Our CEO highlights the astonishing achievement by Oxford University and AstraZeneca was only made possible by long term strategic funding of world class UK science. This article originally appeared in Investment Week
This week’s rollout of the ‘Oxford vaccine’ has shone a spotlight on the importance of Research & Development (R&D) in tackling the greatest challenges faced by humanity. It is knowledge intensive businesses whose years of work goes on to underpin the greatest leaps in mankind. For example, anyone who saw the BBC Panorama programme ‘The Race for a Vaccine’ will know the science behind the AstraZeneca / Oxford vaccine came from years of deep technological work on ways to adapt viruses with small amounts of genetic material to vaccinate against a much feared (but expected) pandemic.
This amazing outcome, as well as the other work carried out by universities during this crisis, such as modelling, has reinforced the UK Government’s commitment to make the UK a global ‘scientific superpower’. The UK is already a world leader in R&D, with universities such as Oxford, Cambridge and Imperial producing high quality spinouts with significant IP in the sectors of tomorrow including artificial intelligence, big data, life sciences, cleantech, medtech and quantum computing.
This position is likely to be enhanced further given the Government’s commitment to increase R&D spending to £22bn per year. Moving into our post Brexit world, this grassroots investment will help put the UK in a strong position to tackle many of the world’s challenges, as well as delivering growth to UK plc.
The Government recognises that both private and public investment is required to meet its ‘scientific superpower’ objectives. This partnership forms the basis for Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) and the Government is particularly keen for more private capital to be invested into R&D intensive businesses which is why they announced the new ‘Knowledge Intensive’ EIS Funds last March.
These funds have been designed to reduce the tax date uncertainty and the administration of investing in EIS funds, in order to encourage increased EIS investment, and it will be interesting to see which companies have the required deal flow to launch these quite specific funds.
This investment in R&D and encouragement for early-stage investing creates a vibrant spin-out and start-up scene, however more can certainly be done to help encourage institutional funds invest in later stage investment opportunities as these companies develop. For instance, research conducted with Beauhurst shows the level of investment for R&D / Intellectual Property (IP) heavy businesses that the government is looking to support is below that of other areas within venture capital. It also shows a lower rate of investment in later stage companies.
The UK must have an investment ecosystem that can support these ventures throughout their growth journey to reap the full benefits of our world leading research. Whilst venture capital performance in the UK and Europe has been strong over the past few years, the pool of capital remains concentrated, and shy of investing into R&D / IP heavy businesses. We need domestic ‘scale-up’ or ‘growth’ funds to support the best of the best to reap the benefits both financially and societally here in the UK.
As we emerge from Brexit and the Covid crisis, the Government has an opportunity to supercharge certain sectors to kick start long term growth with well targeted funding to drive future innovation and job-creation. The grassroots R&D investment is committed, and initiatives such as Knowledge Intensive EIS funds should encourage early-stage investment. There is a review on the potential reform of defined contribution pension to allow an allocation to venture capital which could help later stage investment in these companies, but this will take time and is not targeted.
Pushing large amounts of cash towards R&D is not enough to put the UK ahead in a post Brexit world, we need a targeted agenda that focuses on the Knowledge Intensive, university spin-out businesses that will keep Britain ahead. The strategy should be to plug the equity gap for the businesses that could create a global ‘scientific superpower’.
Businesses and universities in the UK have a strong history of working together successfully, galvanising and turning around projects at speed when faced with a common goal. Encouraging investment from the private sector into knowledge intensive businesses must continue to be a Government priority – the ‘Oxford vaccine’ is a shining example of what can be done but we need this in multiple sectors to achieve the growth we seek.
The article was first published in Investment Week on 7th January 2021. To read the full article click here