Felicity Burch is Director of Innovation and Digital at the Confederation of British Industry. She leads the CBI’s policy work to create the conditions that enable businesses to come up with new ideas, invest in research and development (R&D) and adopt new technologies. Felicity’s background is in economic policy, focused on business growth. Before the CBI, she was Senior Economist at MakeUK, the manufacturers’ organisation, formerly EEF. In this role she led the development of their innovation policy and industrial strategy work and delivered a breadth of economic and industrial trends research.
It is particularly important that a UK version of the US Advanced Research Projects Agency (ARPA) has the potential to set the UK up as a science superpower. This is a unique moment in UK history. In addition to the Covid pandemic and the ensuing economic crisis that has unfortunately resulted, there is also Brexit. We now need to demonstrate to the rest of the world what an independent UK can do after leaving the EU.
Being a science superpower should mean that UK science and innovation is influential and impactful all around the world. The proposed new agency has the potential to play a role here, especially if it can help solve specific social or economic challenges, particularly those that are global challenges not just domestic ones. In areas like health or net zero, the UK has the potential to lead the way.
The establishment of a new agency is also an opportunity to solve problems associated with our existing innovation ecosystem. The first of these is about leveraging business investment. The UK is brilliant at science and innovation, but for a long time we have not done enough of either. R&D spend has remained stubbornly around 1.7% of GDP. We are now in a period of increased Government spending. While that is very encouraging, countries have only successfully raised the level of overall R&D when they have leveraged business innovation as well, so this new initiative needs to be designed to achieve that goal. In addition, there is not enough market pull rather than science push, so we do need to make sure we are creating a market in the UK for innovation.
Then there is the part to play in levelling up. About half of R&D investment in happens in London, the South and South East of England. Yet, there is brilliant R&D all around the country and it plays a really important role in driving growth, so establishing a new agency outside of London could serve as a catalyst for regional growth. Establishing it around one of the growing regional hubs for research would be a good way of doing this. Not only would that support levelling up, but it could also support a wider pool of talent from around the UK.
In terms of making it all happen, three things are key. The first is to have a long-term funding model. The second involves setting it up to take risks and then the final one is leveraging investment
Feast and famine, chop and change are the opposite of good innovation policy. One of the strongest levers Government has when it comes to spurring private sector innovation is not the money – although that matters too – it is the signal it gives through its choices of where and how long to invest. The US model of DARPA exemplifies this. This programme has existed for 60 years and receives over $3 billion a year in funding. In the UK, the proposed initial £800 million represents a pretty decent starting point.
Piloting a ‘UK ARPA’ at a small scale before putting funding on a sustained footing could succeed. It will do no good to pilot it and forget it, though. If the initial model does not work, then try new iterations in order to arrive at something that does. This is how businesses scale their endeavours.
It is not easy for Government to work like that. It does not want to be seen to get things wrong in the first place. But if this is to be the pattern for ground-breaking innovation, then it has to work really well. It will, then, need a strong sponsor within Government to make sure that does happen.
The key benefit of a UK ARPA model is the ability to encourage high-risk research, the kind of research that will not happen if left to the market alone. Two features are particularly important: independence and customer relationships.
The US agency operates outside traditional oversight structures which allows it to pursue high-risk innovation where the market and potential government funders would not do so because of considerations about value for money and return to taxpayers. If the new UK agency sits outside UKRI, that may also provide a degree of independence. But what is exactly is its ‘branding’ and how will it engage with businesses and the science and innovation community? There must be a coherent innovation system, so independence and coherence must be looked at together.
A market for products and services
When a company develops new products and services, it invests in early-stage research because it expects there will be a market for it at some point. Government can play a vital role here in creating new markets with its procurement approach. Where businesses invest in R&D outside of the UK, the decision is often linked to bigger market opportunities elsewhere. So it is really important that Government uses its buying power to support innovation. The success of the ARPA programme in the USA is in part down to that extended pipeline procurement model where the Department of Defense plays a vital role.
Solving broad national security challenges is a clear opportunity for the new agency and there are a few other areas, such as health and energy, where organisations like the NHS could play a real role in acting as a lead customer. While the new agency will be a Government creation, industry expertise and funding will be important factors in its long-term ability to bridge the gap between bluesky research and marketable products. Therefore, both Government and business need to work together closely on its development.
Other factors: it needs to have a brilliant brand. The agency’s brand will need to be bold if it is going to compete internationally and attract investment. To do this, Government must be ambitious in its marketing – identify a new name and a mission statement that inspires and encompasses its purpose and vision. This will also help attract the brightest researchers from around the world.
Second: get the IP right. Intellectual property agreements can often be the blocker preventing good collaborations on innovation.
Finally, funding needs to be designed in a way that works for business. The US ARPA model offers funding in 10-year increments with three-year gates to check if the project is successfully delivering – the presumption being that the funding continues if the project is working. So there are some really practical steps that can be taken to ensure this new agency is fit for purpose. Done well, ARIA presents an opportunity to help the UK become a science and innovation superpower.