Appendix A4

Catapult: Britian’s New Initiative in Applied Research

The global financial crisis that began in 2008 served to dispel the widely-held view in Britain that the effects of long erosion of the country’s manufacturing sector would be offset by a dynamic and growing financial services sector. With banks collapsing and property values plummeting, across the political party spectrum, British policymakers called for a national revival in manufacturing. The renaissance of British manufacturing would be driven by innovation derived from the country’s scientific research base, regarded as the second-best in the world after that of the United States. The centerpiece of this new national effort is a network of “Technology and Innovation Centres” (TICs) for applied research that, for branding purposes, have been dubbed “Catapults.” Their mission is to serve as a bridge between the country’s research base and British industry.

The Catapults are intended to bring some coherence to the bewildering array of public and private organizations in the United Kingdom that are engaged in technology transfer from universities and other basic research organizations to industry. The Catapult program will take some of the best of these organizations, provide “core’ funding from the government over a five-year horizon, establish governance arrangements, and align each center with national strategy. Each Catapult will focus on a technology area in which the United Kingdom enjoys a strong manufacturing presence already. Total government funding for this effort has been set at £200 million over a five year period. Overall direction and core funding for the Catapult network is being provided by the Technology Strategy Board, a non-departmental public body largely staffed by individuals with backgrounds in business and industry.



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Appendix A4 Catapult: Britian’s New Initiative in Applied Research The global financial crisis that began in 2008 served to dispel the widely-held view in Britain that the effects of long erosion of the country’s manufacturing sector would be offset by a dynamic and growing financial services sector. With banks collapsing and property values plummeting, across the political party spectrum, British policymakers called for a national revival in manufacturing. The renaissance of British manufacturing would be driven by innovation derived from the country’s scientific research base, regarded as the second-best in the world after that of the United States. The centerpiece of this new national effort is a network of “Technology and Innovation Centres” (TICs) for applied research that, for branding purposes, have been dubbed “Catapults.” Their mission is to serve as a bridge between the country’s research base and British industry. The Catapults are intended to bring some coherence to the bewildering array of public and private organizations in the United Kingdom that are engaged in technology transfer from universities and other basic research organizations to industry. The Catapult program will take some of the best of these organizations, provide “core’ funding from the government over a five- year horizon, establish governance arrangements, and align each center with national strategy. Each Catapult will focus on a technology area in which the United Kingdom enjoys a strong manufacturing presence already. Total government funding for this effort has been set at £200 million over a five year period. Overall direction and core funding for the Catapult network is being provided by the Technology Strategy Board, a non-departmental public body largely staffed by individuals with backgrounds in business and industry. 337

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338 21ST CENTURY MANUFACTURING Currently seven Catapults have been or are being established, with the expectation they will all be operating by the end of 2013.1 BRITAIN’S CHALLENGE: CAPTURING VALUE FROM SCIENTIFIC RESEARCH Britain’s leaders have been struggling to translate research from the nation’s excellent science base into technologies with industrial and commercial impact for a century, but with a few exceptions such as pharmaceuticals, the challenge has proven intractable. Perhaps the biggest obstacle has been embedded attitudes in the science and business community that inhibit close collaboration and a reluctance by successive governments to become too deeply involved in “industrial policy.” Additional challenges are presented by the erosion of the manufacturing base, a shrinking industrial research infrastructure, and a work force that often lacks the skills needed by technology-intensive companies. Globalization and the rise of new low-cost industrial powers like China, Korea, and Brazil have given this longstanding British dilemma a new urgency. “Bridging the gap between academia and industry to create cutting- edge technologies in manufacturing is important if the United Kingdom is to remain competitive in the global economy.”2 Numerous studies of British international competitiveness have concluded that while the United Kingdom has a basic science capability second to only that of the United States, “it falls short on translating scientific leads into leading positions in new industries.”3 In 1919, the economist Alfred Marshall observed that “the small band of British scientific men have made revolutionary discoveries in science, but yet the chief fruits of their work have been reaped by 1 The main inspiration for the Catapult initiative is the Fraunhofer-Gesellschaft, Germany’s successful network of parapublic applied research institutes, and some elements of the Fraunhofer model have been replicated in the current British effort. Like the Fraunhofer, each Catapult will receive “core” funding from the government over a comparatively long time frame (five years) which it is expected to augment with revenue from contract research for industry and public bodies. The designation “Catapult” represents an effort to establish a brand with a reputation for excellence, as the Fraunhofer has succeeded in doing on a global basis. Like the Fraunhofer, the Catapults are not mere conduits for research results from universities to companies but will operate their own well-equipped facilities that perform on-site research to develop, test, and prove innovative products and processes for industrial consumers. The expectation is that the Catapult initiative will translate into new manufacturing jobs in Britain. 2 Professional Engineering. 2012. “Fast Growth at Technology Centre Bodes Well for Manufacturing.” June 14. 3 Hauser. Hermann. 2010. The Current and Future Role of Technology and Innovation Centres in the UK. pp. 1. A 2009 Cambridge University study observed that “The perceived failure of the UK to exploit effectively its science and technology base has been the subject of hand-wringing by politicians and policy specialists for nearly a century and government efforts to remedy this have been redoubled over the past 15 years.” Mina, Andrea, David Connell and Alan Hughes. 2009. Models of Technology Development in Intermediate Research Organizations. University of Cambridge: Center for Business Research. Working Paper No. 396. December. p. 3.

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APPENDIX A4 339 businesses in Germany and other countries where industry and science have been in close touch with one another.”4 In fact, many British innovations have led to commercial successes, but often the commercial benefit has inured to countries other than Britain.5 A Commanding Position in Basic Science Britain enjoys an extremely strong global position in basic science, ranking second only to the United States according to some commonly-utilized benchmarking metrics. 6 With respect to highly-cited published scientific papers, Britain is “solidly second among all countries,” ranking second or third across a broad range of scientific disciplines. 7 “The UK science base is one of the most productive and influential systems of publicly funded research in the world.”8 British researchers are the most efficient and productive in the world in terms of output per researcher and per unit research spending.9 British universities 4 Cited in a speech by University and Science Minister, David Willetts at Policy Exchange, January 4, 2012. 5 Although there is scant quantitative information about how widespread this phenomenon has become, Parliament was regaled in 2012 with anecdotal examples of British inventions exploited outside of Britain and yielding little if any value-added in Britain. The University of Edinburgh developed a novel remediation technology for the removal of hazardous subsurface contamination but no UK-based licensing partner could be established, so the technology was licensed to a Canadian firm and is undergoing successful testing in the United States. House of Commons, Science and Technology Committee, Technology and Innovation Centre Enquiry, Written evidence submitted by UK Deans of Science. April 20, 2012. Although the United Kingdom has done pioneering research in carbon fibers, all major carbon fiber production is overseas. Bridging the Valley. 2012. Op. Cit. Written Evidence submitted by the Association of Independent Research and Technology Organizations (V45). Cambridge-based Raspberry Pi revised plans to manufacture low cost computers in the United Kingdom, choosing Taiwan and China instead, because of “prohibitive taxation” and “lack of UK competitiveness.” Plastic Logic, a spinoff from Cambridge University’s Cavendish Laboratory, decided to manufacture its plastic electronics products in Dresden, citing the “high skills base of the work force, the presence of Fraunhofer facilities and the difficulties associated with planning and construction timescales in the UK.” 6 As of 2010, the United Kingdom had produced 116 Nobel Prize winners, second only to the United States’ 320 winners from a population around five times as large as that of the United Kingdom. Recent British Nobel Laureates include Sir Robert G. Edwards (2010), the pioneer of in-vitro fertilization; Sir Martin Evans and Matthew Kaufman (2007), the first individuals to clone embryonic mice stem cells; Oliver Smithies (2007), the inventor of gel electrophoresis and a pioneer in the development of techniques for altering animal genomes; Sir Andre Geim and Konstantin Novoselov (2010), who conducted groundbreaking research on graphenes; and Sir Anthony James Leggett (2003) who made major contributions to the theory of superconductors and superfluids. Dyson. 2010. Ingenious Britain. Op cit. p. 35. 7 Weinberg, Bruce A. 2009. “An Assessment of British Science Over the Twentieth Century.” The Economic Journal. June. The rankings were based on data from the Institute for Science Information’s Highly Cited. Ibid. pp. F261-62. 8 HM Treasury. 2004. Science and Innovation Investment Framework 2004-2014. July. p. 8. 9 Department of Business, Innovation, and Skills. 2011. International Comparative Performances of the UK Research Base.

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340 21ST CENTURY MANUFACTURING consistently rank among the global leaders across the scientific disciplines in education and research, and in the field of clinical/pre-clinical health, three of the top five ranked institutions are British, including number one, Oxford.10 Given Britain’s rich scientific heritage, it is a question of central importance to the nation why the country’s scientific research and discoveries have not had greater industrial and commercial impact. A number of interrelated factors appear to be involved, including cultural attitudes, an eroded manufacturing base, the decline of the public and private research infrastructure, an opaque clutter of intermediate research organizations, and a work force that too often lacks the skills for technology-intensive manufacturing.11 The Cultural Challenge British values, ideas and its rich intellectual tradition are celebrated at home and admired around the world. However, certain aspects of British culture and economic ideology have proven serious impediments to the forging of close working relationships between the science community, government, and private industry. They are sometimes noted as key reasons that adoption of the German model of innovation would be difficult in the United Kingdom. A number of recent studies of Britain’s innovation system have urged a major national effort to modify traditional national biases and perspectives12. In countries like Germany and Taiwan, which have proven adept at translating scientific knowledge into competitive products, scientists, engineers, technicians, and skilled factory workers are admired throughout the broader society. That is less so in Britain, a fact that is reflected in phenomena such as the lower priority historically accorded science and engineering curricula at some universities, the tendency of young people to avoid careers in these fields, and ultimately, shortages of personnel with the education and skills needed by technology intensive domestic companies.13 Sir Peter Williams, Chairman of the 10 Times Higher Education World University Rankings 2011-12. 11 Goodwin, Tom and Nick Matthews. 1998. Knowledge Transfer: A UK Competitive Weakness. London: Institute for Public Policy Research. 12 Dyson. James. 2010. Ingenious Britain: Making the UK the Leading High Tech Exporter in Europe.. p. 13-22. 13 “Successive governments have been concerned that negative public perceptions are acting as a barrier to growth in manufacturing…a fifth of respondents [in a recent Institute for Manufacturing survey] would encourage their children to follow a career in manufacturing, compared to a third in the U.S.” Parliamentary Office of Science and Technology. 2012. Advanced Manufacturing. Postnote Number 420. September. p. 4 In 1991, New Scientist lamented a common national “ingrained belief that making things is a second-class occupation. The New Scientist. 1991. “Last Chance for British Industry.” November 30. A 2010 report to the Conservative Party by entrepreneur James Dyson observed with respect to British national attitudes, “Young people’s perception of engineers and scientists would be comical if it were not tragic. Look at the national stereotypes. Scientists are egghead lab-coated geeks; engineers are metal-bashing factory workers or mechanics fixing broken appliances. It’s no wonder careers in science and technology are deemed

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APPENDIX A4 341 United Kingdom’s National Physical Laboratory, told Parliament in 2010 that “the technician class is a forgotten, underrated, and undervalued one in this country and has been endemically.”14 The German and Taiwanese innovation models relentlessly drive findings derived from basic research into the factory and marketplace. Given Britain’s formidable position in basic science, a comparable attention to commercialization of research would have undoubtedly had a dramatic effect on British international competitiveness. However, a longstanding attitude commonly found in the United Kingdom’s science establishment has been indifference, if not disdain, for the practical application of research results. Britain’s greatest electronics research team of the Twentieth Century reportedly used to toast their innovations with the cry “And may it never be of use!”15 In contrast to Germany, where close interaction between universities and industry can be traced back to the Eighteenth Century, traditionally in Britain, “the university and the business and industrial community always treat[ed] each other with indifference, if not distrust and hostility.”16 unappealing by both parents and their children. By contrast, countries like the USA, Germany and France hold these careers in much higher esteem.” Dyson. 2010. Ingenious Britain. Op Cit p. 13. 14 Williams complained that “in the 1990s we had this obsession with turning everybody in the country into a university graduate without any thought whether the market and demand was there for such people, and at the same time and in the same process, we therefore implicitly devalued what the Germans might term the product of the Fachhochschule, rather than the university. The net result is that…you reap what you sow…the technician class for big and growing businesses is sorely in need of more technicians.” House of Commons, Science and Technology Select Committee. “Bridging the Valley of Death.” Improving Commercialisation of Research.” Oral Evidence. Q112. The American historian Martin Wiener argues that despite the fact that Britain was the first country to industrialize, a persistent strain exists in British culture, particularly in the upper classes, which disdains industry and business, an attitude that Margaret Thatcher’s government acknowledged and fought to change. Mrs. Thatcher’s closest political ally, Sir Keith Joseph, distributed to every Minister a copy of Wiener’s book, English Culture and the Decline of the Industrial Spirit, 1850- 1980. The Economist. 2010. “Empty Shelves.” April 27. 15 Toast at a dinner held for the Rutherford team of Cavendish Laboratory, Cambridge University. The work of this team contributed substantially to the development of the electronics industry and atomic energy. Oakley, Brian and Kevin Owen. 1989. Alvey: Britain’s Strategic Computing Industry. Cambridge MA: MIT. p. 267. Professor Keith Ridgeway, Research Director of the Advanced Manufacturing Research Centre, told Parliament in 2010 that part of Britain’s problem in translating scientific knowledge into commercial products and industrial processes was that “the universities have had a system of appraisal and monitoring that has been a bit adverse to work in the industrial sector. It rewarded publication and pure research rather than work within industry. That has been a factor.” House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. January 20 2010. Q42 Ev 12. 16 Chandler, Alfred. 1990. Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge MA; Harvard University Press. P. 293. Chandler, an economic historian, comments that British production managers and engineers agreed that “practical work on the job was far more useful than spending the same amount of time at a university.” At the universities, training in science was a proper function of the university; vocational training was not. As a result of this belief, the critical linkage between higher education and industry, so essential to the development of long-term

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342 21ST CENTURY MANUFACTURING Today, generations after this dynamic was observable, it remains an issue in the U.K.17 A 2009 study by the University of Cambridge commented that “the first and foremost point to make is that the evidence overwhelmingly shows that as direct contributors to the development of commercial innovation processes higher education institutions are way down the list of sources of knowledge for information that UK businesses cite.”18 “Although British science is frequently lauded as being second only to the United States in capability, the gap between the research carried out in academia and its successful application commercially has vexed successive governments.”19 In the historical accounts of how Germany overtook Britain in industrialization in the late Nineteenth and early Twentieth Centuries, British manufacturers are faulted for the fact that “the British did not innovate as rapidly or effectively” as their competitors, and were slow to introduce new technologies in their operations.20 British economic and military historian Corelli Barnett cites Britain’s “cult of the ‘practical man’ [which] led to a positive distrust [in industry] of the application of intellectual study or scientific research to industrial problems.”21Alfred Chandler chronicles how British industry failed to exploit the new production technologies of the “Second Industrial Revolution,” capital-intensive, continuous process machinery that achieved high volume throughput and economies of scale.22 In postwar Britain, the manufacturing sector was criticized to the effect that there was not enough technical training on the shop floor, managers were poorly trained, and companies failed to attract talented young people. A U.S.-based management expert, Dr. David Granick, characterized Britain as the “home of the amateur.” British managers “did not think there was any special experience that was useful for a future managing director. Granick observed that “professionalism was a serious charge against an individual in British industry.”23 In countries like Germany, the United States and Taiwan, which are innovation leaders, the government plays a supportive role in coordinating and sometimes funding collaborations between the research base and industry. For industrial capabilities in Germany and the United States, remained tenuous in Britain before 1914 and continued to be so during the interwar years. 17 For specific examples of industry-university applied research collaborations that left the industrial side dissatisfied, see, “The Power of Knowledge,” The Manufacturer (April 18, 2008). 18 Mina, Andrea, David Connell and Alan Hughes. 2009. Models of Technology Development in Intermediate Research Organizations. University of Cambridge: Center for Business Research. Working Paper No. 396. December. p. 3 19 Professional Engineering. 2012. “Catapults to Fame and Fortune.” July 31. 20 Friedberg, Aaron L. 1988. The Weary Titan: Britain and the Experience of Relative Decline 1895- 1905. Princeton: Princeton University Press. p. 85. 21 Barnett, Corelli. 1972. The Collapse of British Power. Atlantic Highland, NJ: Humanities Press International. p. 94. 22 Chandler, Alfred. 1990. Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge MA; Harvard University Press. 23 TUC. 2011. German Lessons: Developing Industrial Policy in the UK. December 8. p. 26.

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APPENDIX A4 343 many years, representatives of British business have urged the government to put in place a comparable long-term industrial strategy.24 However, the laissez- faire policies introduced by Margaret Thatcher beginning in 1979 were carried forward by successive governments, including New Labour under Tony Blair.25 Such government action has been inhibited, albeit not foreclosed, by a longstanding and commonly-held view that the government should not intervene in the economy to promote particular sectors and companies.26 This attitude has not prevented successive British governments from implementing industrial promotion initiatives, but it has inhibited such efforts in terms of funding, duration, and scale.27 Until recently, many British policymakers were dismissive of the erosion of the manufacturing sector, arguing that the national economy was undergoing a structural transformation in which a dynamic financial services industry would offset job losses in manufacturing, an “evolutionary” perspective 24 A 2012 editorial in Professional Engineering commented that Business Secretary Vince Cable “has his work cut out putting his goodwill and fine words into action. The first step to achieving this would be the development of a national industrial strategy. It’s hard to see how manufacturers can make long-term investment decisions when they don’t know the long-term plans of those in power.” Professional Engineering. 2012. “Fewer Fine Words and More Action to Support Industry are Needed from Vince Cable.” July 31. 25 In 2009, the wake of the financial collapse in 2008, Business Secretary Lord Peter Mandelson introduced a “New Industry, New Jobs” program featuring a more activist role for the government in industry than any policy since the 1970s. Among other things the program provided for government review of whether long-term government capital investment should be undertaken in innovative small and medium companies. HM Government. 2009. New Industry, New Jobs. April. 26 “In Britain, the tension between the ruling party’s free market ideology and the patent need to adjust and upgrade industry resulted in inconsistent and underfunded programmes.” Jacobsen, Kurt. 1992. "Microchips and Public Policy: The Political Economy of High Technology.” British Journal of Political Science. October. p. 506. 27 Paul Jackson, the Chief Executive of EngineeringUK, a not-for profit which promoted engineering, said in 2012 that “We desperately need an industrial policy that sets the vision and framework for rebalancing the economy. The government has announced many useful initiatives to support engineering and manufacturing. But it has gone about things in a piecemeal fashion. That means the initiatives haven’t had the desired overall effect.” Professional Engineering. 2012. “Engineers Call on Government to Develop Nationwide Industrial Policy.” May 11. The Alvey Programme, launched in 1983 by Margaret Thatcher’s government to promote national competencies in computer science, received funding from the government and industry and involved industry-university research collaboration. In 2012, Sir Peter Williams recalled for Parliament the outcome of the Alvey Project: “In the typical British style of risk aversion, because it was then a large sum of money, Alvey was scattered in small pieces so that nobody could blow a large sum of money that was high risk. The net result is that I suspect for many in this room the name Alvey is entirely new. I commend that you go back and look at the evaluation reports on Alvey. You will see that it made no difference whatsoever to the electronics and IT industries in the United Kingdom in subsequent decades.” House of Commons, Science and Technology Select Committee. Bridging the Valley of Death. Oral Evidence. Q116.

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344 21ST CENTURY MANUFACTURING that was also espoused by many economists. That perspective has been partially if not wholly discredited by the events of the past five years.28 Not so long ago, it was fashionable in Whitehall and Westminster to claim that this relative industrial decline didn't matter. Then came the banking crisis, which showed what happened when you bet the lot on the City—and the bet didn't come off.29 British attitudes that have hampered innovation, are beginning to change. In government, all major parties recognize the need for a strategy to enhance the competitiveness of the manufacturing sector, although a reluctance remains to pick “winners and losers”30. The Chancellor of the Exchequer closed his March 2011 budget statement with the following statement: We want the words: “Made in Britain,” “Created in Britain,” “Designed in Britain,” and “Invented in Britain” to drive our nation forward—a Britain carried aloft by the march of the makers. That is how we will create jobs and support families.31 With respect to the research community, high tech entrepreneur Hermann Hauser commented in 2010 that “when I first talked to our scientists about how to engineer their research into a real product rather than a scientific idea, I got brushed off. I find that practically none of that attitude remains.”32Lord Sainsbury of Turville, author of a 2007 study of the British government’s science and innovation policies, said in 2010 that he believed the country had “turned the corner” in terms of young people going into science and engineering, with increases in the number of entrants into engineering courses 28 “The banking crisis and subsequent recession showed that the UK had become over-dependent on financial services and property. Even worse, it is now clear that the banking and financial services sectors, taken as a whole, did not generate as much added value as has been supposed. Instead, paper profits were reported which were based on leveraging the price rise of financial assets.” Dyson. 2010. Ingenious Britain. Op Cit. p. 7. 29 The Guardian. 2010. “David Cameron’s Talk About Reviving British Industry is Nonsense.” November 1. 30 According to the Trades Union Congress, the current UK “Coalition government is not in favour of an activist approach to industrial policy. Whether this is because of its focus on deficit reduction, which limits the amount of money available to support such an approach, or is the result of an ideological attitude to government intervention, is unclear. In truth, it is probably a mixture of the two.” TUC. 2011. German Lessons: Developing Industrial Policy in the UK. December 8. p. 26. 31 HC Deb 23 March 2011 c966. 32 The Engineer. 2010. “Centre Point: Hermann Hauser Discusses Commercializing Technology.” September 6.

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APPENDIX A4 345 and the number of young people taking apprenticeships.33 The need to “rebalance” Britain’s economy away from financial services and toward manufacturing has “been spouted by politicians of all stripes since the recession [including] Lord Mandelson, the Chancellor John Osborne, business secretary Vince Cable, and David Cameron.”34 A Vulnerable Manufacturing Base At the end of three decades of free market fundamentalism under successive Conservative and New Labour governments, Britain is now looking back at “one of the biggest industrial declines observable in postwar Western Europe”35. At the end of the 1970s, manufacturing accounted for nearly 30 percent of national GDP and employed 6.8 million people, but by 2010, its share of GDP had shrunk to 11 percent of the economy and the sector employed about 2.5 million people, an attrition rate of nearly two-thirds36. The composition of the British manufacturing sector has also undergone a transformation, with large and medium-sized firms at the top of the manufacturing chain headquartered in the United Kingdom having become “a nearly extinct species.” ICI, GCE, Lucas, “and all the rest have all been broken up and sold off.” The big British-owned factories of the 1970s are mostly closed or sold off either because of shareholder value demands for profit which encouraged retreat, or as a result of inept privatization which destroyed supply chains.37 The closure of the factories doomed many of the assembly and process companies that supported them: “When the big factories closed, the supporting infrastructure decayed. Import dependency is the legacy…British manufacturing has downsized into workshops, as it loses its industrial districts.”38 The proportion of British companies with 10 or fewer employees grew from 52 percent in 1983 to 76 percent in 2010, while the proportion of firms with 200 or more employees shrank from 4 percent to 1 percent during the same period.39 Manchester University’s Center for Research on Socio-Cultural 33 Professional Engineering. 2010. “Gordon Brown’s Record on Science, Engineering and Technology Defended by Lord Sainsbury.” May 14. 34 Professional Engineering. 2012. “Getting the Balance Right.” May 1. 35 Chakrabortty, Aditya. The Guardian. 2011. “Why Doesn’t Britain Make Things Any More?” November 16. 36 Ibid. 37 Centre for Research on Socio-Cultural Change. 2011. Rebalancing the Economy (or Buyer’s Remorse). Working Paper No. 87. Pp. 29-30. 38 CRESC. 2011. Rebalancing the Economy. Op. Cit. p. 33. 39 The Guardian. 2010. “David Cameron’s Talk About Reviving British Industry is Nonsense.” November 1.

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346 21ST CENTURY MANUFACTURING Change (CRESC) commented in 2010 that “the legacy of Thatcherism and New Labour is a British manufacturing sector dominated by small workshops.”40 CRESC released a study in 2011 which concluded that thirty years of welcoming inward foreign investment, coupled with the advent of a manufacturing sector dominated by small “workshops,” would limit Britain’s ability to use innovative technology to capture high levels of UK-content in manufacturing. Companies at the top of the United Kingdom’s supply chains are typically foreign-owned branch assembly plants, such as the Japanese automakers, “limited by their role in a global division of labour established by a corporate parent for whom the United Kingdom is an important market but a relatively high wage cost production base whose export profitability is complicated by currency fluctuations against the Euro.” Small workshops firms are often cogs in global supply chains which are largely non-British.41 A number of observers point out that the dramatic shrinkage of British manufacturing overshadows areas of abiding strength. The United Kingdom is still the ninth largest manufacturing nation on earth. Although the sector has contracted in terms of jobs and percentage of GDP, output is actually 25 percent higher than it was in 1970, reflecting the rapid improvement of labor productivity.42 The British machine tool industry—critical to the manufacturing sector—recovered quickly from the recession and enjoyed dramatic growth after 2010, reflecting equipment orders from automotive and aerospace firms.43 Rolls- Royce is a world class producer of technology-intensive products and is the second-largest maker of jet engines in the world. The United Kingdom has attracted investment by Japanese automobile producers and India’s Tata group and retains the third largest auto industry in Europe. Two of the world’s largest 40 CRESC. 2011. Rebalancing the Economy. Op. Cit. p. 30. A technological divide also exists which, in effect, creates a “tale of two sectors” in manufacturing. “There is a cluster of highly successful firms in high-tech, innovative market sectors. But there is also a long tail of low value-added manufacturing firms that compete largely on price.” Engineering UK 2012. Part 1.3.1. 41 A 2009 Cambridge University study comments that because so much of the value chain in many sectors is outside the UK, “partnering with major multinational companies, often promoted as a reason for encouraging academic-industrial collaboration at the research stage, is quite unlikely to lead to significant added value, and jobs, in the UK.” Mina, Connell and Hughes. 2009. Intermediate Research Organizations. Op Cit. Pp. 7. Tim Crocker, a representative of the UK’s SME Innovation Alliance, told Parliament in 2012 that “I can promise you that there is only one business model in town for small companies: to get to £20 million and sell out. There has been a lot of research on building what has now become recognised as the equivalent of the German Mittelstand and how we grow medium-size companies from a sell-out value of £20 million to something with a revenue of maybe £100 million, which we are really short of in this country. To do that, you have to have longer-term finance that will buy out the VCs and keep the companies in this country. It may be in partnership with a UK company, but the statistics show that most of these companies are sold overseas because the Americans, Indians and Chinese all have their chequebooks open.” House of Commons, Science and Technology Select Committee. Bridging the Valley of Death. Improving Commercialisation of Research. Oral Evidence. Q219. 42 Engineering UK 2012. Part 1.3.1. 43 Professional Engineering. 2012. “Sharpening Up.” April 3.

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APPENDIX A4 347 and most successful pharmaceutical companies, AstraZeneca and GlaxoSmithKline, are UK-based. The United Kingdom is one of the world’s leading countries in the development and manufacture of advanced composite materials. But “the erosion of the UK’s manufacturing base over the last 30 years means that it is now highly skewed with some strong R&D intensive sectors such as pharmaceuticals and defense and aerospace and some, including electronic devices, ITC and materials, with weak absorptive capacity.”44 A Shrinking Industrial Research Infrastructure Structural changes in the British manufacturing sector have affected the industrial research infrastructure supporting manufacturing. Since the 1980s, a significant number of British companies have shut down their in-house laboratories, replaced by an approach exemplified by Cisco Systems—the acquisition of promising start-ups and/or their intellectual property45. AT&T Laboratories Cambridge, for three years Europe’s leading communications engineering research laboratory, was closed in 200246. Public research institutions supporting British industry have also been downsized. Rolls-Royce told Parliament in 2010 that in contrast to Germany: The UK has over the past 25 years consistently dismantled its national research centre base with the loss of the Royal Aircraft Establishment, Marchwood and Leatherhead CEGB Centres and many others. It has also significantly reduced the scale and scope of remaining centres such as Culham, the National Physical Laboratory and the National Engineering Laboratory.47 44 Mina, Connell and Hughes. 2009. Intermediate Research Organizations. Op Cit. Pp. 7. A recent economic model commissioned by the BBC and developed by the Office of National Statistics and Cambridge Econometrics forecasts that Britain’s manufacturing sector will continue to decline steadily through 2020. Professional Engineering. 2012. “Getting the Balance Right.” May 1. 45 Corporate laboratories closing included British Telecom’s Martlesham laboratory and GEC Marconi’s central research. The Engineer: 2010. “Centre Point: Hermann Hauser Discusses Commercializing Technology.” September, 2010. 46 The Guardian commented on the closing of the AT&T facility that “a great research laboratory is a very delicate organism - rather like a great symphony orchestra. It takes years to create, and very skilled management to keep it vibrant. Once broken up, it is impossible to put it back together again. Sometimes these strange social organisms run out of creative steam and deserve to die. But the AT&T lab was not one of these. In fact, in the last years of its life it invented what many of us thought would be one of the defining communications devices of this century (and, incidentally, the salvation of its telco owner) - the broadband phone.” The Guardian. 2002. “Wrangling Money Men Shut Down the Future.” April 20. 47 House of Commons, Science and Technology Committee, Technology and Innovation Centre Enquiry, Written evidence submitted by Rolls-Royce. TIC 82. Ev. 68.

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APPENDIX A4 357 their findings and recommendations, the studies were sufficiently congruent to form the basis for new technology promotion policies supported by all three major parties. The most significant of these was the creation and funding by the government of a number of “technology integration centres” (TICs) to bridge the gap between academic research and commercialization. In 2009, Lord Mandelson, Secretary of State for the Department for Business Innovation and Skills, commissioned a study by an eminent Austrian- born UK entrepreneur and scientist, Dr. Hermann Hauser, to examine business- focused “Technology and Innovation Centres” and their existing and potential role in enabling knowledge transfer in the United Kingdom.84 Hauser studied TICs in a number of countries and the existing knowledge transfer institutions in the U.K. Drawing particularly on Germany's Fraunhofer-Gesellschaft as a model, Hauser set forth a blueprint of recommendations for the establishment of a national network of TICs in the U.K. supported in part by long-term, stable government funding.85 The Labour government stepped down in May 2010 before Hauser's recommendations could be implemented. However, the Conservative Party, the biggest party within the coalition which emerged after the election, had just released a report by James Dyson, an eminent British industrial designer and entrepreneur, examining how Britain could become Europe's leading generator of new technology. He offered wide-ranging recommendations with respect to educational reform, knowledge exploitation, support for high-tech start-ups and established companies, and promoting increased esteem for science and engineering in the United Kingdom. Like Hauser, Dyson addressed the challenge of translating university research into commercial products, and recommended that – "New university/industry research institutions capable of becoming centres of excellence in a particular research field should be given government sponsorship. These institutions should provide space for interactions, promote staff moving between business and academia and allow sharing of expensive resources."86 84 The Manufacturer. 2012. "What is the High Value Manufacturing TIC?" January 6. 85 Hauser, Hermann. 2010. The Current and Future Role of Technology and Innovation Centres in the U.K. March. The Guardian commented that “The German model tends to become fashionable in Westminster every 20 years or so, like flared trousers.” The Guardian. 2012. “British Politicians Are Praising Germany: But Is It Just a Passing Fad?” September 18. 86 Dyson, James. 2010. Ingenious Britain: Making the UK the Leading High Tech Exporter in Europe. p. 38.

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358 21ST CENTURY MANUFACTURING The 2010 Comprehensive Spending Review The Coalition government of the Conservative and Liberal Democratic parties which took power in May 2010 was committed to eliminate the country’s deficit and implement steep cuts in government spending.87 In October 2010, the Chancellor of the Exchequer for the coalition government adopted a Comprehensive Spending Review, characterized by deep cuts in research budgets. The amount allocated to the Research Councils for equipment and facilities was cut in half, forcing a consolidation of existing research infrastructure. Austerity forced hard choices on the government, which decided to maintain spending on priorities at the expense of other programs, stop support for public engagement, and simplify the technology-transfer landscape by rationalizing the clutter of multiple tech-transfer organizations.88 The Spending Review committed £200 million annually through 2014-15 to support manufacturing and business development, emphasizing the commercialization of technology and support for potential high growth companies. The government indicated that these funds would be allocated to support the Manufacturing Advisory Services to fund “growth hubs,” to support high growth companies, and to create a network of Technology and Innovation Centres (TICs). £200 million was earmarked over five years for “an elite network of research and development Technology and Innovation Centres.”89 The TIC Concept In the fall of 2010, the Government announced that it would invest £200 million to create a network of Technology and Innovation Centres over a 4-year period. The Technology Strategy Board would be charged with creating and supervising the TICs. In the 2010-11 Parliamentary enquiry into Technical Innovation Centres, there was considerable support for a government project that would build upon existing research organizations rather than creating entirely new entities that would displace or compete with established ones. Professor Ric Parker, Director of Research and Technology for the Rolls-Royce 87 “The [current] UK government’s raison d’être, its overarching narrative since it was elected in 2010, has been to eliminate the UK’s structural deficit over the lifetime of this Parliament.” Trades Union Congress. 2011. German Lessons: Developing Industrial Policy in the UK. December 8. p. 11. 88 Interview with Professor Nigel Titchener-Hooker, Professor Chris Mason , University College London and Professor Gary Lye, Engineering and Physical Sciences Research Council, London June 11 2012. 89 HM Treasury. 2012. Spending Review 2010. Cm 7942. Pp. 52. October. Mike Oldham, head of the TIC program (now designated “Catapult”) observes that “we got through the October 2010 savage expense review…we survived intact, one of the few programs that did.” Interview, London, June 12, 2012.

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APPENDIX A4 359 Group, said that “we can’t afford greenfield sites if we are going to make any real impact on this.”90 TSB Chief Executive Iain Gray told Parliament that the TSB had surveyed “nearly 100 centres” around the country and concluded that “a shortlist of a couple of dozen” were “operating at what I would call a reasonably good regional maybe even national level, but what we really want to do is to identify a small number of world-leading centres—six to eight—that can operate on a world stage.”91 In January 2011, the TSB published a prospectus for the TICs establishing basic principles, criteria for selecting their areas of specialization, and guidelines for how they would be developed and run. The prospectus clarified a number of basic points about the nature of the TICs:  Physical sites: The TICs would not be virtual but would operate from one or a small number of linked physical sites. They would provide access for businesses to “the best technical expertise, infrastructure, skills, and equipment that would otherwise be outside the reach of individual companies.”92  Funding model: The TICs will be funded through a combination of core funding provided by the TSB and public and private contract research revenues. The core funding from the TSB is expected to enable sustainable investment over the course of five years with the expectation of continuing for another five years.93  Scale: The TICs are envisioned as deploying a technical staffs of roughly 150 highly qualified individuals to achieve annual turnover of £20 to £30 million. Each TIC will need to attract £10 to £15 million per year from the private sector to be viable.  Governance: Each TIC will be run by an “autonomous, business led management board.” The TSB will supervise the TICs utilizing an 90 House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. December 15, 2010. Q4 Ev 7. Dr. Tim Bradshaw, Head of Enterprise and Innovation for the Confederation of British Industry, testified that “There are already existing centres in the commercial space, operating commercially, that we do not need to replicate or tread on the toes of…If we are trying to get an impact on growth and commercial return quickly, then it is probably better to start, by and large, with things we have already and build from there.” 91 House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. December 15, 2010. Q84 Ev 24. 92 Interview with Mike Oldham, Head of Catapult Centres Programme. London. June 12, 2012. 93 In addition to core funding, David Willets, the Minister for Science and Universities, suggested in 2011 that the TICs might acquire existing assets from other public entities. “There are some interesting questions about what is happening to some of the assets of the [Regional Development Authorities] which have not been fully resolved. You may find that some things that currently belong to someone else such as a university or an RDA, could become part of this new [TIC] legal entity. I don’t think that’s a barrier.” House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. January 12 2011. Q123 Ev 31.

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360 21ST CENTURY MANUFACTURING internal advisory oversight committee supported by a small staff or “programme team.”94  Timing: All seven TICs were expected to be fully operational in 2013.95  Metrics: The ultimate measure of success of the TICs will be wealth creation in the United Kingdom, but given the subjectivity and long time frame entailed in such an assessment, intermediate measures will be used, including the value of work won competitively, the number of new and repeat customers per year, number of new projects, intellectual property created and new businesses created.96 Criteria for Selecting Technology Areas The Technology Strategy Board indicated that it would select the target technology areas in which the TICs would specialize according to five criteria: 1) Global markets for technology worth billions of pounds per year; 2) world- leading UK research capabilities in the technology area; 3) existence of a commercial base in the United Kingdom capable of exploiting the technology to capture a “significant share of the value chain;” 4) an opportunity to “anchor” knowledge-intensive activities and wealth creation in the United Kingdom; and 5) an alignment with strategic national priorities. The TSB indicated that its first priority was establishment of a TIC for high-value manufacturing.97 Branding One aspect of the Fraunhofer admired by British policymakers was the strength of the Fraunhofer brand, which is admired around the world and is closely associated with the excellence of German products and engineering. TSB Chief Executive Gray emphasized that British TICs should be given a collective brand name “that we can all buy into and use” as a “very powerful mechanism for the UK.”98 In the end, it was decided to call the TICs “Catapult Centres” based on the use of “catapult” as a verb meaning “to thrust forward or move quickly.”99 94 House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. January 12 2011. Q130 Ev 32. 95 Professional Engineering. 2012. “Catapults to Fame and Fortune.” July 31. 96 TSB. 2011. Technology and Innovation Centres: A Prospectus. January. 97 Professional Engineering. 2011. “Innovation to Boost Economy. February 7. 98 House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. December 15, 2010. Q104 Ev 27. 99 Mondaq.com. 2012. “Innovation and Research Strategy: A Summary (December 2011).” January 18. InnovateUK. “Technology Strategy Board Reveals Name for Technology and Innovation Centres.” December 8.

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APPENDIX A4 361 Intellectual Property The House of Commons Science and Technology Committee said in its report on the TIC enquiry that “the management of intellectual property rights will be crucial to an effective working relationship between TICs, academia, and business. We ask the TSB to set out principles for IP management including an outline of current best practice in its TIC implementation plan but we reject the need for prescription.”100 The TSB has established guidelines for the handling of intellectual property by the Catapult Centres which provide that each Catapult will agree with the TSB as part of its grant funding agreement an IP policy establishing the approach to be taken and the processes which will be adopted. The IPR arrangements are expected to facilitate the acceleration of the commercialization of new technologies and the growth of high-technology industries in the United Kingdom. Ownership of the IPR will vary according to funding source:  If research is conducted exclusively under core funding, the Catapult itself is expected to own the IPR and license it to business users.  If R&D is performed pursuant to a contract with a company, the company is expected to receive exploitation rights for the IPR but the IPR arrangements must not inhibit future use of the Catapult’s background IPR.  If collaborative R&D is jointly funded by the Catapult and business(es), it is expected that all partners will agree to “appropriate arrangements to share the rights to exploit IP created.” The TSB will not allow Catapults to use core funding for collaborative R&D projects.101 Relationships with Universities: In a number of Catapults built on existing research organizations, ongoing relationships between the intermediate research organizations and universities already exist. However, the way the Catapults will interact with universities and other basic research institutes is not yet clear.102 A key question will be the IP arrangements, which will be negotiated by the Catapults, and both 100 House of Commons, Science and Technology Committee. Technology and Innovation Centres. Second Report of Session 2010-11. pp. 37. 101 Technology Strategy Board. 2012. Catapult Centres—Guidelines for Management of Intellectual Property. 102 Interview with David Way, Director of Knowledge Exchange and Special Projects, Technology Strategy Board, and Mike Oldham, Head of Catapult Centres Programme, London, June 12, 2012. David Way of the TSB indicates the UK will not follow the Fraunhofer model in this respect, faulting it because “all [Fraunhofer] centers are run by academics.” Mike Oldham, who heads the Catapult program, say that “how [for the Catapults] to reach into the research base” for technologies sought by industries “is one of the really difficult questions that we have.”

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362 21ST CENTURY MANUFACTURING universities and industry are reportedly saying, “give us some IP models we can use.”103 Building on Existing Organizations: The TICs are being built out of existing applied research and technology transfer entities, a process which is currently under way. TICs will not incorporate the whole landscape of applied research organizations but pick and choose a few of the best ones. A partial taxonomy of the types of entities involved is set forth below.  Research and Technology Organizations (RTO): RTOs are independent “special knowledge organizations” which develop and transfer technology to industry. Many of them trace their origins to the Research Associations (RAs) which were set up between the 1920s and the 1940s to access government funding from what was then the Department of Scientific and Industrial Research as well as funding from industry. They have evolved into a heterogeneous array of commercial and not-for-profit entities which concentrate on laboratory and technical consultancy services. Most of them have a specific sector focus. 104  Knowledge Transfer Partnerships: Knowledge Transfer Partnerships (KTPs) involve three actors, a UK-based company, a knowledge base partner (in most cases a university) and a university graduate, a “KTP Associate,” who is supervised by a mentor with appropriate technical skills (“Academic Supervisor”). The company designates a project that is strategic in character, capable of conveying economic benefit to the firm, and must involve an effort the company could not have undertaken without the assistance of the knowledge base partner. The KTP Associate works at the company to execute the project with the 103 Interview with David Way, Director of Knowledge Exchange and Special Projects, Technology Strategy Board, and Mike Oldham, Head of Catapult Centres Programme, London, June 12, 2012. 104 House of Commons Science and Technology Committee. Technology and Innovation Centres Enquiry. Written Evidence Submitted by Rolls-Royce, TIC 82. Ev. 68-69. Some of the most impressive RTOs are backed by Rolls-Royce, which has developed a network of seven Advanced Manufacturing Research Centers (AxRCs), five of which are located in the United Kingdom. In these organizations, Rolls-Royce, other industrial partners, and universities conduct research on manufacturing process technologies. The UK-based magazine Machinery observed in 2008 that one of the AxRCs, based in Rotherham, Yorkshire, in partnership with Boeing, had “established itself as probably the highest profile manufacturing process development facility in the UK over its short life.” Machinery. 2008. “The Final Piece.” September. The AxRCs “operate in the traditionally difficult space for manufacturing where university research is applied and developed in conjunction with full-scale capital equipment, overcoming the ‘Valley of Death’ between technology validation and productionisation.”

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APPENDIX A4 363 frequent presence and contribution of the Academic Supervisor. The company may or may not ultimately offer employment to the KTP Associate but many actually do. Roughly 1000 KTPs are operating at any given point.105 KTPs are funded by grants, drawn from contributions from over 15 public organizations and are supervised by the Technology Strategy Board.  Knowledge Transfer Offices: Knowledge Transfer Offices (KTOs) are offices established within universities to disseminate information about current university-based research to business, nonprofits, and government agencies. Most of them are funded through the Higher Education Innovation Fund, allocated on the basis of faculty size and knowledge-transfer income. Some KTOs provide back office services for collaborative research agreements with companies, train business employees and coordinate industry networks. The 2010 Dyson report noted that businesses have complained that KTOs display “unrealistic expectations in IP negotiations.106  Knowledge Transfer Networks: Knowledge Transfer Networks (KTNs) are networks designed to raise nationwide awareness of specific technology areas, facilitate research, communication and information sharing, and connecting companies in need of technology with entities capable of providing it. Funded by the Technology Strategy Board, the UK’s KTNs are now hosted on __connect, an online knowledge sharing platform. High Value Manufacturing Catapult The first TIC opened by the Technology Strategy Board was the High Value Manufacturing TIC, launched in October 2011 and subsequently dubbed the HVM Catapult107. The TSB put the establishment of the HVM Catapult on a fast track, reflecting, the government’s emphasis on revival of manufacturing.108The HVM Catapult’s activities will embrace all forms of manufacturing utilizing metals and composites, as well as process manufacturing technologies and bio-processing. It will support a broad range of UK industrial sectors, including pharmaceuticals and biotechnology, electronics, food and beverage processing, chemicals, automotive, and energy.109 105 The KTPs were launched in 2003, superseding the Teaching Company Scheme, which had been established in 1975. 106 Dyson. 2010. Ingenious Britain. Op Cit p. 13. 107 The Manufacturer. 2011. "First National Technology and Innovation Centre Opens.” October 14. 108 Professional Engineering. 2011. “Innovation to Boost Economy.” February 7. 109 UK Trade and Investment. 2012. UK Advanced Engineering. Pp. 29. The scale of the HVMC exceeds that of most Fraunhofer institutes. The HVMC is expected to staff up to a level of 750-1000 people, compared with a typical Fraunhofer staffing of 400 people per institute. The HVMC

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364 21ST CENTURY MANUFACTURING The HVM Catapult aggregates seven UK research centers that are already operating. These organizations are very differentiated, with the Advanced Manufacturing Research Centre (AMRC) heavily oriented towards aerospace and EMG (Warwick Manufacturing Group) oriented towards automotive technology. “A big part of Catapult was to get them all to agree to a common management structure and a common strategy. The big question is centrifugal force…[some of them] almost saw each other as enemies.” 110 The seven manufacturing research centers were receiving government funding through the regional development agencies. With the abolition of the RDAs in 2011 the centers confronted the loss of government funding and were thus “incentivized” to cooperate with Catapult. 111 One of the organizations being folded into the HVM Catapult, the Advanced Manufacturing Research Centre, is a collaboration between the University of Sheffield and roughly 60 private companies which include BAE, Boeing, and Rolls Royce, which enjoys a world-class reputation for high quality collaborative research. The AMRC was established in 2004 with an eye to building on Sheffield's centuries-old expertise in metallurgy and metalworking to develop new manufacturing techniques involving metals as well as new materials.112 The AMRC has already had a dramatic impact on Sheffield's economy. Drawn by the prospect of the proximity of a "world-class facility,” companies such as Rolls-Royce have opened new factories in the Sheffield area, drawing with them smaller supply-chain companies. Richard Wright, Executive Director of the Sheffield Chamber of Commerce, observed of the AMRC that— It was a long-term investment at a time when manufacturing was not really the thing in the UK, in 2002-3 when there was a different impression of manufacturing. If you take a long-term view of things you can build something special. Because we have invested in that area we are now seeing the benefits in terms of a buoyant advanced manufacturing center in the region. Rolls Royce has decided to open two factories here. It has allowed the region to up itself by more than one gear. 113 Another important component of the HVM Catapult, The Manufacturing Technology Centre (MTC) in Coventry, opened in 2011 and is already booming, having outgrown its original 12,000 square meter facility. From a start with 8 employees and 3 projects in April 2011 it had grown to 80 people working on currently has 30 industrial members with a target of 50. Interview with Will Barton. Interim CEO, High Value Manufacturing Catapult. London. June 11, 2012. 110 Ibid. 111 Ibid. 112 The Observer. 2012. "New Hope Rises from the Fields where Miners Fought and Lost.” July 8. 113 Ibid.

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APPENDIX A4 365 160 projects by June 2012. MTC is looking to double its current facility size and will open a 4,000 square meter academy which will train 2.000 apprentices over the next 10-15 years. Clive Hickman, MTC’s CEO, identifies target opportunities for innovative manufacturing to support technology areas such as ultra-large diameter wind turbines, flexible plastic televisions, low-cost batteries for electric vehicles, and partial and fully composite road vehicles.114 The HVM Catapult will make a concerted effort to obtain funding from the European Union and to assist small and medium enterprises in securing EU funds.115 Professor Nigel Perry, CEO of one of the HVM Catapult’s member organizations, told Parliament in 2010 that TICs would play a “crucial role” in the pursuit of EU money and that “we will be developing a dedicated team inside CPI whose sole target will be to identify and target those [EU] framework programmes.” Asked by an MP whether the United Kingdom had “not been extraordinarily successful thus far,” he responded “you can say that, yes.”116 Other Catapults. A number of other planned Catapult centers have been announced by the TSB. Fraunhofer Comes to the United Kingdom In addition to serving as a partial model for the Catapult program, in 2012 the Fraunhofer-Gesellschaft indicated that it would open a Fraunhofer institute in Glasgow focusing on photonics, the first Fraunhofer to be established in the United Kingdom. Photonics had been considered and rejected by the TSB as a possible technology area for the establishment of a Catapult.117 The Fraunhofer Centre of Applied Photonics will be affiliated with the University of Strathclyde, which has an excellent reputation for photonics research and commercialization.118 The head of one of the UK’s Catapults commented that “they’ve picked an area we’re not investing in.”119 The establishment of the 114 Professional Engineering. 2012. “Fast Growth at Technology Centre Bodes Well for Manufacturing.” June 14. 115 Mike Oldham, the head of the Catapult network, comments that “frankly, small companies should avoid EU programs unless they know what they are doing. The primary value of the EU programs is not money, but building links to become part of a supply chain.” Interview, London, July 12, 2012. 116 House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. December 15, 2010. Q76 Ev 21. Professor Richard Brook, President of the Association of Independent Research and Technology Organizations, who testified with Perry, commented that “the process of applying for [EU] framework projects is quite painful in many respects and puts industry off. SMEs find it particularly hard to bear the risk that is involved. The TICs can be the champions of helping them into Europe.” Ibid. 117 The TSB indicated that the sheer diversity of photonics application made it difficult to pin down focused ideas in a coherent manner. Optics.org. 2012. “Photonics Misses out on UK ‘Catapult’ Center.” March 28. 118 Optics.org. 2012. “Fraunhofer Sets up UK Applied Photonics Unit.” March 30; The Scotsman. 2012. “Germans’ GBP9m Scots Laser Research Centre.” May 30. 119 Interview. London. June 11, 2012.

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366 21ST CENTURY MANUFACTURING TABLE APP-A4-1 Planned Catapult Centers Theme Planned Research Focus Connected digital economy Cloud computing, identity management, blending of digital and physical worlds Offshore renewable energy Offshore wind, wave and tidal power Cell therapy Cell therapies in pre-clinical stages Satellite applications Satellite communications, broadcasting, positioning, observation Future cities Urban systems and infrastructure SOURCES: Catapult—Connected Digital Economy—Priorities and Capabilities— Conclusions from the Consultation Exercise, April to June 2012. July 15 2012. Renewable Energy Focus. 2012. “UK Announces £50m Offshore Renewable Energy Catapult.” February 9. Interview with David Way, Director of Knowledge Exchange and Special Projects, Technology Strategy Board, London, June 12, 2012. BBC News. 2012. “Plan to ‘Catapult’ UK Space Tech.” January 4. Future Cities Interest Group. "Future Cities Catapult FAQs.” . Technology Strategy Board. 2012. “Next Catapult Centres to Focus on Future Cities and Transport Systems.” March 21. Fraunhofer in Scotland was supported by German companies operating in the United Kingdom. The Fraunhofer reportedly told the Scottish government that “we won’t invest unless we get government core funding.”120 OUTLOOK While it is too soon to assess the prospects of the Catapult initiative, a few observations are possible. On the positive side, the effort has seen Britain’s political parties work together on an initiative to attack the country’s relative weakness in the area of applied and translational research. A substantial effort has been made to avoid past mistakes such as the failure to provide government core funding to the Faraday Centres. The existing research institutes which are being incorporated into the Catapults are in a number of cases already world- class organizations, and the provision of additional funding and strategic direction is likely to have a positive effect. The TSB has drawn up its vision for Catapult on the basis of extensive consultations with stakeholders and is implementing it with impressive speed. On the negative side, a number of observers have expressed concern that core funding of £200 million over five years is inadequate. Professor Nigel 120 Interview with Mike Oldham, Head of Catapult Centres Programme. London. June 12, 2012.

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APPENDIX A4 367 Perry, CEO of the Centre for Process Information, told Parliament in 2010 that £200 million was “a great start, but I’m not sure it’s’ enough.”121 The Fraunhofers currently receive more than eleven times more core funding from governments than the Catapults will get.122And the misimpression that doomed the Faraday Centres—that the Fraunhofer model involved primarily private funding—may still surround the Catapult effort.123 It is not clear that public funding of the Fraunhofer proportion, which involves two thirds or more of the operating budget and additional funds for equipment and facilities, will be available to the Catapults in an era of stringent fiscal austerity. The 60 Fraunhofer institutes tend to concentrate on narrower and more focused technology areas than the Catapults will do, recalling comments to the effect that past British efforts at applied research spread too little money over too wide a technological landscape. And, as was frequently observed in the Parliamentary enquiry on Technology and Innovation Centres, many of the features of the German innovation system that facilitate the operation of the Fraunhofer are simply not present in Britain. At the same time, the Catapult initiative enjoys support from across the political spectrum in Britain, a dynamic that has not always characterized similar initiatives in the past. It is being implemented at a time when the traditionally distant relationship between the British research community and industry is improving. The Catapults are being formed by incorporating some of the best existing applied research institutes in the world, such as the Advanced Manufacturing Research Centre (AMRC) in Sheffield. While the Catapult project is modest in scale compared with the Fraunhofer, it is reasonable to expect that it will improve the competitiveness of British industry across a relatively broad front and may enable the United Kingdom to retain a competitive edge in a few areas in which it already leads. 121 Perry commented that “we’ve done a lot of benchmarking across Europe with CPI, and what we see is that the average institute across Europe has about €25 million or £25 million, and about 200 people. You’ve been to see the Fraunhofers. There are 59 there and that is the average size of those 59. If you look at the £200 million, we mustn’t forget that in the one third, one third, one third model, that should, with time, grow to have the economic impact of around £600 million effectively,. On that scale, I think it’s a great start, but it has some way to go yet.” House of Commons, Science, and Technology Committee, Technical and Innovation Centres enquiry. Oral evidence. December 20, 2010. Q69 Ev. 19 122 The Fraunhofer s received the equivalent of £447 million in core government funds in 2010, the most recent year for which figures are available, whereas the Catapult program will receive 40 million per year in comparable funding. 123 In October 2011, the British engineering publication Professional Engineering made the statement “In Germany, about 70 percent of the research work carried out by the Fraunhofers is funded by business.” Professional Engineering. 2011. “Technology and Innovation Centres will Stimulate Rebalancing of the Economy.” October 12.