Recommendation 9

HM Government Not Addressed

The government agrees with this recommendation and agrees that public R&D investment should play a strong catalytic role in unlocking private sector investment. This principle is reflected in the mandate given to UKRI and its councils, including Innovate UK. Through our reforms of UKRI we have a target of, and a plan for, a portfolio level leverage ratio of at least £3 of private investment for every £1 of public investment. Across its portfolio, and in particular the components targeted at government priorities and innovative company growth, UKRI will prioritise funding allocations and delivery models that improve investment readiness, reduce risk for private investors, and support stronger connections between publicly funded innovation and markets. UKRI’s Corporate Plan for 2025–27 places clear emphasis on maximising the impact of public funding by crowding in private capital, strengthening business engagement, and supporting pathways from research and innovation to commercial growth. Innovate UK has a central role in this approach as the UK’s national innovation agency. As set out in its recent prospectus changes in how it supports firms will further strengthen its focus on unlocking private sector investment. This includes acting as a trusted source of technical due diligence, supporting businesses to demonstrate commercial potential, and aligning public grant funding with credible pathways to follow-on finance. This will build on its existing success and, for example, Innovate UK’s Investor Partnerships have unlocked £448 million in aligned equity investment from 105 investor partners. Innovate UK will also continue to work ever more closely with partners across the public finance landscape, including the British Business Bank, and seeks to ensure that funded businesses are able to move into equity, debt and other forms of private investment. The heads of Innovate UK, British Business Bank, NWF and other public finance institutions meet regularly to discuss integration through the Strategic Public Investment Forum. Government departments beyond DSIT, whether delivering R&D through UKRI or independently, have a similar focus on unlocking private sector investment. We agree with the importance of monitoring their success in achieving this. Where programmes are intended to attract private investment, this is monitored through programme-level monitoring and evaluation, including the collection of data on co-investment and follow-on investment from private sources. In addition, DSIT is working to improve the quality and consistency of R&D spending data across government and to embed its use in decision- making. DSIT regularly commissions data on departmental R&D spending, and asks departments for information on the private sector investment their R&D programmes attract, or are expected to attract. This will provide a clearer, cross-government view of progress on unlocking private investment and performance across key R&D sectors. In addition, UKRI is working to standardise the recording of private sector leverage across its portfolio, including consistent data on co-investment, follow-on funding and subsequent investment into supported or spin-out businesses, such as equity or venture capital. Chapter 5: Commercialising innovation