Catapults (Science and Technology Committee Report)

Lord Bilimoria Excerpts

Thursday 19th May 2022 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, just to refresh the history, the catapults were proposed in a 2010 review called The Current and Future Role of Technology and Innovation Centres in the UK by Dr Hermann Hauser, commissioned by the then Secretary of State for Business. I worked with Dr Hauser at the University of Cambridge, where I chaired the advisory board of its Judge Business School for five years until 2020. Hermann Hauser said that the UK

“falls short on translating scientific leads into leading positions in new industries. This is in part down to a critical gap between research findings and their subsequent development into commercial propositions that can attract venture capital investment or be licensed.”

He also said:

“Other countries benefit greatly from a translational infrastructure that bridges this gap”.


His report in 2010 proposed that the UK developed an “equivalent capability” focused on

“sustained and substantive support for an elite group of Technology and Innovation Centres”.

That is what led to what we now have as the catapults. In fact, I thank the noble Lords, Lord Mair, Lord Patel, and the Science and Technology Committee for the work they have done on this excellent report.

To summarise—I know that the noble Lord, Lord Mair, said this earlier—there were initially seven catapults and then more were added, so you had: High Value Manufacturing; Cell and Gene Therapy; Digital; Offshore Renewable Energy; Satellite Applications; Transport Systems; and Future Cities. Later on, Energy Systems, Medicines Discovery and Compound Semiconductors were added, and in 2019, the Connected Places Catapult replaced the Transport Systems and Future Cities Catapults.

The Institution of Engineering and Technology summarises that catapults

“provide a crucial role in bridging a gap between academia and industry to provide academia with an insight into future needs of the sector.”

They

“play the role of catalyst in helping innovation to drive skills and vice versa, especially when supporting higher technical skills. … A systems thinking approach is necessary when planning a strategy for the R&D sector because policies across sectors are interlinked. … Catapults need sustained funding that transcends Governments to allow for stability.”

The reality is that the United Kingdom spends 1.7% of GDP on R&D and innovation whereas countries such as Germany and the United States of America spend 3.1% to 3.2%. Just imagine if we spent just 1% extra a year—an extra £20 billion a year—and how much of a difference that would make in powering our productivity and our growth. Would the Minister agree with that? That is leaving aside the shortfall of all these years where we have underinvested.

The Government say they have a strong ambition for R&D as set out in the R&D road map, saying that we should spend 2.4% of GDP on R&D by 2027, but I believe they are not being ambitious enough. They are committed to £22 billion by 2024-25 but I think the Government should target the German and American levels of 3.1% or 3.2% overall. Would the Government agree?

The catapult network is a key part of this. They are key in attracting increased private sector R&D investment and are also linked to the levelling-up agenda. On Innovate UK, the Government play a major role in this as well, and then there are the links with industry. One of my priorities as president of the CBI has been to promote industries and universities and government working more closely together, therefore catapults are music to my ears.

One of the report’s big recommendations is that funding needs to be reformed for catapults—I will come to that in more detail—and the Government need to develop

“a detailed strategic plan for delivering its R&D ambitions”.

The report, Catapults: Bridging the Gap Between Research and Industry, was produced in 2020, a year and a half ago, and it considered the role that technology and innovation catapults have played in encouraging investment and collaborations in UK innovation. It speaks about the funding of the nine catapults, which is an important point. One-third comes from a government grant via Innovate UK, one-third from industry partners, and one-third from collaborative funding—the CRD funding. This is where the report says there needs to be much more flexibility in the funding. Would the Government agreed that that should be introduced to improve the catapults?

To summarise the excellent recommendations of this report, the Government, UKRI and Innovate UK should create a clear plan for how public sector resources and private investment could match the road map ambition. The Government should scale up the catapult network. Do the Government agree with this? Without that, there will not be sufficient private sector investment. UKRI should help catapults and universities work together more easily and UKRI should allow catapults to bid for research council funding where there are clear advantages for R&D and innovation, and Innovate UK should offer greater flexibility in allowing public sector bodies to have a larger share of the CRD funding, particularly where more than one such organisation is involved. Would the Government agree with that last point in particular?

Professor Juergen Maier, who used to be on my president’s committee at the CBI and who is a former CEO of Siemens UK and chairman of the Digital Catapult, told the committee that the UK does not currently have the scale that large multinational companies need for conducting innovation projects, whereas some other countries have more capacity to support innovation.

On international factors, Felicity Burch told the committee that 48% of the R&D performed by businesses in the UK was by non-UK owned businesses. Professor Maier explained that multinational companies look for two things in a country when investing in R&D: quality and scale. He said that on quality the UK does very well but on scale we do “pretty badly”.

Other speakers have referred to Germany’s Fraunhofer Society. In terms of scope, scale and depth of links between academia and industry, Matthew Durdy said that the Catapult Network

“is probably less than a third of the scale of the Fraunhofer [Institutes].”

The Government are doing good things. I am a member of the Chancellor’s advisory board on the Help to Grow management programme, which has 30,000 mini-MBAs for SMEs. It is a fantastic programme, just the sort of thing we need to improve skills and encourage growth. Yesterday, I was privileged to chair the first CBI annual dinner for three years, with almost 600 people present. Our chief guest was the Chancellor of the Exchequer, Rishi Sunak. I shall quote from his speech, which was very relevant to our debate. He said:

“Over the long term, higher productivity is the only way to raise living standards … Our incredible universities produce the third highest number of publications worldwide and we have the second most Nobel Laureates of any nation.”


Cambridge University has the highest number of Nobel laureates of any university in the world.

The Chancellor went on to say:

“Our economy has decarbonised quicker than anyone else over the last twenty years ... We also need to overcome our longstanding weaknesses in investment, skills, and innovation. Even in the decade before the global financial crisis, capital investment had weakened. Research from the Resolution Foundation and the LSE shows that lower capital per hour worked explains around half our productivity gap with France and Germany … since the financial crisis, the rate of increase in innovation has slowed considerably. A weakness that explains almost our entire productivity gap with the United States.”


Then he said this:

“The problem I don’t believe is any longer the government. Public sector net investment is reaching its highest sustained level since the 1970s. Yet capital investment by UK businesses, as a % of GDP, is a lot lower than the OECD average … UK employers spend just half the European average training their employees.”


At the CBI, we estimate that over the next decade, businesses will have to spend £130 billion investing in training and nine out of 10 people today will have to retrain in one way or another in the next 10 years.

The Chancellor went on to say that

“over this Parliament, we in government are delivering our pledge to increase public investment in research and development by 50% to £22 billion. But businesses’ investment in R&D, as a % of GDP, is less than half the OECD average. In other words, further government action can only take us so far. We need you. The wealth creators. The entrepreneurs. The leaders. We need you to invest more, train more, and innovate more … our firm plan is to reduce and reform your taxes to encourage you to do all those things. That is the path to higher productivity, higher living standards, and a more prosperous and secure future.”

It is government’s role to create the environment for business to flourish and to invest in R&D and innovation. The Government did a fantastic thing in introducing the 130% superdeduction to encourage investment, but it is being taken away from us in April next year. We are saying that the Government should have a permanent, 100% reduction on taxes for investing by businesses. Do the Government agree that we should have something to replace the superdeduction: a 100% deduction to incentivise investment? That is what will create the growth that will create the employment that will pay the taxes that will pay down our debt.

The Government do not create the right environment for investing in R&D and innovation by having the highest tax burden in 70 years. We have already had a fragile recovery from the pandemic, exacerbated by the sad war in the Ukraine, and high taxes stifle growth and the recovery. I was on the universities and business task force that reported in 2020. One revelation that came out from that was that a huge proportion of the private sector investment that this report and the Chancellor are talking about comes from abroad. We need to continue to be a magnet for inward investment, but how can we be if we have the highest rate of taxes in 70 years? Historically, we have been the second or third largest recipient of inward investment in the world.

As chancellor of the University of Birmingham, I am so proud of one example of what the report talks about and the catapults are trying to achieve. In 2012, a PhD research project into producing a hydrogen-powered train led to a model hydrogen-powered train in the engineering department of our world-leading railway institute, headed by Professor Clive Roberts. That led to COP 26 in November last year, when we had the world’s first retrofitted hydrogen-powered train up and running. The Prime Minister and Prince Charles were on the train; I chaired a meeting of university leaders on the train. That happened only because of research by a world-leading university, working in collaboration with Porterbrook, the rolling stock company, companies such as Siemens and the Government with Innovate UK. That is what led to that world-leading innovation. That is the potential of catapults.

To conclude, catapults have a crucial role in eabling this country’s phenomenal ability to be creative and innovative in a world-beating manner: to get universities, government and business working together to create best-of-the-best, world-leading innovation.