Source · Select Committees · Public Accounts Committee
Recommendation 19
19
Other factors that may have influenced the reduced participation of smaller businesses include insufficient communication...
Conclusion
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
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.