a major risk for us. To me that is not the issue. Philosophically, if you are going to have international students, whether from China or anywhere, they leave your university with knowledge in their head, and they may choose to apply it in business in their country of origin. It’s kind of what they do. I do not really feel that the country is suffering as a result of providing high-quality research training to international students. We probably benefit, because some of them decide to stay here and start their businesses here. It is totally different from the defence and satellite-type stuff where, clearly, you do not want certain countries to acquire your knowledge; but that is about the people you recruit into that type of research. Obviously universities are very much on top of that.

The question about the stickiness of spin-outs in the UK becomes very important. It is one thing to launch, but the other thing is for them to stick in the UK, and grow in the UK. I want quickly to mention three points. The first is having the ecosystem—the infrastructure; the lab and office spaces, regionally, to support them. The second is clusters, which thrive best when there are clusters of industries in a particular region. The third is around transport and interconnectivity. At times, particularly in the north, some things can be a challenge. It is not only about finances. It is about other parts of the ecosystem that work together to deliver the stickiness of first spin-outs in the UK.

The reason that clusters are important, just to emphasise it, is the talent pool that I have mentioned a few times. That is the trick that works for Kendall Square and silicon valley. You have a ready-made ecosystem of really high-quality talent anchoring institutions; you bring in big corporations and they bring in the staff we need to service our companies. Not every academic can give up the day job and go and run a company. Neither are we very good at running companies. We need other types of talent to do that.

I am going to bring in George and then Lauren, and then Adam.

I will be a bit cheeky: invest in them. A national UK Government investing in them will demonstrate that they are important in the context of UK competitiveness. For us in Scotland—I think it is true for places in England as well, with the mayoral authorities and so forth—city and regional deals are very important for the parts of the UK that are not as prosperous as the south-east. Some city deals have done really well, with innovation front and centre. As a result, those cities and regions have done well. Some city deals have been quite low on innovation. Within the UK, I would recast city deals so that innovation had to be more prominent in all of them. I think that would make a real difference. We could potentially do with revisiting the science and innovation audits that were done under BEIS eight to 10 years ago, when objective evidence was collected about the strengths of clusters. That is really important in backing up the story. That led to the Strength in Places fund, via UKRI. That, to me, worked for some places, and I think it could be done again. An old thing that works is still a good thing if it works.

Yes. That may need new data. It is a good point to take away and look at. I also want to capture the point about looking at the numbers of Chinese students at undergraduate and PhD level and how they are distributed across the country. We are getting so much great information and so many suggestions from the panel, I want to make sure we are capturing them.

There are two points I want to mention. It is well known that we have a world-class university sector, but we need to talk more about our international competitiveness and leadership in translational innovation centres. For example, at Sheffield we have perhaps one of the best translational innovation centres in the world, with around £350 million of assets. We all know about AMRC, the Advanced Manufacturing Research Centre. We have TERC, the Translational Energy Research Centre, which does a lot of work on sustainable aviation fuels. We have GTIMC for gene therapy, and the Royce Translational Centre for materials. There is a list of them, and those are areas that could be magnets for international investment. We have seen many examples in the Sheffield region.

We have seen very positive developments there, such as the investment into Sheffield from Boeing, which happened because colleagues in the US were aware of the translational research—the AMRC—in the region. That is something that we can promote more, along with collaboration with city councils and mayoral combined authorities, for example.

This is also a question for the FCDO, which we should put to them, and for the science networks. We only have 10 more minutes with this fantastic panel. Lauren would like to come in, and then we will bring in Adam.

Thank you. You mentioned devolution and Mayors. Dundee doesn’t have a Mayor.

No.

Yet 16% of its local economy is based on sciences, and life sciences. How have you done that, despite all the obstacles?

The answer to that lies very much with some of the leadership of the university over the last 20 or 30 years. We have had a real commitment to investing in world-class science in health and life sciences. That has been borne out by No. 1 placings in the research excellence framework for biological sciences, in the last two REFs; we were equal with the Institute of Cancer Research, to be honest—but anyway. Also, we have a very good reputation for the spin-out activity that we have done. The first thing is that we have a strong focus on quality. The point has been made a number of times that the best opportunities that you get to do commercialisation come from really high-quality research, if you can sustain it. Those are the ones with the highest value. The second thing about Dundee’s specific trajectory is that there has been a real commitment to investment in translational centres—centres where new research is translated into a more commercialisable opportunity. For instance, we have invested in the creation of the drug discovery unit. It is the largest university-based drug discovery unit in the UK. It is like a pharmaceutical industry drug discovery outfit, but it is in a university. The Medical Research Council protein phosphorylation unit is a 15 or 20-year investment from the Medical Research Council, and, again, it is translational in nature. We have invested in those things with them, and as a result we have assets that are really strong when it comes to commercialisation. I think that is what has driven the growth and numbers. It is also important to say—I am sure that Irene and everyone involved would say the same—that role models on the academic side are super-important. For example, you may know of Axis Shield Diagnostics, which was a start-up company in Dundee, probably in the 1990s. The fact that it was visible and stayed in the city during its growth trajectory made a big difference. Our challenge at the moment, and the reason why we are building an innovation hub under the Tay cities deal, is to get businesses formed in our city to stay and grow in our city for economic benefit. Exscientia, which Irene knows very well, was formed in Dundee and has now been taken over by a US company, but it is headquartered in Oxford.

Lauren, you’ve got to be very quick, and then we will go on.

During my PhD I coupled with one of the diagnostic centres that was spun out from there, so that was really interesting. I want to bring in local job opportunities. Not everyone has the opportunity to go to university. How has this helped people who may not have had that opportunity?

Again, making reference to the Tay cities deal and reinforcing how important the city deals are to cities like ours, which may have a research-intensive university but has a basically poor and fairly unqualified hinterland of people, part of the Tay cities deal is a skills theme. Within that is a skills for life sciences strand, which involves the University of Dundee, the University of St Andrews, Abertay University and the James Hutton Institute, which all have life sciences capability. The intention is that people from our region will have the opportunity perhaps to aspire to be technicians or take other roles within the company that do not require the same level of academic qualification.

Thank you very much. I will now hand over to Adam to focus on the role of universities in supporting regional growth.

Thanks, Chair, and thank you everybody. This morning has been really informative. We have already touched several times on the golden triangle of Oxford, Cambridge and London and its great successes. It has been world-leading for centuries, frankly. We have also talked extensively about innovation and the regions. How should the Government balance making sure that the golden triangle remains internationally competitive with spreading innovation more evenly around the regions? How can we harness all the great work that is being done in the golden triangle to support all our universities and SMEs around the rest of the country, to support regions like mine in the east midlands?

We will go through the panel. It is a really important question for everyone. We will start with Professor Tiwari.

Thank you. The key word here is complementarities. It is not a zero-sum game. We need to look for complementarities. As an example, we had a number of conversations in Sheffield with companies based and founded in Cambridge, about looking for their manufacturing scale-up operations in Sheffield. That is quite a good example of complementarity. You are talking about a city with an expertise base in advanced manufacturing. It has space available that is more cost-effective than there may be in Cambridge, so it provides an ideal opportunity for the scale-up of operations, or the scale-up of a spin-out, in the Sheffield city region. That kind of conversation could happen at a more systemic level or more governmental level, where we can look for complementarities and encourage the work to be shared across regions. My head of commercialisation sometimes uses the phrase “headquartered in Cambridge and scaled up in Sheffield”. That is the kind of follow-up that we perhaps need to look for in future.

Thank you.

That sort of thing has been happening all the time. We have the same with the Birmingham innovation park. We put companies there. We have put companies in the north-east region as well. It goes back to George’s point: we haven’t been good at describing, and branding, how good a story this is. The world knows our higher education system; people would bite your arm off for it. We have not been good—it is our bad, too, but we have to work together—at getting the message out about our expertise in this space, and our success story. We are licensing as many things as our big competitors in the USA. We are really good at this, but we do not tell the story. We are doing lots of collaborations and partnerships. The report said let’s all start working on common templates and learn from what has gone on in the golden triangle. Let’s call it. Let’s make a triangle with an arc and a driveway through Milton Keynes, so that we have a golden triangle innovation cluster. We have to do more of that, because the UK is a small country and we have to work together. Quite a lot of us, anyway, have been planting companies around, but we need to do it more systematically. We are creating partnerships, as many universities are, to share knowledge, to create more consistency, to move companies out and to talent-pool. It is a win-win. I cannot build enough space for the companies that are coming out of Oxford, so this is great for us, and for our people. It takes talent to other parts, and brings the economy, because the job opportunities are huge. With that comes, as you were mentioning, David, the apprenticeships that can be offered to local schoolkids to learn and train. The sequelae and knock-on effects are enormous. If we could be encouraged to do more, and it was more of a mission, we would be absolutely up for that. We are here to serve, as I keep saying.

To clarify that, Professor Tracey, you seem to be suggesting that we are doing a great job of growing companies out of the golden triangle into the rest of the country; but a key part of the question is how the rest of the country can learn from the success of the golden triangle to grow its own spin-outs better.

The whole basis of the report is to say, “What have we learned from the golden triangle, which has been at it for 20 or 30 years, and what are the deal terms we have learned to get to?” The big part is learning from where we have got to. That is what everybody is implementing. Then there is knowledge-sharing among the Russell Group and the UUK group. The people in the positions that my colleagues here are in connect together, and learn together. That is all happening.

Let’s hear from you, Dr McBeth.

I have two things to say, one of which follows on from what Irene said. Innovation infrastructure is incredibly important. The south-east has a lot of innovation infrastructure, because the private sector is prepared to invest in innovation structure in the south-east of England, and it is blossoming out from there, as well. Away from the south-east of England, innovation infrastructure will not be invested by the private sector, because of perceived lack of demand. The public sector has to play an increasing role in creating innovation infrastructure the further from the golden triangle you go. I feel that the Government have to be prepared to mandate one or more of their agencies to encourage more innovation infrastructure to be created regionally. For example, perhaps the British Business Bank could be asked to ring-fence a percentage of its available funds to work with the private sector to create innovation infrastructure in other cities and regions across the UK. In Scotland we have the Scottish National Investment Bank, which is the same sort of idea as the BBB. The key thing about them is that none of these machines works unless there is provision at every stage in the pipeline. In a lot of the regions there just is not enough innovation infrastructure even to cope with what is coming out of the research bases at the moment, let alone what might be coming out in future. That tees me up for the final thing I was going to say, which was about the volume of good stuff coming out of the research bases. It is great that the most recent Budget confirmed that the UKRI proof-of-concept fund pilot would proceed, because it is very important to have that in the UK. We need a lot more of that. Non-diluted funding at the point where research turns into the next thing—non-diluted funding of £200k or whatever per project—can make an absolutely huge difference to the number of high-quality spin-out or commercialisation opportunities that are created. It is proven that that works. However, it has always been difficult to get different politicians to agree that that is the right thing to do. They always expect that the private sector will go into that high-risk space, and it won’t. We need more proof-of-concept funding, whether it is UK national or devolved.

Thank you very much. I will bring Adam back, quickly, and then Tom, and then we will have to move on to our next panel, which is looking at innovation infrastructure.

I have a quick question. You just made some really interesting points. Building on that, do you think, beyond the models that we have in the UK, there are models and examples internationally that we should be pulling in, to do our best locally?

It is a really good point. In the report we compare some things in terms of what works well. I will just go back to the capital element of it. It is very interesting, with the pension reforms and access to that capital. You could make a very crude comparison with a lively ecosystem that is now self-sustaining. It is about having the supercluster and the connectivity. The infrastructure and the private sector are there. You have more permeability between the public and private sectors. The report touched lightly on something we have not flagged that speaks to this. One thing we could probably learn—in my role as vice-chancellor I need to do it—is to create a model of tenure track for our academics that is a lot more permeable, as I would describe it, so that there is ease of porosity between the public and private sectors. We have to work out how to backfill all the teaching and all the other stuff you have to do to run the university, but we have to let the next generation of academics who are coming through either have a hybrid existence, where they are 25% in a company, and 75% in, or go out for five years and then come back in. We have to allow freedom between the public and private sectors. That is for us to sort out. That is probably the bit that is, slightly, the elephant in the room, because it is quite a big cultural change in the university sector. We have to work out how to backfill. We suggested that the Government should help us with the teaching backfill. In the US you have different models for that. You are basically funded for 75% and you can do what you want with the other 25% if you are in a tenure-track role. That is something I am looking at actively, and is one thing I would highlight.

Professor Tiwari.

We also need to look at the cost base for our early spin-out companies—the companies that are coming out. How do we preserve them and allow them to grow? In our South Yorkshire Mayoral Combined Authority visit to Pittsburgh, led by Mayor Oliver Coppard, one thing that came up was the presence of regional labs at Pittsburgh, which offered cost-effective solutions for the scale-up to spin-out organisations. That is another formula we need to look at. How do we reduce the cost base for companies that are in their early days?

That is a question we will put to the catapults next. Tom, do you want to join in briefly?

Obviously, it is a great thing and we all want more regional growth to be supported by the sector. What sort of social considerations are given, as part of it, to the fact that in places like Cambridge and Oxford, and even Harrogate, the cost of living can be massively increased? How do we make sure that when we see regional growth from the sector, it is done in a way that is supported and that, touching on what Lauren said, opportunities are given to local people, rather than people moving into the area because the workforce have not been upskilled?

It is a fantastic point, and we refer to it in Oxford as inclusive innovation. We have to grow well. Part of the reason for challenges with growing and the idea of growth is that, frankly, in Britain, we have not grown well. We have done things without thinking about the impact on traffic, schools, and access to GP services. If with our innovation and growth agenda we can prove that we can do it well and with sensitivity, in a way that is inclusive of the local people, and it brings absolute direct tangible benefits and we resolve some of the infrastructure problems, we will change the cultural perception that growth equals bad, which is a bit of a road block, culturally, in Britain. We are all quite mindful of that, so in Oxford we refer to it as inclusive innovation. That is our way of thinking about it. We haven’t got it perfect, but are working hard on how to do it with our local city and county councillors. I have an innovation council that brings those things together and we are thinking hard about how to make sure we grow well when we do it. There are criticisms of what has happened in the US, and it is a real problem. It is a problem for the students, because they spin out so many companies they are not finishing their degrees, or they are having challenges. That is a problem, too, because you have to train the next generation, or pipeline, of scientists. There is a balance to be struck. Too much is bad because you are not training people, and you put such pressure on the local that nobody can afford to live there as a post-doc, so you have a crisis in recruiting post-docs, because they cannot afford to live in the Bay area. We have to watch what has not worked in the American model and not make the same mistakes here. It comes down to inclusive growth.

Thank you very much, panel. I am afraid we have to move on to our next one. We have over-run but your contributions have been very interesting, and coming from across the UK—Sheffield, Dundee and Oxford—they have given us a lot of insight into the role of universities in driving regional growth. If you would like to submit further written evidence we will all be ready to read it. Witnesses: Martin McHugh, Mike Wright and Professor Cordwell.

Welcome to our second panel for this morning’s evidence session on growth, innovation and the regions. We will be specifically looking at regional innovation, catapults and clusters, and devolution and innovation. I will ask you to introduce yourselves, and say where you are, and then I will open it to the Committee for questions.

Thank you for the invitation. My name is Mike Wright. I am the independent chair of the West Midlands Innovation Board, which was set up five years ago. The membership is businesses and the universities in the region. We have joint discussions and meetings developing strategies for the innovation ecosystem in the west midlands. It is a very large geographical area. We have a population of nearly 5 million people. The combined authority stretches from Wolverhampton in the north-west down to Coventry in the south-east, through Birmingham, and it consists of seven local authorities, so it is a sizeable piece of geography. We have six universities in that combined authority region, two of which are Russell Group. The others are very productive and successful in their areas as well.

Thank you very much.

Thanks to the Committee for the opportunity to represent, I guess, the Greater Manchester voice, with multiple hats today. My background, unlike the previous panel, is not as an academic. I am an entrepreneur by trade, but joined the university 12 months ago to lead on a process called the regional innovation review, which, in a way very pertinent to today, recognises the role of the university in driving growth as the largest innovation asset in our city region, and asks what we could and should do to drive economic growth and maximise the innovation potential of our region. That resulted almost 12 months later in the creation of a new unit, called Unit M, which has a mandate to unlock the full potential of our region’s innovation economy. I now lead that unit and chair Greater Manchester’s business board and work closely with Andy, as Mayor, and our city leadership. It is great to be here.

Thank you very much.

My name is Martin McHugh. I am the chief executive of the Compound Semiconductor Applications Catapult, based in the heart of the compound semiconductor cluster in south Wales. We are one of nine catapults in the catapult network, whose purpose is to help companies take the deep tech research from universities and commercialise it.

Fantastic. We have south Wales, Manchester and the midlands represented here, which is a good complement to our previous evidence panel. I am going to ask Emily to kick off, and then bring in George.

I have a couple of questions about catapults and their role in driving growth and innovation in the UK. The first is simple, but maybe not that simple. There are nine catapults and that has been pretty stable for a long time. The areas have been stable for a long time. Have we identified the right areas? Are there any areas that we are missing in the catapult network? Should we be pushing on additional catapults?

I think that is a question for the whole panel.

Thank you very much. It is a very good question. In 2011, Hermann Hauser’s original report recommended that there should be far more catapults than we currently have. As you point out, the catapult programme has been fairly stable since the inauguration of our catapult in around 2018. The catapult network itself believes there should be expansion into what catapults were originally for, which was to fix market failures. A good example of the catapult network recognising one particular gap and trying to do something to fix it is the Hydrogen Innovation Initiative—HII. There are two ways we can address the question. We can identify where more catapults are needed, and not put them in for the sake of it, and we can identify where the existing catapults could do more in the regions. Catapults are broadly split into three types: those that are called capital-intensive, like offshore renewable, or high-value manufacturing, what you call systems catapults, which are things like Energy Systems, DIGICAT and Connected Places; and application catapults, like us, perhaps; and then Medicines Discovery Catapult and Cell and Gene Therapy Catapult. You have, I think, the right mix of catapults in terms of whether they are national or embedded in their cluster. My recommendation would be that we need to review where more are needed and where the existing ones could do more within multiple clusters. The compound semiconductor catapult is based in Newport, which has a recognised cluster. Our catapult recognises those strong clusters around the UK. I am rather hoping Mr Freeman asks me the same question he asked the other people, about national presence and everything else, because I think there is something to answer there, as well. Does that help?

Yes, it leads very well to my next question. Focusing particularly on areas where we are missing catapults, do you have any suggestions on areas where it would be good to have them?

Very briefly, because I am sitting next to a catapults expert, anybody who knows my colleague, Professor Richard Jones, will have possibly had this fairly lively discussion with him. We have data that demonstrates the absence of a catapult in Greater Manchester and the impact that has had on our regional economy and the R&D spend. The argument is fairly well documented. We have had that conversation in a very lively, robust and productive way with Innovate colleagues and UKRI colleagues.

Is that an absence of any catapult or a particular catapult?

We have particular strengths in advanced manufacturing and materials. The data shows you that when there is not a catapult presence there is an impact on R&D spend in the locality and there are ripples that flow from that. That is not to say that just because there is an absence their role is just to plant one. The other thing we have also had robust dialogues on and that is worth exploring is the notion of what a catapult is, and thinking in a more networked, federated way, exactly as you described, to fill gaps that are needed to plug the market, as opposed to catapults for the sake of catapults.

We heard from our last panel that there was a need to bridge the gap from proof of concept to growth, to scale-up, and that is what catapults are designed exactly to do, in my understanding. I suppose one of the questions is how successfully they are doing that.

It is written right here. Absolutely, I agree. Having been the special adviser who was there when we created catapults and Innovate UK, or as it was known then the Technology Strategy Board, there were specific ambitions for it. I have two questions that are linked. How good have catapults been in reinforcing and growing clusters in the UK? What has been and what should be their role in addressing the talent pool and access to capital challenges for company growth here in the UK?

Going back very quickly to the earlier question, the obvious one is new technologies and enabling technologies like AI. It is an easy suggestion. It is a very complicated answer. The real-world future is that AI is going to be an enabler for all sectors and all capabilities. Having said that, certainly from the west midlands perspective, as was indicated earlier, we leverage three or four catapults. We have two operations with the high-value manufacturing catapult and the headquarters in the region. We convened with Innovate UK and ourselves, at our initiative, a discussion with catapults about how we could leverage not instead of but more local activity and benefit locally. That was a very productive session and we came out with a number of tactical suggestions but they are none the less worth while. To your point, the real issue is how we focus on the translational piece in start-up and funding for start-ups and scale-ups. That is a very complicated issue to address. Certainly, the Innovation board does not get into the detail of that. Our job is to facilitate an ecosystem that businesses, universities and others can take advantage of. The experience thus far is that the catapults, particularly for us the high-value manufacturing one, have been very beneficial in delivering start-ups. Very interestingly, there is a lot of translational activity that has happened. The strategy for the region is not just to base our innovation capability on our traditional advanced manufacturing and advanced engineering capabilities but to go into medic tech, createch and cleantech. A lot of the capabilities that have come out of the high-value manufacturing catapults are translational to give us a quick start in those areas as well. It is not just a focused area; it is a broader application of the outputs of the catapults. If you are going to add them, please don’t mess with the current successful ones, because there is a danger in this country when everything is new. Some of them are working very successfully.

How do you measure success? You just said they are working very successfully.

Everything from local employment; there are nearly 2,000 people employed in the catapults in our region now. In the technology outputs, there are myriad activities that have come out of a particular—

Is there a set of key performance indicators by which this Committee could measure?

The most important thing is innovation links to the combined authorities’ challenges for boosting the local economy. There is an economic impact as well.

I will build on what Mike said with a couple of points. There is a really interesting question as of yesterday about AI, and when we think about the ambition now to have regional capabilities and regional presence and where that fits with catapults, as well as recognising AI as a horizontal. What we increasingly find in a multidisciplinary innovation world is that we are thinking about materials-plus. We are thinking about health innovation. We are thinking about different vertical strengths. There is a knot to unpick quite urgently. I hope we are going to talk about innovation accelerators as a different model at some point, so I will perhaps leave that for now. On the question about access to capital challenges, in my experience and my background as an entrepreneur, the equation is relatively simple, in that if we have quality and calibre of deal flow, capital is fairly good at finding the quality and the calibre of deal flow. Maximising the role of catapults, wherever they be and whatever they are concentrated on, in stimulating not just volume but investor readiness and the calibre of our local, regional, early-stage, high-potential businesses, will help us a huge amount with that challenge.

Thank you.

The catapults have to operate at multiple levels. We have a national mandate. We have a regional presence. What we have discovered in our catapult is that you have to understand the strengths and weaknesses and the opportunities and effects of the region you are supporting, working in and anchored in, and the spill-out effects of that. You also have to understand and appreciate the regional differences of other regions. I will speak for my catapult because I understand it. There are three or four clusters in the UK of expertise in our field. We happen to be based in Newport, but there is a strong cluster in Scotland, a strong cluster in the north-east and an emerging cluster in the south-west, with some elements of activity in Northern Ireland. One thing we have discovered is that each of those regions, while they assign themselves as creditworthy in compound semiconductors, has a particular strength. Your region would be classed as satellite, Scotland more as energy, Bristol more in photonics, and south Wales is more materials. The catapult has to understand strengths and weaknesses within those regions. The other thing I have learnt in the five years I have been in the job is that you cannot trample the region and tell them what to do. They need to understand themselves what you need to support them. The real power for the catapult is how it knits the various regions in the UK to create the UK value chain, which then answers the question you were trying to ask earlier. That is the bit that is missing.

Thank you and thanks for a fantastic question, Emily. We should perhaps be writing to the Secretary of State to ask how the two new organisations he is creating around AI engage or fit in with the catapult network. Lou, if I may call you that, I am interested in your comment that capital finds quality projects. When we are looking at access to capital, that is something that the Committee should consider the evidence for, because I know entrepreneurs across the country who are not convinced that capital is finding all the best ones. Thank you very much for those answers. They were very interesting.

Can I qualify my point? It is about critical mass. What you often find is that entrepreneurs have individual stories where they are slightly alone in how accepting they might be, but creating critical mass in the regions makes that easier to find on a map.

Great.

Thank you, everybody. We touched a little bit on this earlier. Catapults as a concept were created to take low-technology readiness-level ideas and products and catapult them, essentially, up to the higher-level technology-readiness levels. I have heard that referred to as the valley of death where good ideas used to go to die. How do you feel that the whole catapult model, without pointing at individual catapults, is performing in bridging that valley of death?

I am quite happy to answer that, and not from a self-interest point of view. It is a really good question. Catapults are the custodians of translational research from the deep tech through to commercialisation. We have to maintain that. The catapult network itself puts a lot into being a trusted neutral convener in the first place that can be trusted with that. Translational research is an interesting challenge because in its digital format academia would typically be seen to be a 1 to 3 event body on the TRL side of it. Catapults would typically be 4 to 6. Industry would be 7, 8 and 9. One of the things that the catapult network has a concern with is that if there is a handshake from one entity to the other you are relying on a digital handshake. You find that the universities will stretch into 4 and the catapults will stretch into 3. It is a natural thing. We see it as a key measure in our catapult and we measure across all the projects that we are doing what the TRL effect is of our particular catapult, and I know others do it. Typically, over the course of a two to three-year collaborative research project, we see the TR level lift by about two places. We can see where we are moving that, but, to Lou’s point, you need scale and the system needs to be better joined up.

Yes. Do you think, though, that the current model is effective in doing that job?

Yes, it is. There is always room for improvement. Our catapult is not so much about improving that particular side, but about rolling it out to a wider scale across the UK. I have people in the great south-west, in Plymouth, who are quite anxious that they don’t have Innovate UK or a catapult asset in the region. They feel that not having that asset does not naturally make them a go-to place for international investors. In our catapult, like all the other catapults, you are constantly hosting international visitors. The gap appears in whether we can get something similar and appropriate in other regions and whether we can get the existing network to broaden out as well, and certainly give us the opportunity to broaden. Does that answer your question?

Yes.

That is an interesting consequence. If there is a catapult in a subject matter and if you are a company interested in that subject matter and you do not have a catapult in your region, you are at a disadvantage. Lou, do you want to come in briefly?

I want to add really briefly to that point by saying that other models are available. We have an organisation called the Graphene Engineering Innovation Centre, which Chi is very familiar with. It would openly describe itself as catapult-like, but actually it is running programmes like the bridging the gap programme that until recently was EU funded. That spiders out into the existing business network at a really granular level and works with organisations that might not consider themselves to be innovation businesses, and might not recognise that materials innovation or even universities have relevance to their future success and their future opportunity. We have seen huge success with hyper-local activity that is now yielding not spin-outs but scale-ups that take the assets of the university and apply them to local industry in a different way.

Perhaps I could add two points. One is that partnerships are very important—partnerships with business. We have been very successful through the Warwick Manufacturing Group to get Plug and Play to invest in the region. They are experts at sorting out the valley of death question that you asked. There are complementary networks, as Lou said. We have a very good successful Tech West Midlands organisation that is privately funded. That is a network that enables people to talk with each other, do collaborations, do partnerships and to get through the hurdles that you have identified. The problem with the valley of death is that it is a known known, and innovation is a lot about unknown knowns. You need a very strong ecosystem that isn’t a one-stop shop but can leverage the ecosystem depending on the technology you are trying to innovate on. Don’t forget that process innovation is very important, because the way we do things needs to be innovated as well. It is not a one-stop shop. You need to find a way of answering each individual challenge.

Thank you very much. George, you were intimately involved in the catapults and clusters in your time as Minister.

Great. That is a question for each member of the panel.

Thank you very much. Those are three very good questions that probably characterise my daily working life. On metrics, I advocate simple logic models that are appropriate for the industry. The logic model or the impact model would be different for our catapult from a systems catapult that is more UK focused, a capital-intensive catapult or an applications catapult. Our applications catapult is meant to create market pull. We are trying to create the market for the supply chain, and for that we need to help companies design new products. That is why we are particularly interested in TRL. We are particularly interested in keeping our model fairly simple. It is driven by creation of jobs and the investment that SMEs can attract. We have just simplified it down so we can track it. We are able to take that back to five key barriers that SMEs face in trying to introduce new products and commercialise their technology. We have those five barriers clearly understood. We have five clear interventions that we use the core grant for. We then track the outputs and translate those into our outcomes. I can tell you now that we have helped small businesses attract close to £600 million-worth of private investment. We know that is about half as much again as the companies that we don’t work with, for example. On the metrics question, keep it simple. In terms of the regions, I would drive the regions to have an appropriate impact model or logic model that clearly drives their thinking. In terms of place, it is a really good question. A challenge we have faced is one that Sat Apps have faced as well. Sat Apps are based in the clusters. Satellite Applications are in Harwell, but there is lots of satellite activity around the UK. We found the same. You are constantly balancing the needs of a local cluster that thinks you are there to serve them when actually you are there to serve the UK. That is why we were very keen on regional expansion, not necessarily to replicate the infrastructure but to put the coalface activity into the regions. The place I totally agree with. On private sector competition, it is a really good question. The difficulty is that the catapults are mandated to attract private income as part of their thirds model. We have a very simple saying in our catapult, and it is not to demean anything: if you can buy it on eBay and Amazon, we should not be selling it. We have to provide services that are not freely available in the open market, and that is always a challenge. One of the questions I often face is that we are providing services with Government-backed money and we are competing against some private R&D concerns, so you are constantly balancing the ability to make those services accessible to SMEs while not falling foul of subsidy law.

Okay. There is a lot of complexity there, but part of George’s question was to try to simplify it and understand what the metrics are.

The metrics need to be kept simple.

Yes, but there seemed to be quite a lot of complexity in keeping them simple.

That is the nature of the catapult role. In terms of metrics, ours are very simple; I have kept them that way. In terms of place, we need to be in the place to understand where local regions and clusters can benefit from us. In terms of competition, you have to be very aware that, if you are providing commercial services, as you are mandated under the model, you are not competing with the very companies you are meant to be helping. That is the nature of the role, I’m afraid.

Thank you.

I have a quick answer to your questions, George. On measures, everything should now be measured on what the UK’s large growth challenges are, which are translation and adoption; scale-up volume and calibre and keeping our scale-ups in the UK; creating the supply chains, the communities and the specialist networks that mean that businesses do not want to leave; and, critically, taking what we have learnt from the last 20 to 30 years of growth, as was discussed in the previous panel—inclusion. We need to start to measure who benefits from innovation economies, and it needs to be somebody different from who has benefited from the last 20 to 30 years. That comes with the caveat that it is very difficult to measure, but we should start. In the place-based role, we need to recognise the maturity of different ecosystems and places, and catapults can play a really important part in stimulating that and putting a flag of confidence in the ground. I hope that we might have an opportunity to talk about partnerships between places as well, which is a particular passion and opportunity. On where Government capital should be focused versus markets, really simply, Government capital should focus on doing what the markets won’t, where it can de-risk, where it can stimulate, where it can stray where markets will not, and then we should focus our storytelling and our engagement exactly to the points discussed earlier on bringing in capital and giving capital the confidence to invest in the UK.

I want to build on a couple of things that have been said. On the metrics, the only thing I would add is that different technologies and capabilities have different lead times in how you measure the benefits. If you are in the high-engineering, advanced manufacturing world, turning that into a sustained long-term proposition probably takes longer than in other areas, but the long-term benefits are probably very material. Place is interesting. We did a trawl of the catapult network and realised that we probably missed the benefit of one catapult, the Connected Places Catapult. In the innovation accelerator, we deliberately sought to introduce a new catapult to the region to help some of the challenges that we thought we had in that world. It is a two-way thing. A lot of companies in the west midlands, if they are looking for a particular piece of help, will reach out. In advanced materials, there is quite a lot of bilateral work that goes on with Sheffield, which you heard about earlier, and in Bristol. The onus is as much on the place to reach out to the national network as it is to everybody wanting their own catapult cluster in their region. On the private sector, I have nothing to add. At the end of the day, if you think internationally about our capability, the private sector piece and the private sector investment at the end of the day will determine whether you have a successful, long-standing model. Our competitors around the world tend to use regional or national Government funds to pump-prime the early piece, and then have enabling tools to make sure that those businesses, when they have scaled up, are successful. I agree with Lou; sticky scale-up is probably—you heard it in the previous panel—one of the biggest challenges that we have in private and public sector investment.

Thank you. Thanks very much, George. Steve has some questions on devolution and innovation.

Great, thank you. I think at least two of our panel are covered by mayoral devolution in particular. Before we go on to the English devolution White Paper that was published before Christmas, it would be great to hear from you all about how you perceive mayoral devolution in particular as being beneficial or not, or could be doing better to help you all to deliver more innovation in your areas.

I am happy to start. As you are aware, the west midlands was awarded trailblazer devolution status a couple of years ago, but of course the scope of that did not include innovation or R&D, so we are still operating in that space against the national model. Having said that—we keep saying we will talk about the innovation accelerators—the innovation accelerator has been a game changer in boosting our confidence that we probably could influence and guide innovation not instead of but as an “and” against our plans in growing the local economy, and in particular addressing some of the more challenging areas that we have in the region. We are a bit of a microcosm of the UK; we have some very successful parts of the west midlands, but we also have some very challenging areas. We believe that there are opportunities to consolidate some of the pilot work that we have been doing with Innovate UK on the plan for action, which has given us the opportunity to develop a bilateral approach to the particular challenges, and particularly the opportunities for the region, as well as to share those benefits across the country. If I may say so, one of the things we have learnt is that we can work quicker and faster. The previous speakers talked about speed, but because of the set-up we can actually move faster. I must mention one thing. Without embarrassing George, the innovation mapping model tool gives you a lot more data about where the hotspots of innovation are within our region and nationally, which can either forge partnerships or stop you duplicating. There is a lot of maturity in the information that is out there.

They shouldn’t be, should they?

To my earlier point, as a personal view—it will upset a lot of statisticians—we have to stop thinking in sectors because businesses don’t think in sectors. Given all the crises of the last 10 or 20 years, they want more resilience, so they are looking outside a traditional sector approach to deliver a model that gives them more long-term, sustainable resilience.

Thanks. We will take that forward. I want to ask Lou briefly to respond. The Committee visited Liverpool and spoke to Steve Rotheram about the Liverpool innovation deal. I am not sure whether they had innovation as part of their deal. How would you compare yourselves in Manchester, if that is not too controversial a way of putting it?

There are lots of comparables in some of our sector capabilities: strong creative industry routes and biochemicals, and lots of industrial capabilities where there are parallels. There is lots of political alignment. Existing industry collaborations and the physical geography mean that largely our labour markets do not really recognise those boundaries, so there is more fluidity and—a little bit to George’s point about the maps—you do not always see those things on a map. We operate as a north-west region on many levels. We do not have devolved power around innovation either. There is a really interesting point around what devolution gives us, and we have seen this a little bit through the innovation accelerators and their work. Largely, one of the tensions of Government involvement in innovation and Government support is that the innovation industry and the innovation process requires agility and flexibility and, for understandable reasons, that is not always aligned with Government process and procedure. Devolved processes, single settlements and some of the regional levers at a more localised level help with some of that and help us to think in a whole-system way. We have an organisation called Innovation Greater Manchester, which is our convening point for the triple helix: our universities, industry and local government. What that gives us is a way not just to think about the innovation sector and growth, but to think about what comes alongside that, such as skills, transport, housing and all of the other things that are needed to make it work. They need to be considerations. That said, one of the things we learnt through the innovation accelerator is that the ideal is a blend, because there are capabilities, expertise and macro perspectives that exist at a national level that you want to be able to blend with the perspective and the hyper-local knowledge that you have of your people and your economy and your challenges at a regional level. That ability to be able to continue to work in collaboration and, through the White Paper, the strength and commitment of UKRI to work with the mayoral strategic authorities will be critical and definitely was a key positive take-out of our innovation accelerator experience.

Thank you.

I would like to ask two questions. One comes back to place and the second is to allow you to expand on the accelerator. I want to give you that opportunity. My constituency sits in Stoke-on-Trent and into north Staffordshire between Birmingham and Manchester. My question relates to the tensions between the innovations and success seen in the major cities and how that can be rolled out to the wider regions and non-urban areas as well. The Innovation Caucus report identified that there were tensions between the major cities and the wider regions. I would like to ask first about how we could roll out the benefit throughout the region.

Allison, would you ask your second question at the same time?

Okay. How successful were the innovation accelerator pilots in both Greater Manchester and the west midlands? What challenges did those pilots encounter? How could we address those for broader roll-out?

Great. We will go to Lou first this time.

Taking the first question, through the unit we are thinking a lot about this question, because it comes back to the inclusion point around who benefits. There is undeniable evidence about the role of major cities and major conurbations to be growth drivers. We see a really important role for the universities in that. If I take not your territory but a similar challenge for some of our work in the Greater Manchester region, the university has been working incredibly closely with a project called Atom Valley, which is a major long-term innovation project that spans the mayoral development corporation of Rochdale, Oldham and Bury, one of the most deprived parts of the north-west. We are looking at the role of the university and the kind of innovation that comes out of our institution and how we can create presence and work with local skills providers to drive jobs and opportunity for the local population, while also working really collaboratively with the existing business space. The CEAMS programme, which was one of our innovation accelerator programmes, was a bit of a forebear to that, and one of the great things was having pilot-type projects where we could begin that learning curve and gather insights that then informed the larger-scale and longer-term investment. Universities have a really important part to play in that, and skills are an incredibly important part, not just in a university degree sense but at all tiers, particularly in a technical skills agenda and, critically, transport. One of the things that we have learnt in Greater Manchester is that you have to connect the people to the opportunities to remove that barrier. We have tested all sorts of initiatives, as you may have seen, around affordability and free bus travel for our young people. We talk about the young people of our city region being able to see the skyscrapers and removing the barriers in order to get to those jobs and those opportunities. The answer is that you have to work really hard at it; it doesn’t happen by a natural trickle-down. Wiring the ecosystem and measuring success in a way that recognises the importance of that, we think, is critical.

Mike.

I echo what Lou said. The adjacent local authorities are non-constituent members of the combined authority, so they are actively engaged in all the work that we do at combined authority level. Universities West Midlands embraces the adjacent universities as well. Keele is a very active member. As for the opportunities—this was touched on in the earlier session—we have talked about it a couple of times, but the scale-up challenge is probably the biggest challenge that we have as a country and as a region. Adjacent geographies can play a really important role in that. It is not Staffordshire, but if you look at Warwickshire and how it has benefited, it is very big on gaming; it is a fifth of the gaming industry in the UK. It has built up a lot of high value-add supply chain support in the west midlands ecosystem. At the other end of the geography, agritech in Shropshire is a really interesting opportunity that the catapults are working on as well. It is a really important question, and something that we are very conscious of.

I am going to go to Kit and then Lauren.

Excuse me, Chair, the innovation accelerator benefits.

Very quickly. One sentence.

It is a pilot programme, very low scale in terms of money, but it has taught both of us that we have the capability with assurance from RUK to deliver some very exciting projects. All five in our region have exceeded their initial outcome. Regarding timescale, a two-year innovation accelerator project, with the greatest of respect, is too short. I am delighted that the Government have extended it for one year, but if you had known it was three years to start with you would have had an even better outcome.

We visited the digital catapult here in London, and I have to tell you it was a pretty shocking visit from my point of view: a glittery office, completely empty, obviously costing an absolute fortune, and they asked us for more money. It struck me then that they in particular were, effectively, a very expensive way of funnelling Government subsidy to business. It is a kind of flashy Administration arm. When you look at all the catapult exercises and the innovation and all the rest of it, none of it is detectable in national growth figures. Our growth has been sluggish now for a decade. We cannot tell. As you pointed out, there are cities existing perfectly happily and successfully without them. It made me wonder whether there is a different way and a better way. One of the things that everybody tells us is about the difficulty of accessing mid-level capital. If we took all that money and made it much more tax-efficient for people to put mid-level capital into innovative UK businesses, would we have a bigger impact? Turkeys voting for Christmas. Am I wrong? It just felt to me like the digital capital in particular was just an expensive funnel for Government money.

Kit, that is a provocative and interesting perspective. I am going to ask Lauren to ask her question and put both questions to the panel. Revolutionising or completely changing the infrastructure of investment into innovation is the proposal from Kit.

My question was to pick up on what we have been talking about, inclusive growth. How are we measuring and what are the correct metrics, if we need to use metrics, to measure the local impact, and that we are not just moving people out but taking people with us?

Those are two good points on which to finish. How do we measure the local impact? Have we been getting it wrong all this time, and do we need to make all the funding that is available for innovation available as a pot for investment? Kit, was that your point? Can I have your views briefly, because we are running out of time?

Thank you very much. It is a good question. In terms of the total pot, I would take it back one step and put it back to the panel. I have been in the role for five years, and roughly every 18 months the catapults have been subjected to review. There was the original Ernst & Young, BEIS and the House of Lords. There are other reviews going on. As a result of those reviews, there have been multiple reports, and, to my knowledge and from what I have been told by Innovate UK, I am not aware of any failing catapults. If there is a failing catapult, that is an issue for Innovate UK and the Government. When you look at the number of reviews that have been held with catapults and the reports that have been written—

Define failure. Hence my question about metrics.

That is what you need to define. You are telling me that there is a particular catapult failing in that sense. We are not aware—

I don’t think they are necessarily failing; they are doing broadly what they were set up to do, which is to funnel Government subsidy to business. I just find it rather an expensive way to do it.

You need to understand the different types of catapults. They are more of a systems-type of catapult. They are not typically place-based. They are placed all around the UK.

I think you have answered Kit’s general point. It should be said that it was not the official view of the Committee that—

No, it is my own view.

Come to Lauren’s point briefly if you can.

I have forgotten already.

How do you measure inclusive growth?

Again, there are reports that look at the spillover effects. A good example would be the report we had commissioned specifically by Cardiff University’s economic group of our impact within south Wales, and it is quite substantial. I would like to take the impact we have made in south Wales and replicate that in your region—we are there next week to roll out a similar programme—replicate it in Scotland, replicate it in Northern Ireland, replicate it in Bristol and replicate it in Torbay. We have good evidence.

Okay, that’s great. We are running out of time. Is it on this issue, your specific question?

No, it is on the issue of local authorities.

Very quickly.

We saw the presentation from Starship Technologies at the beginning. I hope you were able to be here for that. It was very clear about the role of local authorities and combined authorities. There was a challenge put to us by the previous panel about what the innovation and growth challenge and funding should be to combined authorities and local authorities. I want to understand specifically from Lou and Mike what you feel about that question. How do we make local authorities more open to innovation, to work alongside companies to grow and take risks, as we saw? What official role should combined authorities have?

We are expanding the remit for these last two points: changing the funding model, the local spillovers and how local authorities should be funded to drive innovation.

And how they become less risk-averse to new technologies like Starship.

Mike and Lou, you don’t have to answer the whole question.

Very quickly, I don’t know about the digital because we, frankly, don’t use it, but for the 300 or so businesses that leverage both of the high-value manufacturing catapults in our region it is about enhancing their technical capability. If that went away, we would need an alternative, as I said earlier, to that mechanism to help develop the capabilities of those businesses. Funding might help, but it is actually a resource. By the way, to your question, one of the catapults has gone in to assist us in the Black Country as an area of challenge, and we have set up a satellite catapult in the Black Country to do precisely that, as long as we leverage the opportunities. To the final point about local authorities, if they understand the ecosystem that we have developed, and one local authority will probably be bigger than most, we have to think about scale. If a local authority has a particular challenge—to go back to the Black Country—we can tailor the support out of the total ecosystem in the combined authority. In the innovation accelerators, we mandated that once anything that went into a particular local authority worked—of course it is a pilot, so it might not work, but hopefully it did work—that can be translated to other local authorities for their benefit, and outside the region when appropriate. It is a horrible word, but it is a symbiotic thing. If a local authority can identify its need and can access the network, the local authority can be helped.

Isn’t its need also to promote the local economy?

Absolutely.

It is not necessarily about bad risk profile for local authorities and for combined authorities to take something like Starship robots and say, “Actually, let’s try it out. Let’s be co-developers on this. Let’s give you the access to the disability groups.” It is not really profiled in the devolution White Paper in the sense that that is what the role should be, but as a former local authority leader I think it should be at the heart. If we care about our residents, it is not just about filling potholes; it is about growing business, and having the skills and a strategic overview.

Agreed.

That is what I am trying to challenge you on. Particularly in the west midlands and Manchester, which have been there for longer than most in that sense, but not a very long time, how do you create the devolution framework and the funding framework that allows you to drive that innovation? Rather than doing a top-down through UKRI regional innovation, doing it from bottom-up through combined authorities and local authorities?

Thank you, Emily. In Liverpool where we saw the innovation ambition to have 5% of GDP on innovation from Liverpool, that was a regional authority taking real innovation leadership. Lou, we are going to leave you the last word, and you have three questions to answer in two minutes. I am sure you are capable of doing that.

Yes, I will bounce through. I will work backwards and start with the local authority point. It is a really important point. Innovation is complex, it is messy and it requires topic expertise. The way to empower local authorities to think and apply the knowledge that they have of their own economy is to build that muscle memory. Mariana Mazzucato talks a lot about this. Let’s not deplete local authorities of that capability. Part of the way you build that capability is collaboration with UKRI, Innovate UK, universities and industry people who bring that, and you work as a collective. They also have immense procurement capability, as does national Government—

Yes, that is a very important point.

—who are hugely powerful in issuing those first contracts that create business confidence. I am really passionate that we crack that in the next phase of devolution. I can say this because I don’t have a catapult and I don’t run a catapult: it is absolutely legitimate to challenge what the success measures of catapults are based on current economic needs. That is completely justifiable. We are in the innovation business, so we should be able to innovate new formats; that is what the innovation accelerators were. Thinking about the needs of our economy as it changes, and really challenging ourselves on those models is perfectly justified, especially when it is public money. Inclusive growth is quite granular, which is why it is complex and people do not always like to do it, and it creates an accountability. You have to look at who gets the jobs and who moves from long-term unemployed households into economies and opportunities that they did not know existed. That is not just about traditional skills pathways; it is how you collaborate with industry and how at a very hyper-local place you incentivise and collaborate to create opportunities for neighbouring communities. Beginning to put that front and centre of what a success measure is is quite radically different. We can learn from lots of organisations like the B Corp movement and lots of global movements.

Can you measure that?

Yes, because you measure demographic data as to physically which geographies—

Can we see how that can be measured?

Yes, and it is one of the things we are working through in the new innovation capability at the university. Obviously, we have an abundance of brilliant academic minds in our productivity institute, and behind us, from a research capability. Lots of people are talking about inclusive innovation. The question is now how we deliver it and how we model that and how we show that it is not growth or being inclusive, but actually the two things working symbiotically together.

Excellent. That is a fantastic note on which to finish the session. We are all united with the Government and in this Committee in looking for long-term, inclusive and sustainable growth. It is really good to hear some of the barriers to that, some of the measures of it and some of the ways in which we can test it going forward. Thank you very much, panel.