Source · Select Committees · Public Accounts Committee
Recommendation 17
17
One of the Fund’s five objectives is to increase collaboration between new small companies and...
Conclusion
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
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The government agrees with the Committee’s recommendation. Target implementation date: October 2021 4.2 UKRI is committed to increasing engagement with small and medium sized enterprises (SMEs) within the research and innovation system. The NAO report notes the Fund has had success in attracting small business involvement (small and micro companies accounted for over 40% of project awards in Waves 1 and 2). Challenges have worked hard to build networks and reach out beyond the ‘usual suspects’. For example, 73% of non-academic organisations funded by the Next Generation Services Challenge have not previously participated in a UKRI-funded project. 4.3 High levels of co-investment, with public and private sector funders working in partnership, have helped increase the overall investment, allowing projects to be funded that would otherwise have not happened. However, such a strong emphasis on co-investment targets may have led to a portfolio with a lower risk appetite than first envisaged, and a larger role for established industries which are more able to evidence match funding as part of the challenge commitments. It should though be recognised that large companies are also important for generating critical mass in resilient national supply chains. 4.4 This may help explain why the Fund had a slightly lower level of SME involvement in Wave 3, when the emphasis was on increased match funding. Although as the NAO report made clear, it has not been possible to establish whether there is a causal link between the two. 4.5 Lessons from the approach to SME engagement across the current Challenges are informing the design of future Challenge-led delivery. This will consider the appropriate balance between risk and scale, including a more flexible approach to co-investment requirements for SMEs and emerging industries. 4.6 The department will write to the Committee by October 2021 outlining these learnings and how these will be embedded into future Challenge-based funding.