Research growth hidden by the trees: BERD analysis

Scottish university research continues to be rated as world class according to the UK wide 2014 Research Excellence Framework (REF 2014). According to Research Fortnight, over 85% of Scottish university research was rated as having an impact in wider society and economy. However, figures from the Scottish Government @scotgov shows that our research base is not being exploited here in Scotland.
 
The Business Enterprise Research and Development (BERD) Scotland 2013 figure outline the spend on R&D by business. The good news is that R&D spend has increased by 10% in cash terms in 2013 compared to 2012. However, the spend in proportion to GDP has remained stubbornly at 0.6% for the last decade, despite government interventions to increase the spend using tax breaks across the UK and the promotion of knowledge transfer with university researchers. So it looks like government policy is not having an impact in developing the Scottish research base but the devil is in the detail.

The overall BERD spend is dominated by large companies and sectors so a look at a breakdown maybe more revealing. One area where there is significant growth year-on-year is in BERD spend by small and medium size enterprises (SME) with a 12% increase in 2013.  This is interesting as the government policy is likely to have a greater impact on SME R&D spend than that of large businesses such as pharmaceuticals.  The large businesses consistently spend relatively large amounts on research which makes it difficult to make an impact on the overall figure due to relatively small growth in BERD spend by SME.  Successful SME are also ripe to be taken over, hence there is significant volatility in the figures, particularly for independent SME, but the overall rise in spending is heartening.

The sources of funding reveal that investment by other UK business declined from 20% in 2005 to 1% in 2012 whereas own funding for R&D has increased from 50% to 75%.  The source of own funding is not expanded but this lack of spend by other business could have contributed to the demise of wave technology companies.

Comparisons with the rest of the UK show that Scottish business is lagging behind as even Northern Ireland spends proportionality more and only Yorkshire, Wales and the North East spend less. Relative BERD spend in Scotland is half that of the UK as whole which itself is half to quarter of that of our competitors.

It does seem that there are the roots for the growth of a knowledge economy within SME but that large enterprises dominate the figures. So, it is likely that government policy has at least contributed to the growth in R&D undertaken by SME and the rating in the REF 2014 show that our university research base is world class.

Economic forum, research spend and wind not waves.

National Economic Forum

The national economic forum met in Edinburgh this Wednesday with the theme of Rebalancing the Economy: Creating a Fairer and more Prosperous Scotland. The forum brings together business and wider society  representatives with government to discuss economic growth. It is opened with an address with the First Minister who outlines relevant government policy and  takes questions. This is followed by a panel session and workshops chaired by relevant ministers. The event allows for a two way exchange on  policy which allows government to share its ideas and gives representatives an opportunity to affect how those ideas are  implemented. The theme of this meeting followed on from the business pledge, that was announced as part of the Legislative programme, and the effect of further devolution arising from the Smith Commission. I gave an overview of these announcement in All Change as the Smith Commission publishes report, in a review of the week for PubAffairs.

Nicola Sturgeon led on the business pledge stating that businesses will be asked to commit themselves to good business practices, such as innovation and internationalisation, as well as a living wage, gender equality and supporting workforce engagement. In return, the companies will be offered more support from the Scottish Government and enterprise agencies. She went onto to say that the government will improve skills and maintain the most competitive business rate system across the UK as well as investing wisely and well in infrastructure and to support innovation.

Research Funding

Meanwhile in London Vince Cable, addressed the Royal Academy of Engineering saying that investment in science brings an economic return and that we should follow the EU example and count science funding as investment not spending. He lamented the relative lack of R&D spend by business but said he was in favour of great investment in Science. 

Despite the tax breaks for R&D and initiatives from Scottish Enterprise and the Funding Council there has been no growth in business spend on R&D as a proportion of GDP in Scotland (or the UK).

Wind not waves 

While wind power continues to take off it seems wave power has stalled. In Scottish Parliament questions on Thursday, Labour MSP Malcolm Chisholm asked the Scottish government about Pelamis Wave Power which has gone into administration.While it seems they can not help the company, the government hopes to keep some of their employees in Scotland with the creation of Wave Energy Scotland. However, they will have competition from those made redundant by Aquamarine Power. It seems neither could secure the funding required to further develop their wave power prototypes from private investors.

Creative review

The Economy, Energy and Tourism Committee has announced a review of the Economic Impact of the Creative Industries. The inquiry will focus on the TV and film and video games industries. The deadline is 8 January but with Christmas preparations this doesn't give much time.

To consider how Scotland can grow sustainable TV and film and video games industries. - See more at: http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/84491.aspx#sthash.KdMtssg0.dpuf

To consider how Scotland can grow sustainable TV and film and video games industries.   - See more at: http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/84491.aspx#sthash.KdMtssg0.dpuf

Economic Impact of the Creative Industries

Parliamentary engagement

Parliamentary engagement

In the last week there are have been 2 conferences which have facilitated dialogue with the Scottish Parliament. Last Friday it was Business in Parliament and on Wednesday it was the turn of Science in Parliament.

Business in Parliament

The Business in Parliament conference is an example of an event which impacts on Government policy and shows the advantage of engaging with politicians.  Both Alex Salmond, the outgoing First Minister, and John Swinney, the Finance Minister attended and addressed the conference, stating that ideas generated by participants had led to changes in government policy.   These ideas had come from business representatives in attendance at the conferences which have been running for eight years and are jointly organised by the Scottish Parliament Economy Committee and the Scottish Government.

Many other Minsters were in attendance and chaired workshops to encourage business participants to  share ideas and issues with the government.   This showed the willingness of the government and MSPs to listen and act on business issues.

The conference also showed the government interest in tech business both in terms of the speeches and workshop topics.  The First Minster highlighted the innovation centres and in particular the opening of the eighth centre which deals with big data.  He said the innovation centres had been set-up to tackle the challenge in performance between the research base in universities and the lack of impact on business.  A workshop also addressed businesses of the future.

Science in Parliament

The Science in Parliament conference is another annual event which has been running for a number of years and took place at Dynamic Earth.

Alasdair Allan, the Science Minster, in addressing the conference said that the government supported scientific endeavour. He then pointed out that Scotland ranks 4^th in the OECD countries for research funding and that Scots performs well in the Science PISA analysis of School pupils.

The theme of the conference was Science education and included research which showed a lack of funding for Science in schools compared to England. This research was covered in the media which also highlighted the conference.

In the afternoon a panel of MSPs from all parties addressed the conference and took questions from the audience.  All parties stated their commitment to Science and education, recognising the need to increase the number of scientists in the workforce.

These conferences show that politicians and the government are keen to engage and will develop policy based on the experience of business people.

Dr Tony Axon is Director of Positive Spin and can get your views on Science and technology and other policies to the decision makers and politicians.

Wind and water?

The Economy committee’s Inquiry into Scotland’s Economic Future Post-2014 is busy this week with two sessions on energy.  First, a special session in Aberdeen looking at the future of oil and gas takes place on Monday afternoon.  Then on Wednesday the usual session in the parliament where future energy sources are the topic with a particular emphasis on wind and wave power.

 

The written submissions for the first meeting concentrate on the ownership and tax issues of independence for Scottish waters as well as the operational impacts for the industry.  Prof. Warne of CMS Cameron McKenna LLP, is giving oral evidence and states that though the issues are capable of resolution, they will bring uncertainty which could impact on investment while negations take place and new administration is up and running.

Prof. Alex Kemp of the University of Aberdeen will present a paper which outlines the likely income and costs from oil production until 2050. Though his assessment of Scottish waters shows that Scotland would get 90% of oil revenues, the long-term predications show a dramatic fall in oil and gas production. 

So just as well the committee will address new energy sources on Wednesday with four panel members:

Dr. Toke of the University of Aberdeen is optimistic for the future of energy, asserting that the 100% renewable energy target is attainable in Scotland without significant impact on energy prices. 

Dr Nicola McEwen, University of Edinburgh is though concerned that the proposed partnership on green energy across the UK could stifle development.

Martin McAdam, of Aquamarine Power, who have developed the Oyster state that:

“A number of independent studies have underlined the significant long-term growth potential offered to Scotland by a thriving ocean energy sector. Aquamarine Power has itself spent more than £5 million directly in the Orkney economy and works with more than 40 local firms.”

Eric Machiels, Chief Executive, Infinis, who have wind farms and landfill gas sites in Scotland also believes there can be significant growth in such energy but is concerned at any perceived threat of a potential interruption to financial support.

It seems the future is bright but much depends on not only the decisions of the Scottish people but of both UK and Scottish governments.

A lack of science?

The recent survey by @ingeniousbrit showed a mixed response from small businesses on independence. There was a small majority (48%) who thought a Yes vote would harm their business but a significant minority (37%) thought it would be a positive step.  They surveyed 1000 businesses but there was little detail about their size or nature. Despite this lack of scientific method, the survey was picked up by the BBC and other media.

 

The Economy committee’s Inquiry into Scotland’s Economic Future Post-2014 restarts this week by taking evidence from business representative bodies.  However, judging by their written submissions, the scientific and technology companies will not be uppermost in the evidence session. Of the three written submissions only the CBI even mention science or spin-outs and then only in the context of university research funding.  It seems in responding to the inquiry these organisations have failed to look at the future for the economy in Scotland and particularly the new growth areas in technology and science.

In the second panel is the Reid Foundation whose paper at least looks to develop a vision for a future economy. It states

“Given Scotland's levels of education, history of innovation, natural resources and geostrategic position we should be a high-skill, high-pay, high-productivity, high-investment, high-innovation economy.”

They go on to list areas including innovation where Scotland can develop this vision. Interestingly, one thing they suggest is that education and training should be more about engineering, maths, computing and design.  But not science, then go on to champion scientific research and development in another point:

“We should seek 'smart specialisation' wherever we can developing specialisations where Scotland's high-skill workforce and research and development make us competitive in export markets.”

Their evidence may be contradictory in places but at least it addresses the actual issue of the type of economy Scotland should develop rather than the esoteric and unanswerable questions that have so far dominated the debate.

Last week it was the turn of the Education Committee to start taking evidence on the future of Scotland with representatives from Universities.   They did address the issue of research and innovation but again failed to develop a future view, simply hoping the status quo would prevail after the referendum.

At the Scottish Labour party conference in Perth, the mood was upbeat with claims of the biggest conference turnout.  However, there was little for @Posvespin to tweet although research and innovation got a passing mention in the leader’s speech. Next it is the turn of the SNP with a rally for the referendum in Aberdeen from 11 April.

Dr Tony Axon is Director of Positive Spin and can get your views on Science and technology and other policies to the decision makers and politicians.

Take a tax break?

The budget offered some assistance to science community with increased funding with research centres to develop the R&D base.  Of more immediate benefit for innovative companies is the increased tax break for R&D, broadly defined. This announcement was aimed at SMEs who do not make a profit in an attempt to increase R&D to drive new manufacturing. 

 

There are also other R&D tax breaks available for large companies.  These incentives were introduced by the labour government and have been in place in one form or another for a decade.  But it seems that the Chancellor doesn’t believe they work as he couched his announcements with scepticism:

“If Britain isn’t leading the world in science and technology and engineering, then we are condemning our country to fall behind. So we will establish new centres for doctoral training, for Cell Therapy and for Graphene – a great British discovery that we should break the habit of a lifetime with and commercially develop in Britain.”

There may be examples of failures to capitalise on research developments but there are also success and ironically the last Conservative government, run by a scientist, did as much to decimate the science base as traditional manufacturing by encouraging short-term investment. Jobs for Laser researchers were as scares as mines in my home town by the Nineties. 

However, the new policy is to encourage investment in research but are the tax breaks working?  In Scotland the BERD spend has stubbornly stayed at 0.6% of GDP over the last decade and is dwarfed by the public funding of R&D.

So the world class research undertaken in Scotland does not seem to translate to products or the development of a business and enterprise research base.  However such stimuli take time to reap rewards and the large companies, particularly in pharmaceuticals, will dominate the BERD figures. Indeed, the National statistics on innovation showed Scotland as having more robust spin-outs. So are the tax breaks encouraging research in companies? 

This question is crucial as the Finance Secretary John Swinney will be considering the policy in the future.  In setting out plans on a yes vote, he said:

“Careful and targeted use of tax credits and allowances in an independent Scotland could make a difference and break down the barriers which limit private investment in R&D and harness more effectively the research in our universities.”

With a promise of more devolved powers even in the event of a no vote, he could be considering the best ways to promote research in industry and this may impact on tech companies and spin-outs.

Dr Tony Axon is Director of Positive Spin and can get your views on this and other policies to the decision makers and politicians.

Only another 6 months.

Today marks the 6 months to go point for the referendum campaign. So depending on your view point, we only have 6 more months to suffer the uncertainty or time is running out to influence the debate.  Whatever your view point, there was some news of interest to tech companies and thoughts on R&D espoused this last week.

 

BBC Scotland’s Douglas Fraser, chose to look deeper at Scotland’s economy and quoted evidence from the Bakbasel economic consultancy in Switzerland who offered their assessment of Scotland's current position and what it would have to address if it became independent. Through comparison with similar nations and regions within Europe, it emphasises that Scotland has significant advantages in its competitiveness and highlights Scotland's strong university research, but points out there's a weakness in translating it into patents and commercial benefit.

The Scottish Government addressed innovation with a gift and a promise. In the present, the Government announced £6.6M for Digital skills and in the future that R&D would be central to the economy with the formation of Scottish Agency for Innovation.  Finance Secretary John Swinney promised to continue investment in innovation centres which amounted to £124 over 5 years. Then in setting out plans on a yes vote, he said:

“Careful and targeted use of tax credits and allowances in an independent Scotland could make a difference and break down the barriers which limit private investment in R&D and harness more effectively the research in our universities.”

The latest evidence session of the Economy committee’s Inquiry into Scotland’s Economic Future Post-2014, included questions on R&D in Scottish industry from Christian Allard the SNP MSP, who lamented the decline of the manufacturing sector and question the lack of R&D in industry. In response Professor Jeremy Peat of the David Hume Institute said:“We need to stimulate an environment in which there is greater demand from the business community for innovation and interrelationship with the high-quality academics who undertake that work. We also need to set up incentive mechanisms so that those in universities are as incentivised to use what they produce by way of innovative potential in the business community as they are to produce academic journal articles, which might help in some of the assessments that take place. I want to see the desire on both sides to innovate and to use the marvellous work that is going on in a number of sectors across Scotland. If we are really interested in Scotland maximising its potential, it is critical that we make use of R&D. We all seek an innovative, productive and competitive Scotland.”  Professor Anton Muscatelli, Principal of Glasgow University agreed and went onto to say that “Not surprisingly, we find that small economies’ spend is directed to things such as economic development and education and away from things such as defence, which are less important to smaller countries than to larger ones.”

 

This week the inquiry turns to tax issues before taking evidence from Business on 2 April.

At the Scottish Conservative party conference in Edinburgh last weekend, the Prime Minister promised further devolution if the referendum is lost including greater tax powers. In the Leader speech, Ruth Davidson, also recognised the need for developing a tech economy saying:

“The greatest gift this generation can give to the next is an education system that truly prepares Scotland’s young people for the challenges of a competitive global economy.”

Next weekend it is the turn of Scottish Labour to meet in Perth. So what does the Science and the tech community want from Scotland’s opposition party?

Positive Spin will be attending the conference and can get your views to the policy makers and politicians.