Recommendations & Conclusions
21 items
2
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Not Addressed
We are not convinced that UKRI’s and the Department’s approach to intellectual property generated by the Fund adequately protects taxpayers’ interests. Taxpayer funding invested through the Fund creates a ‘bridge’ between pure research investment and commercial development. There will potentially be value in the intellectual property associated with the projects …
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We are not convinced that UKRI’s and the Department’s approach to intellectual property generated by the Fund adequately protects taxpayers’ interests. Taxpayer funding invested through the Fund creates a ‘bridge’ between pure research investment and commercial development. There will potentially be value in the intellectual property associated with the projects that are funded. As we have seen with previous reports, it is important that intellectual properly produced as a result of taxpayer investment is exploited to maximise the value of the investment. However, UKRI has not ensured that any intellectual property generated as a result of the Fund is used to the benefit of the UK. The Department asserts that the Fund’s purpose is to accelerate R&D investment generally, not to capture any potential benefits in this way. We are not convinced by its view that retaining a say over intellectual property rights is not necessary to recoup the benefits of the Fund for the UK. A better understanding of what benefits the Fund is expected to deliver to the UK economy would provide UKRI and the Department with a stronger basis for considering the best way to protect taxpayers’ interests. The Committee is highly sceptical about the Department’s response after the hearing that “IP rights, should be owned by the party best placed to exploit them” because UK Academia does not have a strong record of protecting IP rights. Recommendation: UKRI should re-examine its current approach of not holding a claim on intellectual property generated through the Fund. It should write to the Committee by July 2021 setting out the results of its review and explain how it intends to best protect the taxpayers’ interests and maximise the value from taxpayer investment in the future.
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Government response AI summary
The government's response addresses unrelated issues concerning the identification of clinically extremely vulnerable people and NHS data strategy, completely failing to address the recommendation for UKRI to re-examine its intellectual property approach for the Fund.
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HM Treasury
3
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Not Addressed
The Department has not yet made clear how it will make sure the UK will meet the target to spend 2.4% of its GDP on R&D by 2027. The government has a target to 6 Industrial Strategy Challenge Fund increase the UK’s public and private investment in R&D to 2.4% …
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The Department has not yet made clear how it will make sure the UK will meet the target to spend 2.4% of its GDP on R&D by 2027. The government has a target to 6 Industrial Strategy Challenge Fund increase the UK’s public and private investment in R&D to 2.4% of GDP by 2027. In 2018, the latest year for which data are available, the UK spent £37 billion on R&D, the equivalent of 1.7% of its GDP. This is well below the Organisation for Economic Cooperation and Development’s average of 2.4%, and the level achieved by other OECD countries. Germany for example spent 2.9% of its GDP on R&D in 2018. In 2019, the Department announced that to achieve government’s target of 2.4%, both public and private R&D investment would need to rise to around £60 billion each year. The government has committed to increasing public investment in R&D to £22 billion by 2021–25. UKRI asserts that meeting the target is challenging but plausible. The recent impact of COVID-19 on the economy may make prioritising the public investment required to meet the target even more challenging. Recommendation: The Department should develop, and then publish, by October 2021, its plan setting out the steps it will take to meet the 2.4% spending target by
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Government response AI summary
The government response discusses local variation in the Shielded Patient List and future analysis, which is unrelated to the recommendation about the UK's R&D spending target.
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HM Treasury
5
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Accepted
UKRI is not doing enough to make sure the Fund is attracting successful bids from across the country. Funding awarded by the Fund is distributed unevenly across the regions of the United Kingdom. By October 2020, just over 63% of the Fund had been awarded to organisations registered in London, …
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UKRI is not doing enough to make sure the Fund is attracting successful bids from across the country. Funding awarded by the Fund is distributed unevenly across the regions of the United Kingdom. By October 2020, just over 63% of the Fund had been awarded to organisations registered in London, the South East and West Midlands. UKRI does not assess the regional balance of bids in assessing awards. In part, this distribution of funding probably reflects to a degree the location of existing centres of R&D activity, for example the advanced manufacturing base in the West Midlands. The nature of the challenges selected could also have an impact on the location of projects funded, skewing project selection to existing areas of activity. The geographical distribution of funding, however, is not necessarily explained by the distribution of businesses undertaking R&D activities in the economy. UKRI asserts that activity can take place outside of the regions where the company in receipt of funding is registered, but does not have additional analysis to show that this was the case. Industrial Strategy Challenge Fund 7 Recommendation: The Department and UKRI should, by October 2021, set out: the factors that are inhibiting more widespread participation in the Fund; and the steps they are taking to attract more interest in the Fund from across the UK.
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Government response AI summary
The government accepts the recommendation and commits to investigating the drivers behind regional disparity in the Fund's distribution, seeking to improve participation across the UK, and will write to the Committee by October 2021 detailing the inhibiting factors and steps to attract more interest.
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HM Treasury
6
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Not Addressed
The elongated time taken by the Department and UKRI to provide funding to successful bidders risks putting off businesses from applying for the programme. It took UKRI, the Department and HM Treasury 72 weeks to select and approve the challenges that were given funding in 2019–20. It took UKRI on …
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The elongated time taken by the Department and UKRI to provide funding to successful bidders risks putting off businesses from applying for the programme. It took UKRI, the Department and HM Treasury 72 weeks to select and approve the challenges that were given funding in 2019–20. It took UKRI on average a further 31 weeks to assess applications for project funding and approve individual projects. The lengthy time taken to agree challenges and approve projects leads to delays in funding projects. For example, we heard from one organisation that meaningful work has yet to start on some projects for which those responsible had started to bid for funding as early as 2018. Taking too long to approve challenges and then select projects to fund risks delaying the impact from the projects which are supported. This prolonged process may also potentially deter some organisations from applying for funding and delay the impact of UKRI’s investments. We are concerned that this could particularly affect smaller businesses which may not have the financial and staffing resources to wait for funding. Recommendation: The Department, HM Treasury and UKRI should set out by October 2021 how they intend to speed up the time taken to approve challenges and projects.
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Government response AI summary
The government's response provides only introductory text and lists relevant reports, failing to address the recommendation for the Department, HM Treasury, and UKRI to outline plans for speeding up approval times for challenges and projects.
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HM Treasury
7
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Deferred
Powers currently delegated by the Department and HM Treasury to UKRI do not strike the right balance between the governance necessary to support efficient decision making and unnecessary bureaucracy. The Department and HM Treasury set the governance arrangements for UKRI’s oversight of the Fund, including the requirements for approving new …
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Powers currently delegated by the Department and HM Treasury to UKRI do not strike the right balance between the governance necessary to support efficient decision making and unnecessary bureaucracy. The Department and HM Treasury set the governance arrangements for UKRI’s oversight of the Fund, including the requirements for approving new challenges. UKRI, the Department and HM Treasury each approve business cases for challenges in turn—as a result business cases can take over a year to approve. One consequence of this delay is that funding is slow to be allocated. In addition to delaying getting funding to those delivering approved projects, this could create extra financial pressures in the later years of the programme as funded activity builds up. The Departments’ approach to the appointment of senior civil service positions has led to delays in appointing Challenge Directors, which have taken an average of over 37 weeks. Challenge Directors are fundamental in setting the direction for, and then overseeing delivery against, the objectives for each challenge. UKRI would like to be able to appoint these senior staff earlier, but to do so depends on its delegated powers from the Department. Recommendation: The Department and HM Treasury should, by July 2021, review the conditions they place on UKRI to manage the Fund with a view to supporting more efficient decision making. The Department and HM Treasury should write to the Committee to explain the changes they have introduced together with their intended impact. 8 Industrial Strategy Challenge Fund 1 Measuring the impact of the Funds
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Government response AI summary
The government disagrees with the specific recommendation but accepts the need to address the issues raised, stating that these will be considered and addressed as part of the forthcoming Spending Review 2021.
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HM Treasury
1
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Accepted
On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) and UK Research and Innovation (UKRI) about the management of the Industrial Strategy Challenge Fund (the Fund).1 Assessing Fund performance
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On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) and UK Research and Innovation (UKRI) about the management of the Industrial Strategy Challenge Fund (the Fund).1 Assessing Fund performance
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Government response AI summary
The government accepts the importance of demonstrating outcomes and impact for the Industrial Strategy Challenge Fund and commits to writing to the Committee by October 2021 to outline the expected short, medium, and long-term impact of existing challenges, focusing on jobs and economic benefits.
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HM Treasury
4
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Not Addressed
The Department has five objectives for the Fund, to: • increase UK businesses’ investment in R&D, while also improving R&D capability, capacity and technology adoption; • increase multi- and inter-disciplinary research; • increase engagement between academia and industry on targeted innovation activities; • increase collaboration between new small companies and …
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The Department has five objectives for the Fund, to: • increase UK businesses’ investment in R&D, while also improving R&D capability, capacity and technology adoption; • increase multi- and inter-disciplinary research; • increase engagement between academia and industry on targeted innovation activities; • increase collaboration between new small companies and those that are established; and 1 C&AG’s Report, UK Research and Innovation’s management of the Industrial Strategy Challenge Fund, Session 2019–21, HC 1130, 5 February 2021 2 C&AG’s Report, paras 2, 3 and 6 3 C&AG’s Report, para 1.11 4 HM Treasury, Build Back Better: our plan for growth, Policy Paper CP 401, 3 March 2021 Industrial Strategy Challenge Fund 9 • and increase overseas investment in R&D in the UK.5
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Government response AI summary
The government response does not address the committee's item regarding the objectives of the Industrial Strategy Challenge Fund, instead discussing the delivery of shielding support to clinically extremely vulnerable individuals.
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HM Treasury
8
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Accepted
We asked the Department and UKRI why it had not ensured that the taxpayer benefited from any intellectual property generated as a result of successful commercial development paid for by the Fund.19 The Department told us that securing intellectual property was not the purpose of the Fund—instead it was to …
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We asked the Department and UKRI why it had not ensured that the taxpayer benefited from any intellectual property generated as a result of successful commercial development paid for by the Fund.19 The Department told us that securing intellectual property was not the purpose of the Fund—instead it was to accelerate R&D expenditure more generally. UKRI recognised that it was important to consider how to ensure a return on public investment, but added that it was not clear that retaining intellectual property rights was necessarily the best way to recoup the benefits of an investment. In its view, securing intellectual property was neither “...simple, cheap or low energy”. It told us that it was considering alternatives such as taking an equity stake in some investments.20 We sought assurances from UKRI and the Department that they would seriously think about how the public purse can benefit in the event of any “commercial successful roll out that has benefited from this bridge funding from the public purse.”21 The Department agreed to look at whether there might be specific exceptions to its current position.22 The Department subsequently wrote to us to explained that the Intellectual Property Office was working on “how to ensure that the Government receives a financial reward for its innovation and taxpayers are getting value for money going forward.”23 Meeting the R&D spending target
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Government response AI summary
The government accepts the recommendation, committing to review its current approach to intellectual property (IP) with UKRI, consider the committee's concerns, and report back by July 2021, to ensure the taxpayer benefits from commercially successful IP.
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HM Treasury
9
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Rejected
The government has a target to increase the UK’s public and private investment in R&D to 2.4% of gross domestic product by 2027. The Fund contributes to this target.24 In 2018, the most recent year for which data are available, the UK invested 1.7% of its gross domestic product in …
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The government has a target to increase the UK’s public and private investment in R&D to 2.4% of gross domestic product by 2027. The Fund contributes to this target.24 In 2018, the most recent year for which data are available, the UK invested 1.7% of its gross domestic product in R&D. This is below the average across the OECD of 2.4%. UKRI told us that it thought the UK should be aiming well above the OECD average. It told us that in 2018 Germany spent 2.9% of its GDP on R&D.25
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Government response AI summary
The government explicitly rejects the implied recommendation to aim above the 2.4% GDP target for R&D investment. They reaffirm their commitment to achieving the 2.4% target by 2027 through increased public investment and a forthcoming innovation strategy to leverage private sector funds.
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HM Treasury
10
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Rejected
In 2019, the Department announced that to achieve government’s target of 2.4% both public and private R&D investment would need to rise to around £60 billion.26We asked witnesses how, and by when, it was going to increase funding to meet the target. The Department told us that it hoped to …
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In 2019, the Department announced that to achieve government’s target of 2.4% both public and private R&D investment would need to rise to around £60 billion.26We asked witnesses how, and by when, it was going to increase funding to meet the target. The Department told us that it hoped to start to see significant increases in public investment in R&D in the next dataset published by the Office for National Statistics, which would cover
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Government response AI summary
The government disagrees with the recommendation to detail how and when funding will increase to meet the 2.4% R&D target, stating it has already committed to raising public investment and is developing an innovation strategy, with further plans to be set out in Spending Review …
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HM Treasury
11
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Rejected
UKRI considered that meeting the target as very challenging but also described it as plausible if it could, for example, maintain the momentum the Fund had generated around private investment. It asserted that having an ambitious target was important “otherwise, one won’t even meet unambitious targets, let along ambitious ones”.30 …
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UKRI considered that meeting the target as very challenging but also described it as plausible if it could, for example, maintain the momentum the Fund had generated around private investment. It asserted that having an ambitious target was important “otherwise, one won’t even meet unambitious targets, let along ambitious ones”.30 UKRI acknowledged though that the “hit to the economy” from COVID19 would make prioritising public investment in R&D challenging.31 28 Q 16, C&AG’s Report, footnote 6 29 Q 16 30 Q 17 31 Qq 16–17 12 Industrial Strategy Challenge Fund 2 Distributing funding fairly and efficiently Speeding up approval of challenges and projects
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Government response AI summary
The government disagrees with the Committee's implied concern regarding the feasibility of the R&D spending target, stating its commitment to increasing R&D investment to 2.4% of GDP and outlining ongoing efforts, including a forthcoming innovation strategy, to achieve this goal.
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HM Treasury
12
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Accepted
In the third and most recent wave of funding that started in 2019–20, it took UKRI, the Department and HM Treasury 72 weeks to select and approve challenges.32 We asked the Department and UKRI why it took them over a year to select and approve challenges. The Department told us …
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In the third and most recent wave of funding that started in 2019–20, it took UKRI, the Department and HM Treasury 72 weeks to select and approve challenges.32 We asked the Department and UKRI why it took them over a year to select and approve challenges. The Department told us that fundamentally the time taken was because it was a difficult process, but recognised that overall it had taken too long and committed to a faster process next time. It identified three reasons for the day: that it had been more open to receiving ideas for challenges and had to consider over 250 proposals as a result; the business cases themselves were challenging because they needed to demonstrate that the Fund was supporting research that could be considered ‘genuinely incremental’; and it had to make sure that proposals were relevant to the Industrial Strategy.33
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Government response AI summary
The government accepts the need for a faster challenge approval process, committing to consider a more streamlined approach and simpler governance for future challenges. It will write to the Committee by October 2021 outlining plans to improve approval speed.
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HM Treasury
13
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Accepted
The Department told us that part of the reason for the delays in approving challenges, and ultimately projects, lay with drawn-out approval processes.34 The Department and HM Treasury are responsible for approving business cases for challenges. The Department told us that the process for selecting and signing off challenges started …
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The Department told us that part of the reason for the delays in approving challenges, and ultimately projects, lay with drawn-out approval processes.34 The Department and HM Treasury are responsible for approving business cases for challenges. The Department told us that the process for selecting and signing off challenges started with UKRI consulting industry and academia, and then shortlisting potential challenges. UKRI submitted a business case for each challenge to the Department and HM Treasury for their approval in sequence.35 Once challenges have been approved, UKRI has to select which projects to fund. UKRI explained that it does this after considering, for example, a project’s alignment with challenge objectives and financial checks on the applicant and on the project costs. The National Audit Office looked at the total time taken from when applications were submitted to when funding was offered, and found that UKRI took on average 31 weeks.36 UKRI told us that the time taken to approve projects was because it had to undertake a series of due diligence checks which were crucial to ensure that taxpayer’s money was being spent well. It acknowledged that while this was an iterative process it could “drag on for far too long” and that it needed to find effective ways to speed it up.37 It noted that some of the process it could “speed up within UKRI” but highlighted its dependency on, for example, companies responding promptly to checks.38
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Government response AI summary
The government agrees to consider a more streamlined approach for selecting and approving challenges, with a simpler governance structure, for future challenge delivery. They also note established UKRI programmes improving project application and approval processes, and will update the Committee by October 2021 on plans …
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HM Treasury
14
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Acknowledged
We were concerned that lengthy approval times, combined with changes in coinvestment requirements, could deter participation from some small and microsized companies.39 For example, we received written evidence from Tees Valley Combined Authority which told us that it had submitted three successful and sequential bids relating to industrial decarbonisation for …
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We were concerned that lengthy approval times, combined with changes in coinvestment requirements, could deter participation from some small and microsized companies.39 For example, we received written evidence from Tees Valley Combined Authority which told us that it had submitted three successful and sequential bids relating to industrial decarbonisation for funding from the Fund. It explained that it had started its bids in early 2018, however meaningful work on the project had yet to commence 32 Q 37, C&AG’s Report, para 15 33 Q 37 34 Q 37 35 Q 38, C&AG’s Report, paras 2.14, 2.16 36 C&AG’s Report, paras 2.18–2.19, Figures 1 and 6. Of the 236 projects with applications submitted in late 2018 of after, it took an average of over 31 weeks for funding to be offered. The shortest time between an application being submitted and funding offered was 16 weeks, and the longest took over a year at 53 weeks. 37 Q 42 38 Q 42 39 Q 59 and C&AG’s Report, para 2.19 Industrial Strategy Challenge Fund 13 due to “the on-going process associated with managing the funds”.40 Similarly, evidence from Universities Scotland indicated that lead times for the Fund’s project—“to build the consortium, complete the application, await assessment outcomes, and for funding to come through to universities”—were, in its opinion, far too long.41 UKRI acknowledged that a two year wait for funding was very frustrating for businesses wanting to get on with projects. UKRI and the Department told us that there was a trade-off between quality and speed, and that they were hoping in the future to be “equally high quality and a lot faster at the same time”.42
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Government response AI summary
The government acknowledges the impact of long approval processes and states that future challenge delivery models will consider a streamlined approach with simpler governance. It will also write to the Committee by October 2021 to detail plans for improving the speed of future funding approvals …
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HM Treasury
15
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Acknowledged
Delays in getting new challenges approved have had a knock-on effect on UKRI’s ability to start spending. For example, in 2019–20, UKRI had underspent by £86 million, equivalent to 14% of its budget for the Fund the year. During 2020–21 UKRI agreed to re-profile £165 million from the current budget …
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Delays in getting new challenges approved have had a knock-on effect on UKRI’s ability to start spending. For example, in 2019–20, UKRI had underspent by £86 million, equivalent to 14% of its budget for the Fund the year. During 2020–21 UKRI agreed to re-profile £165 million from the current budget into future years for 20 challenges, mainly due to the impact of COVID-19. We asked UKRI about the extent to which any delays in distributing funding to projects will affect its ability to spend the Fund in its final years. UKRI said that the need to reprofile spending into future years created financial pressure in the later years of the programme. The NAO found that reprofiling funding could have an impact on planned activity, which in turn might impact on the amount of co-investment generated by partner organisations. It similarly found that additional pressure on future budgets could also come from the impact of COVID-19 on the level of activity undertaken on funded projects. UKRI told us that it would be easier to manage the risks from reprofiling budgets if it had a multi-year settlement. However, in the Spending Review 2020, the Fund was part of a one-year settlement.43
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Government response AI summary
The government acknowledges the impact of lengthy approval processes and states that future challenge delivery models will consider a streamlined approach with simpler governance. It will also write to the Committee by October 2021 to detail plans for improving the speed of future funding approvals …
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HM Treasury
16
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Accepted
Lack of staffing capacity within UKRI may also have impacted the time taken to approve bids. At the start of Waves 2 and 3, UKRI faced significant challenges recruiting staff to oversee and manage the challenge programmes. Of the 186 full-time-equivalent staff UKRI estimated it needed to administer the Fund …
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Lack of staffing capacity within UKRI may also have impacted the time taken to approve bids. At the start of Waves 2 and 3, UKRI faced significant challenges recruiting staff to oversee and manage the challenge programmes. Of the 186 full-time-equivalent staff UKRI estimated it needed to administer the Fund in 2019, 103 were vacant in June
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Government response AI summary
The government agrees with the recommendation to address staffing capacity issues impacting bid approvals, aiming for an October 2021 implementation date. They will consider a streamlined approach for future challenges and existing UKRI improvement programmes are underway, with a commitment to update the Committee on …
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HM Treasury
17
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Acknowledged
One of the Fund’s five objectives is to increase collaboration between new small companies and those that are established. Analysis undertaken by the National Audit Office showed that UKRI had initially succeeded in attracting a range of different sized companies to participate in the Fund. However, in the third wave …
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One of the Fund’s five objectives is to increase collaboration between new small companies and those that are established. Analysis undertaken by the National Audit Office showed that UKRI had initially succeeded in attracting a range of different sized companies to participate in the Fund. However, in the third wave of funding, the proportion of projects awarded to companies classified as large (categorised as having more than 250 staff) increased from 20% in the second wave of funding to 29% in the third. This expansion has been at the expense of the proportion of micro (categorised as having under 10 staff) and small sized enterprises (categorised as having between 10 and 50 staff). Their proportion of projects awarded fell from 44% in the second wave to 31% in the third wave.47
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Government response AI summary
The government acknowledges the concern regarding SME engagement, stating UKRI is committed to increasing it. Lessons learned will inform the design of future Challenge-led funding, considering a more flexible approach to co-investment for SMEs, and the department will write to the Committee by October 2021 …
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HM Treasury
18
Recommendation
Fifty-Sixth Report - Industrial Strateg…
Accepted
There are several reasons why the proportion of smaller businesses receiving funding could have fallen including the increase in UKRI’s requirements for coinvestment from participants for wave 3 funding. UKRI increased the co-investment requirement from industry in wave 3, responding to a requirement from the Secretary of State for Business, …
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There are several reasons why the proportion of smaller businesses receiving funding could have fallen including the increase in UKRI’s requirements for coinvestment from participants for wave 3 funding. UKRI increased the co-investment requirement from industry in wave 3, responding to a requirement from the Secretary of State for Business, Energy & Industrial Strategy. The ratio of public investment to private investment increased from 1:0.45 in Wave 1 to 1:1.5 in Wave 3.48 The Department told us that it could not prove that the drop in the proportion of small businesses between waves 2 and 3 was solely due to the increase in coinvestment. But it conceded that it was reasonable to believe that it was a “really big factor” because it was harder for small businesses to meet the coinvestment targets. The Department emphasised that co-investment targets were nonetheless important in generating private investment which helped to boost the overall spend on R&D. It explained that it was working with small businesses to help them address this challenge.49 UKRI suggested a more tailored approach to co-investment for different sized companies might help.50
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Government response AI summary
The government agrees with the recommendation to increase SME engagement and will implement a more flexible approach to co-investment requirements for SMEs and emerging industries, outlining learnings by October 2021.
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HM Treasury
19
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Accepted
Other factors that may have influenced the reduced participation of smaller businesses include insufficient communication about the Fund reaching SMEs, limited capacity within SMEs to participate in collaborative bids, and the lengthy approvals processes for funding.51 We received written evidence from Universities Scotland, which told us that “insufficient communication and …
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Other factors that may have influenced the reduced participation of smaller businesses include insufficient communication about the Fund reaching SMEs, limited capacity within SMEs to participate in collaborative bids, and the lengthy approvals processes for funding.51 We received written evidence from Universities Scotland, which told us that “insufficient communication and notice of calls severely limits breadth and excellence” of the research and innovation funded by the Fund. This issue is particularly relevant to small and medium sized enterprises which have limited resources both in terms of people and resources available for co-investment to engage in collaborative bids.52 UKRI assured us that it is working hard to ensure it is reaching all the businesses that would want to and could contribute and that it has engaged as early and as widely as possible. It asserted that its approach had meant it had been able to reach new participants and that 73% of the businesses that had participated in the Fund had not had any previous interaction with UKRI.53 But it acknowledged it has tended to work in a “fairly generic way” – for example, with regard to setting coinvestment requirements. It recognised that a different approach could help engagement. It told us that it needed to be more conscious of differences in the research and business communities, and that “the mix of big and 47 Q 21; C&AG’s Report, para 5, 2.7, Figure 7 48 C&AG’s Report, para 2.9 49 Q 40 50 Q 41 51 Ev ICF0001, para 1–2, 7, C&AG’s Report, para 2.9. 52 Ev ICF0001 53 Qq 38, 41 Industrial Strategy Challenge Fund 15 small players is different”, within each challenge. It acknowledged that it could take a more flexible approach to targeting its timing of engagement with particular parts of the business community.54 Regional distribution of funding
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Government response AI summary
The government agrees to increase engagement with SMEs, noting that lessons from current challenges are informing future designs. This will include considering a more flexible approach to co-investment requirements for SMEs and they will write to the Committee by October 2021 to outline these learnings …
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HM Treasury
20
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Accepted
Whilst UKRI does not have an explicit objective to consider the regional balance in its funding awards, the 2017 Industrial Strategy did include a focus on ‘prosperous communities’ across the UK.55 The government’s 2020 Roadmap for R&D expenditure sets out its intention that spending on R&D and innovation should contribute …
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Whilst UKRI does not have an explicit objective to consider the regional balance in its funding awards, the 2017 Industrial Strategy did include a focus on ‘prosperous communities’ across the UK.55 The government’s 2020 Roadmap for R&D expenditure sets out its intention that spending on R&D and innovation should contribute to its ‘levelling up’ agenda.56 Analysis by the National Audit Office showed that the distribution of funding across the regions was uneven. Between 2017 and 2020, almost two thirds of the money committed to projects as part of the Fund had been distributed to companies registered in three regions of the UK—London, South East and West Midlands. In comparison, areas such as the North East or Yorkshire & Humber received 2.9% and 1.8% of the Fund respectively over the same period. The NAO concluded that this distribution was not necessarily explained by factors such as population size or the distribution of business undertaking R&D activity. UKRI noted that this analysis was based on data on the location of the organisation in receipt of the funding and not necessarily where the R&D activity took place. However, it did not provide us with any analysis setting out the regional distribution of the Fund based on where it thought R&D activity was actually taking place.57
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Government response AI summary
The government agrees, committing to investigate the drivers of regional disparity in ISCF funding and to improve participation across all parts of the UK for future Challenge-led funding. They will publish a UK R&D Places Strategy and write to the Committee by October 2021 with …
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HM Treasury
21
Conclusion
Fifty-Sixth Report - Industrial Strateg…
Acknowledged
UKRI recognised the need to think about R&D expenditure in terms of what it described as the ‘place part of the agenda’.58 Comparing the distribution of the Fund with what it described as normal R&D expenditure, UKRI asserted that it thought that investment through the Fund in London was “very …
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UKRI recognised the need to think about R&D expenditure in terms of what it described as the ‘place part of the agenda’.58 Comparing the distribution of the Fund with what it described as normal R&D expenditure, UKRI asserted that it thought that investment through the Fund in London was “very comparable” and that for the South East it was about “one third up”. UKRI considered that the level of investment received by the West Midlands was “over twice the level…you see normally”.59 It told us that this was due to the nature of some of the challenges on which the Fund focused, particularly mobility and the fact the UK’s advanced manufacturing base was located in the West Midlands.60 54 Q 41 55 C&AG’s Report, para 2.10 56 C&AG’s Report, para 2.10, HM Government, UK Research and Development Roadmap, Policy Paper, 1 July 2020 57 Q 44; C&AG’s Report paras 2.11–2.12, Figures 8 and 9 58 Q 46 59 Q 44 60 Qq 44, 46 16 Industrial Strategy Challenge Fund
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Government response AI summary
The government acknowledges the importance of R&D funding for the levelling-up agenda and commits to investigating the drivers of regional disparity in funding distribution. It will work to improve participation for future Challenge-led funding, publish a UK R&D Places Strategy in 2021, and write to …
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HM Treasury