‘Innovate UK should invest in tech firms’

The new head of Britain’s £1.1 billion-a-year innovation agency should transform it from a grant distribution body to one that makes equity investments in strategically important tech firms, according to Cambridge University’s entrepreneur-in-residence Ewan Kirk.
Stella Peace took over the job as interim executive chair of Innovate UK on Tuesday from Indro Mukerjee, who held the £195,000-a year-post for three and a half years.
Peace steps up at a time where the Treasury is scrutinising how effective public money is being spent at all its agencies, ahead of the budget on October 30 and after stinging criticism of Innovate UK from many of the 1,400 women business owners that had applied for its £4 million Women in Innovation awards when it awarded only 25 grants — half the promised number.
Kirk, who is also a non-executive director of the engineering giant BAE Systems and chairman of Deeptech Labs in Cambridge, said: “It is a good idea, but badly executed. The incoming chair should transform it into more of an investment-led rather than grant-led organisation”. This would see Innovate UK invest directly in companies developing technology of national importance, working alongside the government’s economic development agency, the British Business Bank.
Innovate UK’s reach is wide, supporting more than 450,000 “innovators” in the year to April, including 10,600 tech businesses through its flagship Business Growth programme. These businesses in turn secured £674 million in private-sector funding, while “creating and maintaining 6,713” skilled jobs.
Innovate UK claims that for every £1 of public money it hands out, businesses secure £3.61 of direct benefit, and generate further social and economic value. It is already leveraging in venture capital investment, matching £40 million of grants to 82 businesses last year with £123 million of connected equity investment from its partners.
The last government increased Innovate UK’s budget significantly in March 2022, with the £1.1 billion it has this year to spend a marked 66 per cent increase on the levels four years earlier.
However, it has also been required to become more efficient, cutting the equivalent of 25 per cent of its full-time headcount to about 750 people, which has led to increased workloads, according to the latest annual report from its parent body, UK Research and Innovation. The latter, which also funnels public monies for academic research, says it is “one of the world’s most-efficient funding agencies” with its own operational expenditure taking up 3.3 per cent of its total budget.
Kirk said Innovate UK needed to have clearer objectives, ways to assess its success and to double down on areas of its work that were proving successful. He highlighted the impact of the nine catapult centres, which are cutting-edge research and development facilities used by large and small companies and specialists in their fields.
These attract about a third of Innovate UK’s annual budget and they range from ones focused on cell and gene therapy and medicines discovery to energy systems and high value manufacturing. “The catapults, in nine strategic areas, are a good idea, but they are still under funded,” said Kirk, who is the Royal Society entrepreneur-in-residence at Cambridge University, based at the Centre for Mathematical Sciences.
“Innovate UK has a big budget and it should be the vehicle for the UK government to invest in growth. The grant system is complicated, over bureaucratic, and difficult to navigate. So much so that there is a little sub industry of consultants who will work with start-ups to help them get their Innovate UK grant accepted in return for between six and 10 per cent of the money. That is terrible. It is just a dead weight and as soon as something like that happens you should be all over it as Innovate UK, trying to make the application process simpler.”
A spokesman for Innovate UK said it was “constantly doing everything it can to make our application process as smooth and efficient as possible, while ensuring we remain good stewards of public money”.
He said: “Recently we simplified the application form for some competitions by reducing the number of questions from ten to six to make the application process more straightforward, particularly for first-time applicants. Later competitions have trialled introduction of video question in the application to provide applicants with an opportunity to talk about their innovation in a different way to just words.”
Typically the success rate for applying for an Innovate UK grant or loan under one of its schemes is around 20 per cent. The rate was much lower than that for its Women in Innovation scheme, which has run since 2016. Some 1,452 people applied for grants of up to £75,000, with initially only 25 accepted when Innovate UK had indicated that up to 50 would be successful.
“The decision to award only this number was a mistake and we prioritised wrongly. We recognise the impact this has had on the many applicants, and on the community as a whole, and we apologise wholeheartedly,” it stated at the start of September.
Peace has held senior roles at Unilever and most recently as chief research and development and quality officer at Nomad Foods, home to the Birds Eye and Findus brands.
Lord Patrick Vallance, the science minister, is recruiting for a permanent replacement to Mukerjee, alongside a new chair of UK Research and Innovation as Dame Ottoline Leyser steps down from the role next summer.
Vallance said UKRI would be required to place “greater emphasis on using research and development to deliver major government initiatives, such as its five missions, which includes kick-starting economic growth, making Britain a clean energy superpower and building an NHS fit for the future”.