Sharon Todd on turning Britain into a science superpower 

RISHI SUNAK’S laudable ambition to turn Britain into a science superpower has moved innovation up the political agenda. This is a welcome development, mirrored by the rhetoric from opposition parties.

Ambitious as the prime minister may sound, however, words are not enough. Britain is already far behind its international rivals in the race to transform economies for emerging challenges. It must act now if it is to take advantage of its globally recognised strengths in science research, or risk permanent economic decline.

Research by LEK Consulting, commissioned by the Society of Chemical Industry (SCI), shows that without a detailed, focused industrial strategy for life sciences and clean tech, Britain will lose out on £230bn ($280bn) of gross value added (a measure of the value of goods and services produced) and 240,000 jobs by 2030 in those two sectors alone. All of the companies interviewed as part of the research noted the declining competitiveness of Britain.

SCI, a charity that has connected industry, academia and government since 1881, has developed a Manifesto for an Industrial Science & Innovation Strategy. This provides a policy framework for the entire life cycle of science, from the genesis of an idea to making sure that any mass production, years later, takes place in Britain. If the government adopts this strategy in full soon, Britain might still have a chance of becoming a science superpower.

The proposals range across eight policy areas. Three cover the entire life cycle of a science-based business. The others involve interventions at specific points, when an innovation risks coming to a halt or being taken overseas because of a lack of domestic support.

The first overarching policy area is the need for an Innovation & Science Growth Council, with a direct line to the prime minister. Membership would include bosses of large science-based businesses, startup founders and academics.

This council would replace many of the roughly 70 scientific advisory bodies across government, which have caused confusion and crowd out the voice of business. Industrial experts would advise ministers on the most effective ways of commercialising Britain’s best research and development (R&D). Work would include developing dedicated, government-supported science enterprise zones and adopting the recommendations of Lord Hill’s UK Listings Review, which looked into how Britain can attract more innovative firms and improve access to growth finance. Its recommendations include changes to listing rules and a review of statutory objectives of the Financial Conduct Authority (FCA), a regulator. The changes would add a duty for the FCA to consider Britain’s attractiveness to investors when crafting rules.

The second broad policy area looks at simplifying R&D for scientific companies of all sizes with a single, more investor-friendly tax-relief system. We also call for annual public R&D spending to be set at a minimum of 0.6% of GDP, the OECD average. Based on Britain’s current spending, just 0.46% of GDP (ranking it 27th out of the OECD’s 38 members), this would amount to around £3bn per year of additional money.

The third key area is reform of the visa system. Our members worry that a lack of flexibility and excessive bureaucracy are encouraging scientists to move elsewhere. We recommend that skilled-worker visas should last up to ten years, rather than the current maximum of five, and scientists should be able to move more freely during that decade so they can pick up skills in other countries that can then be applied in Britain.

The use of technology transfer offices (TTOs) also needs reviewing. TTOs are typically created within universities to manage their intellectual-property assets and how they are transferred to industry. They work with university spinouts to help accelerate their growth by investing at an early stage, typically in exchange for a large equity stake. TTOs can be vital for startups. However, some TTOs take too much equity, leaving businesses they invest in less attractive to other investors later on. Our proposals include a standard agreement structure for all TTOs, limiting their equity stake to 20%.

Funding of startups requires patient capital as science businesses take longer to generate returns than firms in most other sectors. Many of our members, however, worry that British rules on early-stage capital and allowances are unnecessarily complicated. Moreover, limits on the tax losses that companies can carry forward deter investment by private equity and venture capital. These rules should be simplified and loosened so investors are encouraged to support companies until they become profitable.

Another area ripe for reform is pension funds. We welcome politicians’ recent focus on this, not least the so-called Mansion House reforms unveiled in July by Jeremy Hunt, the chancellor of the exchequer, which aim to boost investment in high-growth companies and increase returns for savers. However, we note that the typically small size of British pension pots means that fund managers tend to favour risk-averse strategies. Our proposals include pooling pension assets and loosening rules preventing funds from investing in startups and scaleups (firms further along the growth track).

AstraZeneca’s decision in 2021 to build a $400m factory in Ireland rather than Britain because of our “discouraging” tax system was a wake-up call. It signalled that Britain’s most significant science-based multinational no longer considers its home country an attractive place to invest. We have proposed a tax incentive to encourage the construction of large production facilities. Qualification for this would be based on job creation, the amount already spent developing the technology and the wider economic benefit.

Similarly, Britain could use net-zero tax credits to encourage large investments that help the country meet its greenhouse-gas-reduction targets. Britain also needs a more narrowly tailored successor to the super-deduction for capital investment, focused on eco-friendly assets. The super-deduction offered a 130% capital-allowance deduction for capital expenditure. Its cancellation in March stoked corporate concerns about Britain’s waning attractiveness.

This is not an exhaustive list of the SCI manifesto’s recommendations. Our proposals provide—to use the political jargon—an oven-ready industrial strategy. We urge parties of all political hues to adopt them now, before it is too late for our economy. ■

Sharon Todd is chief executive of the Society of Chemical Industry.