Close spin-out funding gap to fire innovation, says Russell Group

Increased funding could help UK universities create more spin-out companies, according to the Russell Group.

A submission outlining the research-intensive mission group’s hopes for the country’s forthcoming industrial strategy says that one institution has estimated that funding shortages have prevented six in 10 of its potentially viable spin-outs from being developed.

The Russell Group highlights the importance of England’s Higher Education Innovation Fund (HEIF), which supports institutions’ commercialisation activities. This is currently worth £260 million, and the maximum allocation is limited to £5.7 million per university.

“This cap restricts the scale of innovation activities many universities can undertake,” the Russell Group says, highlighting that every £1 invested in the fund has been found to generate £14.80 of economic return for the UK – a figure that approaches £20 for the biggest institutions.

“Increasing the value of HEIF would enable universities to significantly step up their commercialisation and business engagement capacity and substantially increase the number of high-growth spin-outs,” the report says.

The Russell Group also advocates for the creation of a “Spark fund” designed to close the gap in early-stage funding for spin-outs, supported by co-investment from universities and private sources.

Other recommendations include:

• Reforming VAT rules for new university buildings which will be used to undertake collaborative research projects with businesses
• Including research facilities and business incubators in any streamlined planning regimes envisaged under the industrial strategy
• Allowing employers to spend up to a quarter of funds raised under the Growth and Skills Levy on non-apprenticeship training, with this proportion potentially being increased to half in future
• An early declaration of intent to associate to the European Union’s next research framework programme
• A welcoming environment for international students and staff.

Writing in the report’s foreword, former Cabinet minister Greg Clark, now the executive chair of the Warwick Innovation District, says universities can make a “unique contribution” to the industrial strategy via their research and innovation activities.

“Taking a strategic approach to supporting UK industrial strength is the right choice given the wide-ranging challenges the UK faces: from insufficient investment in infrastructure across housing, transport, energy and digital capacity, to difficulty for new businesses in accessing financing,” Clark writes.

“The industrial strategy provides a unique opportunity to drive the necessary changes with urgency and at scale. This means putting partnership between government, business, the public sector and universities at the heart of the strategy.”

Plans for the industrial strategy are expected to be set out as part of June’s spending review.

chris.havergal@timeshighereducation.com