Is ‘Plan B’ on the Horizon?

27 October 2022

An analysis carried out by Chris Warkup (Innogen Institute and The Open University) and Joe Sallmen (John Innes Centre) confirms the relatively poor performance of UK businesses in the last two EU research programmes — even when the total funding value of the consortia in which UK businesses participated in is considered. In this blog post, Chris and Joe ask whether ‘Plan B’ will be any better in supporting UK business innovation. They think that larger R&D-intensive UK businesses might be even worse off.

As much as the UK research community wishes the Government to finalise the UK’s association to Horizon Europe this is looking increasingly unlikely. And no matter how important it is to the research community; it is not high on the list of top priorities for our new Prime Minister.

In August, after over a year of delays, the UK Government initiated a formal consultation on association to Horizon Europe with the EU (as part of the dispute resolution processes under the Brexit Agreement). The very first phase of this process was a consultation meeting on the 22nd of September — this failed, with the EU declining the UK’s request for association.

It is not clear whether Step 2 of dispute resolution, a 100-day arbitration process followed by a legal enforcement process (Step 3), will go ahead or if the UK Government will give up on pursuing association and implement its alternate ‘Plan B’. UK Government statements after the meeting made no mention of arbitration as the next step.     

Are EU research programmes good for UK businesses?

In a previous Innogen blog post, we expressed concern that UK success in past EU programmes was mostly success for the academic community, and that UK industry benefitted poorly. This made us wonder whether the UK contributes more commercially-exploited knowledge and IP from its academic base to non-UK businesses than UK businesses secure from non-UK partners.

Thanks to a BBSRC Flexible Talent Mobility Award to the John Innes Centre, Joe was able to work for a short period with Innogen and look at what EU research data could tell us about UK company participation.

We already know that the UK’s University sector was much more successful at securing funding from previous EU Research Programmes than UK industry. However, the net benefit from participation in EU research consortia is expected to be far more than the simple metric of direct participant-income for research. UK companies may be a small player in a large project and benefit significantly from the research of other participants. And of course, UK companies may be partners in projects led from outside the UK — potentially unaffected by UK University success.

We wanted to know what value companies across the EU capture from participation in EU research, but value-capture metrics such as new products launched, revenue increases or leading metrics such as patents filed are not gathered in a comprehensive or reliable way.

Instead, we used total consortium value as crude proxy for benefit potential and analysed the data from the programme dashboards provided by the Directorate-General of Research and Innovation of the European Commission and the available data from the Community Research and Development Information Service CORDIS.

Due to the ease of use and availability of the data, we concentrated on Framework Programme 7 (FP7) and Horizon 2020 (H2020). We analysed the data from the top ten participating countries by total income from all research programmes.

Private research companies are often tagged as SME (small-medium sized enterprises) participants. These SME can be service providers, administration partners or even the companies of the academics in the consortium and as such, we focussed primarily on non-SME participants. Non-SME participants are deemed more likely to have the in-house development and innovation capacity to capture value from the research outcomes. More details can be found in our report.

Overall, in FP7 and H2020, the UK ranked second in overall funds received (by country total). In H2020, the UK ranked 6th overall in total funding received by larger businesses and 8th when assessed by the average value of the consortia in which they participated. In these metrics the UK was behind major UK competitor nations such as The Netherlands, Italy, Spain, France and Germany.

Our analysis reinforces the view that past UK participation in EU research programmes benefitted UK academia substantially more than UK businesses. We may never know if this resulted in a net outflow of Intellectual Property and know-how that was detrimental to UK business competitiveness.  

Might Plan B be any better for UK businesses?

In July of this year the Department of Business Energy and Industrial Strategy finally published an outline of its alternative to Horizon Europe — the so called Plan B — Supporting UK R&D and collaborative research beyond European programmes. Might this be any better for UK businesses?

The plan sets out some initial transition measures and then outlines the potential longer-term funding structure. The four themes for the new plan are:

  • Top Talent. Increases for existing international talent mobility schemes being the greatest focus. No mention is made here of research talent within businesses.
  • Uplifts to Innovation Support. What is described here is mainly to be delivered by increased funds to Innovate UK. The schemes illustrated, such as Smart Awards and Investor Partnership and Scale Up/Growth support are very much focussed on early or young technology businesses that are SME. In one section, it is specifically stated that this activity is SME focussed.
  • Global Collaboration. This is about “Bottom-up collaboration with researchers in partner countries around the globe.”  UK funding support for any UK entity participating in EU programmes under Third Country rules will also be supported for agreements signed before March 2025 and possibly beyond.
  • R&D System. Increased funding for innovation infrastructure, digital research capacity and research clusters.

Using uplifts to existing schemes in transitional arrangements is fully understandable in terms of speed. However, the focus on innovative SME with high growth potential, but barely any mention of existing larger R&D intensive businesses, seems odd. Especially when considering that the UK has little scope to achieve its ambitious target of 2.4% GDP being spent on R&D without significant increases in research spend by larger businesses (or perhaps by changing how that percentage figure is calculated – as might be about to happen).

It may be telling that this 2.4% target gets not a single mention in The Growth Plan 2022 recently published by Government. The growth of high-tech companies is proposed to be supported by £500m “aiming to crowd billions of pounds of private investment for UK science and technology businesses.” Larger businesses not looking for such venture capital support will have to be content with reduced Corporation Tax and any outcomes from the review of R&D tax credits already underway.   

There may well be complications due to competition law in setting up an alternative to EU research funds for larger businesses; if this is the case, it should at least be acknowledged and best possible options to support them in international R&D collaboration should be sought.  

The initial look at what is meant by ‘Plan B’ may well give some reassurance to UK universities that their income might not suffer as much as they fear. Increased Innovation funds for SME via Innovate UK is also good news; but frankly it looks as if Plan B could be significantly worse for larger UK R&D intensive businesses than the EU programmes were —and that was not great. Supporting UK businesses that already invest lots in R&D to get more out of international research collaboration, must surely be a missed opportunity for UK growth.     


Further reading:

Sallmen II, J. W. and Warkup, C. Participation by the United Kingdom in recent EU Framework Programmes: Insight on the participations of large UK companies in FP7 and Horizon 2020. (2022)