Recommendations & Conclusions
9 items
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
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
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
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
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
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