COMMENT Science and technology start-ups in the UK face a wide range of obstacles to success, with access to capital just one of them. Jeremy Hunt used his Mansion House speech to announce reforms to the way pension funds invest the £1.5tn of savers’ money that sits on their books in an attempt to improve funding for the sector. This is welcome but more needs to be done if the UK is to truly capture the potential of its £90bn-a-year life sciences industry.
At present, defined contribution schemes invest just 0.5% of their assets in unlisted UK equities. The most significant of the announcements was a “compact” agreed between nine of the biggest UK pension schemes to commit 5% of their default funds into unlisted companies. It is estimated that, all going well, this could free up to as much as £50bn to be channelled into British start-ups by 2030, most of which would likely be directed into start-ups in high-growth, high-potential sectors – like science and technology.
However, more holistic, structural changes will be necessary. The sector’s brightest minds agree. This was made clear at Bidwells and EG’s Creating a Scientific Superpower event, where leading thinkers from the life sciences industry were brought together to discuss the measures needed to make UK science and tech start-ups more attractive investments.
Lack of labs
Pension schemes did emerge as a major point of discussion. Opinions coalesced around the need for reform. Sir Jonathan Symonds, co-chair of UK Life Sciences Vision and chair of GSK, said that he was “spending just as much time on reform of the pension system as life sciences” and lamented the fact that despite being a relatively capital-rich country, nearly 100% of investment into the life sciences industry derives from foreign investment.
David Willets, president of the Resolution Foundation, also pinpointed pension reform as a way to unleash private investment in the country. Indeed, Hunt’s reforms to better leverage the power of pensions will likely give a much-needed boost to high-growth start-ups in the UK.
But it was also made evident that reform to pensions is just one piece of the puzzle to unleash the full potential of the UK’s science and tech industries. There is not much point in redirecting pension fund investment if there is a lack of staff with sufficient skills to carry out work in these sectors, no available premises in which this work can be done, or the right infrastructure and connectivity to support them.
Restrictive planning laws act as a considerable roadblock to growth and are badly in need of reform. One useful case study for this is the Oxford-Cambridge Arc area, a shining beacon for UK innovation and home to one of the largest concentrations of high-growth businesses in the world. A lack of available lab space is stifling investment and rates of commercialisation, even though investors are exceptionally eager and ready to deploy capital into the area. This is in large part due to obstructive planning bureaucracy, lab availability rates in the region are near zero.
Join the dots
Having access to talent and workers with sufficient skills to work in the facilities that are built is also of paramount importance. This is something Sir Peter Knight, senior research investigator at Imperial College London, testifies to: “One of the things we need to do to improve our competitiveness in terms of innovation is work on the skills base. To do things at scale, we’ve got to join the dots between training, education, innovation, and investment.” Alongside increased investment in education at home, this could include measures such as removing barriers to global talent by encouraging international scientists to move to the UK. Baroness Nicola Blackwood, chair of Genomics England, agrees: “The flow of scientists into the UK and promoting international collaboration is something we should be pushing the government more on.”
The infrastructure to support the facilities and skills is also critical for incubating thriving businesses. Knight said that “infrastructure can often be the catalyst” for innovation. Illustrating how planning and infrastructure and planning feed into each other, Willets stated the importance of “finally resolving the planning issues to enable places like Cambridge and Oxford to have proper connectivity”. It is hoped that updates to the East-West rail, which are estimated to add £100bn GAV to the region, will go some way towards achieving this.
While Hunt’s pensions are a welcome step towards harnessing the country’s science and tech potential, they are just one component needed as part of a coordinated strategy to supercharge economic growth. High growth industry needs to be supported through lab space availability, which itself can only be achieved through a more receptive planning process. It needs access to talent to populate and work in these spaces, backed by the right infrastructure and connectivity. If all these things are achieved together, we will have an industry fully ready to make the most of extra investment through reforms to pensions. The extra £50bn touted through reforms will only happen if a coordinated, targeted strategy is executed to unlock our full science and tech potential.
Max Bryan is head of science and technology at Bidwells
