Bone-dry British tech SMBs miss out on cash shower

It's a postcode lottery and we're not winning anything

Opinion Government technology promotion agency Innovate UK, the former Technology Strategy Board (TSB), surprised many last year when it agreed to spend no less than £800,000 on a piece of software that would “minimise building waste” sent to landfill by construction companies.

The happy recipients for this bizarre project included two SMEs, Sustainable Direction Ltd, Waste Plan Solutions Ltd and the University of the West of England in Bristol. In the real world, such software might cost £5,000 maximum. In addition, there is no market for the product as companies already strain to reduce the amounts sent to landfill and avoid excessive charges.

Sadly, it was just another example of the kind of worthless project signed off by Innovate UK, a group of about 100 apparently expert individuals based in Swindon. This wouldn’t matter if it wasn’t for the critical role Innovate UK’s huge budget plays in accelerating emerging companies and technologies in the UK.

If ever there was a government agency that singularly failed to grasp the priority of “re-balancing the economy” towards engineering and manufacturing, especially in the north of England, it is Innovate UK.

Overall, the North West gets only a few per cent of total UK grants from Innovate UK, and Yorks/Humber only five per cent, while London gets 25 per cent and the South East 17 per cent. This means that hundreds of hard-pressed engineering firms in the north have been deprived of adequate support.

Instead, dozens of doubtful digital media firms – which hardly need the cash – have been given millions of pounds – but with little tangible result in nearly all cases. The one activity vital to the SME economy is the Smart Award programme, in which small companies can apply for modest sums to enable them to develop and de-risk new product ideas and test prototypes.

The scheme isn’t new – indeed, it has an eminent pedigree. When the much maligned-DTI ran the Smart Award scheme, starting in the 1980s, it was so successful it helped give birth to some extraordinary companies such as Bookham Technologies, bone graft firm Ceramisys and high-flying clean chemicals firm Tristel plc. By contrast, today’s Smart Awardee SMEs have much less potential.

Worse, the government has been pushing ahead with its increasingly troubled Catapult Centre programme, which establishes a hub at which – it is claimed – SMEs can flock to benefit from the minds of the experts and machinery therein. Critics claim that only one of the Catapult centres has even partially been a success – the High Value Manufacturing Catapult, run by the able Dick Elsy. Even here, the take-up from SMEs has been few and the main beneficiaries have been mid-sized firms. The Digital Catapult in London is an expensive piece of architecture with few visitors.

Incredibly, until last year the North West had not been given a single Catapult Centre. When it was finally given one, it was the wrong one. Even though the vast majority of the UK’s power engineering SMEs – and major utilities research – is located in the North West, the Energy Systems Catapult was handed to the West Midlands. Only later was the far less important Medicines Technologies hub given to Alderley Park.

Too many academics infest the corridors at Innovate UK. In fact, only one board member, Harry Swann, managing director of nanotech manufacturer Thomas Swan & Co, based in County Durham, has had any hands-on experience in a manufacturing SMEs. More academics – with little commercial experience or product potential expertise – clog the grants and review panels.

One reason for the high failure rate is that advanced technology created by academics in labs can often only be incorporated into a company’s product range at a cost in time and money. The cost of the centres is an astonishing £85m – but only £15m a year has been spent on the crucial Smart Award scheme.

If British industry had its way smart expenditure would rise ten-fold to cover more than 5,000 grants a year – rather than the paltry total of 524 handed out in 2013-14 – especially since Innovate’s total budget leapt from £397m in 2012-13 to £576m last year.

The current Smart Award form consists of a 10 point questionnaire – all done centrally in Swindon. This is wrong, says Richard Moseley, R&D engineer and veteran fund-raiser for SMEs who has helped SMEs win 142 innovation grants worth £11m since 2002.

According to Moseley: “The DTI always insisted on a business plan from all applicants. We need to go back to a business-led approach – which gives the assessors a better grasp of the commercial potential of the project, and the process also mentally prepares the companies themselves to apply for private finance in future.”

At the core of Innovate UK’s problems has been its total inability to devise or implement a coherent UK industry strategy. Choosing the right technologies to back has also not been Innovate UK’s strong point.

In August 2015 it sent some British space technology companies on a trade mission to the US. Innovate UK claims the sector “employs 37,000 people and has revenues of £7.5bn.” The true figure is about five per cent of that figure once the entirely irrelevant broadcasting and phone revenues are deducted.

This is the equivalent of saying “my dog is worth £10,000 because that is the cost of its pet food.” Two of the firms enjoying the sunshine of Utah – Bird.i and Gyana – were start-ups in data and satellite imagery. Hard-headed electronics and instrumentation firms were few in number.

Oddly enough, the one sector in the UK that has really boomed in the past 15 years – food and drink – has enjoyed relatively little funding or intervention from Innovate UK. Food and drink is now the UK’s largest manufacturing sector, and probably the only manufacturing sector that is actually growing in the numbers employed.

Least scrupulously monitored over the years at Innovate UK has been environmental and energy research. In spite of the billions spent on these programmes – by Innovate UK and others – not a single breakthrough has been delivered.

Indeed, landfill waste software for beginners is unlikely to be the last questionable project – environmental or otherwise – to get the nod from Innovate UK’s assessors. ®

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