How to make the UK an innovation nation

Daniel Korski
Spice Girls Photocall - Greenwich
The UK needs to do more to support innovation (Source: Getty)
a href="">Prime Minister Theresa May intends to start 2017 with a flurry of policy announcements including apparently unveiling what Nick Timothy, her co-chief of staff, called “a more long-term and strategic approach to economic and industrial policy” in an article he published before he re-joined government. Industrial strategy is back.

This is very welcome. But how does the government manoeuvre between the pitfalls of left-wing statism, the problems of Christian democrat corporatism and the avarice of neo-liberalism?

Nobody should want to pick commercial winners, as history shows it produces sub-optimal outcomes for shareholders, consumers and tax payers alike. Brazil placed strict controls on the import of foreign computers in the 1980s to support its own “infant” computer industry. I don’t know about you but I’ve never considered buying a Positivo laptop over a Mac or a Dell computer.

Too much support, even if it might be legal for a Britain outside of the EU, will also just set off an unhealthy competition for subsidies with European economies. Do we really think that a British government will ever be willing to spend as much taxpayer money propping up British firms as a French government will go to back French companies?

Conservatism can also mean many things – indeed that’s partly the secret to its endurance – but if it begins to mean a philosophy of how to use taxpayers’ money to prop up British companies then the party will not only forsake Thatcher’s legacy but ultimately lose to Labour which is, not least in a post-Corbyn context, always likely to be seen as better at distributing the state’s largesse.

Given this, May’s government should focus on making Britain the most innovation-led economy in the OECD. This is how: First, the government should look afresh at the incentives provided to those who can commercialise their research or get others to do so. Is it really worthwhile for researchers to commercialise their work? As worthwhile as it is to publish in peer-reviewed journals?

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What about the incentive for employees? Is it time to reform the law so that if you leave a company to set up a new firm (rather than go to an established competitor) you should not be bound in the same way by non-compete clauses? When I worked in Downing Street we looked into this but didn’t have time to act on it.

Then the government should consider changing the ownership rights over the intellectual property (IP) that people produce regardless of where they produce it. If you, as an individual, produce something while working for a firm then, like in Germany, you should have some of the IP rights. Not all, but some.

Great centres of research like universities should also be forced to share more rights to their IP, as Stanford University does to great success. And while we look at university reform, in tandem with the government’s excellent and liberalising Higher Education bill, we should change the way that universities engage with startups and would-be entrepreneurs. Universities haven’t yet understood that owning anything more than a small equity stake in a student’s firm, that is less than three per cent, stymies the development of the business.

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Thus, the government should ban universities from taking more than a three per cent equity stake in firms they back but then provide additional incentives for the Imperials, Edinburghs and Newcastles of this world to invest in start-ups created by facility, alumni and students alike. In the US universities take a very small stake in their spin-offs but have grown rich on the generosity of their alumni billionaires.

Fourth, Britain needs a new approach to government-held IP. Departments own loads of IP either because they once financed the research or because they bought a service or a product. But most of it lies dormant, unused by anyone. The government should set up a government-owned IP brokerage which sifts through all the IP and either re-sells it in auctions, gives it away or cobbles together teams that can take it forward.

We also need to make sure the government uses its own financial muscle in a way that supports innovation. That means taking a fresh look at the planned integration of Innovate UK and the Research Councils. It means looking at In-Q-Tel, the independent, not-for-profit fund owned by the CIA which invests in venture-backed startups developing technologies that provide innovation within 36 months vital to government business. Why don’t we have a UK version?

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And it means using public procurement, local, national and in the NHS and police, to experiment more and give British startups a chance to bid for pilot projects.

UK-only public contracts will hurt British firms, as other countries will in a post-Brexit context then exclude them for their tenders, but what about small-scale, more experimental UK only tenders – just so smaller innovative UK firms can get started.

A lot of innovation comes not from universities or research institutes but from large British firms like JLR, Airbus, Rolls-Royce, ARM, Dyson, GSK and so forth. Here the government’s role is more indirect. But I’ve never spoken to a CEO who did not worry about the quality and quantity of British science, technology, engineering and maths (STEM) graduates. By some estimates the economy needs 100,000 more a year just to keep the status quo graduates. A new strategy could reduce tuition fees for STEM graduates or lower their post-university rate of income tax.

Finally, the government needs to make the UK attractive for world-beating researchers to come here to research and commercialise their discoveries. Various visa routes must remain open and a post-study visa route for PhDs in key subjects must be internationally attractive. Like it or not, these are the people whom the UK has to attract if we want to compete in the coming decades. And the UK is now at risk of looking less and less attractive by the day.

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As an initial move, the government could set up a fund – call it the Geim Fund after the Sir Andre Geim, the Soviet-born Nobel Prize winning physicist working at the University of Manchester – to be used to attract the world’s top 20 researchers across disciplines to move to the UK. They should be offered whatever they want ­– salaries, faculty positions, staff, a lifetime pension, whatever – as their migration to the UK could relocateentire scientific communities. Turn receipt into a ceremony at Buckingham Palace, like the Nobel Prize, to make it attractive for the world’s leading researchers.

Industrial strategy need not be a Wilsonian dystopia. But there is another altogether more realistic risk: that any new effort becomes just another set of soon-to-be-forgotten government documents or a number of public-private forums that mainly help established and rent-seeking players. To avoid that the government would do well to strive to make the UK an Innovation Nation.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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