ASSEMBLY BUSINESS

Report on the Committee's Inquiry into Developing the Northern Ireland Economy through Innovation, Research & Development

Committee: Enterprise, Trade and Investment

Session: 2011/2012

Date: Thursday, 24 May 2012

Reference: NIA 42/11-15

ISBN: Only available online

Mandate Report Number: Mandate 2011/15 First Report

Together with the Minutes of Proceedings of the Committee relating to the Report, Minutes of Evidence, and Written Submissions

Powers

The Committee for Enterprise, Trade & Investment is a Statutory Committee established in accordance with paragraphs 8 and 9 of the Belfast Agreement, Section 29 of the Northern Ireland Act 1998 and under Assembly Standing Order 46. The Committee has a scrutiny, policy development and consultation role with respect to the Department for Enterprise, Trade & Investment and has a role in the initiation of legislation.

The Committee has power to:

  • Consider and advise on Departmental Budgets and Annual Plans in the context of the overall budget allocation;
  • Approve relevant secondary legislation and take the Committee stage of relevant primary legislation;
  • Call for persons and papers;
  • Initiate inquiries and make reports; and
  • Consider and advise on matters brought to the Committee by the Minister for Enterprise, Trade & Investment. 

Committee for Enterprise, Trade & Investment

Report on the Committee's Inquiry into Developing the Northern Ireland Economy through Innovation, Research & Development

Together with the Minutes of Proceedings of the Committee Relating to the Report,
Written Submissions, Memoranda and the Minutes of Evidence

Ordered by the Committee for Enterprise, Trade & Investment
to be printed on 24 May 2012
Report: NIA 42/11-15

Mandate 2011/15 First Report

Membership

The Committee has 11 members, including a Chairperson and Deputy Chairperson, and a quorum of five members.

The membership of the Committee is as follows:

Democratic Unionist Party
Gordon Dunne
Stephen Moutray
Paul Frew 1
Robin Newton 4, 6

Green Party
Steven Agnew

Sinn Féin
Daithí McKay (Deputy Chairperson)
Phil Flanagan
Jennifer McCann 2

Social Democratic and Labour Party
Alban Maginness (Chairperson)
Patsy McGlone 5

Ulster Unionist Party
Sandra Overend 3

1 With effect from 24 October 2011 Mr Paul Frew replaced Mr David McIlveen

2 With effect from 23 January 2012 Ms Jennifer McCann replaced Ms Sue Ramsey

3 With effect from 06 February 2012 Mrs Sandra Overend replaced Mr Mike Nesbitt

4 With effect from 27 February 2012 Mr Paul Givan replaced Mr Robin Newton

5 With effect from 23 April 2012 Mr Patsy McGlone replaced Mr Alasdair McDonnell

6 With effect from 21 May 2012 Mr Robin Newton replaced Mr Paul Givan

Table of Contents

List of Abbreviations and Acronyms used in the Report

Executive Summary

Summary of Recommendations

Introduction

Key Issues and Findings

Conclusions & Recommendations

Appendices

1. Minutes of Proceedings

2. Minutes of Evidence

3. Rapporteur Meetings

4. Written Submissions to the Committee

5. Research Papers

List of Abbreviations and Acronyms used in the Report

ADS - Aerospace Defence Security

AFBI - Agri Food Biosciences Institute

BERD - Business Expenditure on Research and Development

BMC - Belfast Metropolitan College

CBI - Confederation of British Industry

CEO - Chief Executive Officer

CIIF - Creative Industries Innovation Fund

CIP - Competitiveness and Innovation Framework Programme

DARD - Department of Agriculture and Rural Development

DEL - Department of Employment and Learning

DETI - Department of Enterprise, Trade and Investment

ECF - Enterprise Capital Funds

EIPs - European Initiative Platforms

EIT - European Institute of Innovation and Technology

ERA - European Research Area

ERRIN - European Regions Research and Innovation Network

EU - European Union

HMRC - Her Majesty's Revenue and Customs

FE - Further Education

FP7 - Framework Programme 7

GB - Great Britain

GVA - Gross Value Added

HE - Higher Education

HEIF - Higher Education Innovation Fund

HIE - Highland and Islands Enterprise

INI - Invest Northern Ireland

INTERREG - Interregional co-operation programme

IP - Intellectual Property

IRDG - Industry Research and Development Group

IREP - Independent Review of Economic Policy

KTP - Knowledge Transfer Partnership

LEAs - Local Enterprise Agencies

MEP - Member of the European Parliament

MNI - Manufacturing Northern Ireland

MoU - Memorandum of Understanding

NDPB - Non Departmental Public Body

NI - Northern Ireland

NIACE - Northern Ireland Advanced Composites & Engineering

NILGA - Northern Ireland Local Government Agency

NISP - Northern Ireland Science Park

NRC - Northern Regional College

PFG - Programme for Government

QUB - Queen's University Belfast

R&D - Research and Development

RAE - Research Assessment Exercise

RDAs - Regional Development Agencies

RISAP - Regional Innovation Strategic Action Plan

RoI - Republic of Ireland

SBRI - Small Business Research Initiative

SE - Scottish Enterprise

SEK - Swedish Krone

SERC - South Eastern Regional College

SFA - Selective Financial Assistance

SFC - Scottish Funding Council

SME - Small & Medium Sized Enterprises

SSAC - Scottish Science Advisory Council

SWC - South West College

TSB - Technology Strategy Board

UCD - University College Dublin

UK - United Kingdom

USA - United States of America

UU - University of Ulster

VINNOVA - Swedish Research Council and the Agency for Innovation Systems

ZIM - Central Innovation Programme for SMEs

Executive Summary

Background and Purpose of the Inquiry

1. The Committee became aware early in the current mandate, of evidence that levels of innovation and research and development (R&D) in Northern Ireland were not as high as would have been expected given the opportunities and programmes that are currently available. Additional evidence had come from the report on the Independent Review of Economic Policy (IREP) calling for improved structures and increased levels of support for innovation and R&D.

2. The Treasury consultation on rebalancing the Northern Ireland economy noted the particularly low level of business expenditure on R&D. It further noted that R&D and innovation are particularly low when compared to successful small economies in Europe several of which are in more peripheral locations than Northern Ireland. Over the past five years business expenditure on R&D in Northern Ireland has averaged 0.69% of Gross Value Added (GVA) compared to 1.23% for the UK as a whole. Business expenditure on R&D in Northern Ireland is heavily focused on a small number of companies, with just 10 companies accounting for around 57% of all business R&D investment in 2009.[1]

3. In the current economic climate, and with decreasing levels of Selective Financial Assistance available to companies in Northern Ireland, the Committee considers it essential that the opportunities to invest in R&D are fully exploited. There are perceived difficulties in attracting high levels to Northern Ireland due to issues such as the large number of small businesses here compared to other parts of the UK, the small number of universities and difficulties in attracting high levels of R&D to Northern Ireland.

4. The purpose of the inquiry was to identify barriers faced by organisations in availing of opportunities for support for innovation, research & development and to bring forward recommendations on how these barriers can be overcome to maximise support for innovation, research & development opportunities for the benefit of the Northern Ireland economy.

The Current Position

5. There is a wide range of opportunities available for business and academia to become involved in innovation and R&D. This ranges from international R&D programmes and large EU programmes such as Framework Programme 7 and others to opportunities provided by individual local councils. In between are UK-wide programmes, programmes specific to Northern Ireland, for which Invest NI has responsibility and programmes which are run on a cross-border basis, mainly through InterTradeIreland.

6. The Committee was impressed with the numerous positive comments from respondents regarding the support they received from Invest NI representatives and from InterTradeIreland. It is evident that the work being done on the ground to support organisations involved in R&D is undertaken in a positive and professional manner and is very much appreciated by those who benefit from the support.

7. Other UK regions have their own specific programmes to provide support for R&D. The Republic of Ireland has a high level of success in R&D, as do countries such as Finland, Sweden and Germany. The Committee considered the mechanisms used by these countries as appropriate benchmarks for the direction in which Northern Ireland should move in the future.

8. Evidence to the inquiry is largely supportive of the currently available programmes to support R&D. Their content is considered mostly appropriate to the needs of those organisations becoming involved in R&D. However there were concerns expressed regarding how these programmes are integrated, managed, communicated and administered. One notable example is the low level of venture capital available in Northern Ireland given the high demand. Another is the lack of involvement of the Executive in the Small Business Research Initiative (SBRI), especially given the high level of success of Northern Ireland companies participating in the programme in GB. Concern was widely expressed regarding lower than expected levels of uptake of funding under Framework Programme 7 (FP7). Many respondents also commented on the need for Northern Ireland to be in a better position to avail of opportunities under Horizon 2020, the successor to FP7, which commences in 2014.

Barriers faced by Organisations

9. During the course of the Inquiry barriers to organisations becoming involved in R&D have been identified by organisations from all sectors and of all sizes. Barriers range from simple issues such as lack of awareness of opportunities and lack of knowledge and skills required to become involved to issues relating to funding, risk, difficulties in commercialising R&D and the complexities involved in the funding processes.

10. There is an evident lack of awareness of the opportunities and support available for innovation and R&D. This is especially the case for, but not solely confined to, Small and Medium Sized Enterprises (SMEs). Many organisations may be aware that opportunities may exist but have no awareness of their own eligibility to avail of those opportunities. In some cases this may extend to companies not realising that the work they are doing actually constitutes R&D. Sometimes the key barrier may be that an organisation does not know how to access the support that may be available.

11. Where there is some knowledge and understanding of available opportunities and support there are still many cases where that support is not sufficient to overcome the lack of capacity and capability within the organisation to avail of those opportunities. Many companies do not have the resources available in terms of people, time and finances to avail of opportunities and the available support is insufficient to help them in overcoming these barriers. Even if resources were to be made available to support organisations, many would still lack the knowledge and skills necessary to go through the application process and to engage in R&D projects. There have been suggestions that the FE and HE sector is well placed to provide support in this regard.

12. Issues were raised regarding the nature and level of funding that is available to support R&D. These included problems with access to finance, low levels of funding and the limited sources of finance that respondents believe are available. Some respondents raised concerns regarding the absence of specialist resources, lack of up-front support and the need for more consistency in research and development funding.

13. A number of respondents from both the private and public sectors raised concerns about the limited availability of opportunities for business-led R&D and for support for the commercialisation of R&D. There was general agreement across Government, business and academia that commercialisation of research is where the long-term benefits of increased innovation and R&D will be realised. It was felt that more opportunities for business-led R&D will lead to a greater focus on commercialisation.

14. In acknowledging that there will always be risks associated with participation in R&D respondents believe more could be done to assist businesses to become aware of those risks and to manage them. Perceptions of risk may often be enough to deter a company from getting involved in R&D, especially if there is the perception that the business itself may be at risk if limited resources have to be allocated with no certainty of success. Intellectual Property (IP) risks were cited as a key barrier to collaboration between businesses. Collaboration is considered to be essential to R&D success. Examples of successful collaboration in leading R&D economies such as Sweden, Finland and Israel were cited as examples of how concerns between companies can be overcome and risks relating to issues such as IP can be managed.

15. The most common risk cited by respondents as a barrier to participation in R&D is the high level of, what is considered, unnecessary and repetitive bureaucracy involved in the programmes and in the administrative processes that are required. This was a major concern regarding EU funded programmes. The Committee recognises that there is little that can be done at implementation level to change this, however there may be opportunities to influence in relation to Horizon 2020. There were also concerns regarding the level of bureaucracy associated with programmes administered at a more local level. The Committee recognises and supports the need for accountability in all funded programmes. The Committee also appreciates that Invest NI has been working to improve the administration of programmes and that much work has been done to eliminate some of the unnecessary bureaucracy. There may be opportunities in this regard to further review processes and streamline programmes to identify and eliminate duplication and unnecessary bureaucracy.

16. Many of the barriers highlighted in the report impact on organisations of all types and sizes from all sectors. These barriers are however magnified for many SMEs and micro-businesses. Small businesses do not have the flexibility and resource to become fully focused on innovation and R&D and still concentrate on the day-to-day running of the business and planning for the future. These businesses need greater levels of hands-on support to enable them to participate in the often complex processes involved in many of the support programmes for R&D. This support may involve every aspect of the process, including support to increase knowledge and skills, support navigating the range of opportunities to determine the most appropriate route to innovation and R&D, help with identifying and managing risks and support through the complexities involved in the process from application to evaluation.

Strategic Approach to Innovation and R&D

17. According to the EU Commission representative in Belfast, Europe's average growth rate has been structurally lower than that of its main economic partners. This is largely as a result of a productivity gap that has widened over the last decade due to differences in business structures combined with lower levels of investment in R&D and innovation, insufficient use of information and communications technologies, reluctance in some parts of society to embrace innovation, barriers to market access and a less dynamic business environment.[2] The United Kingdom just makes it into the top ten countries for innovation according to the Global Innovation Index[3] and is ranked 6th in Europe behind Switzerland, Sweden, Finland, Denmark and the Netherlands. As stated above, levels of innovation and R&D in Northern Ireland are particularly low when compared to successful small economies in Europe and other regions of the UK. Therefore, much work is needed if Northern Ireland is to achieve its potential and achieve the appropriate levels of innovation and R&D as a region.

18. Much positive work is being done to develop and grow the capability within Northern Ireland to become involved in innovation and R&D. It is recognised within DETI that R&D can play a significant role in attracting Foreign Direct Investment (FDI) and economic growth. There have been calls from respondents for the prioritisation of sectors and DETI has done this through the Programme for Government and the Economic Strategy. While much is being done at a strategic level there is also evidence that there is considerable disconnection between programmes, between Government, business and academia and within each of the three sectors. The work DETI is doing at a macro level to develop the R&D agenda from an international perspective is essential to grow the economy through Foreign Direct Investment. It is also important to drive innovation and R&D within Northern Ireland and support indigenous business of all sizes and academia to engage now and with any new opportunities which may arise in the future. Many respondents have informed the Committee of the need for a more holistic, better coordinated and planned approach across all sectors and at all levels.

19. The infrastructure that is currently in place to support R&D has largely evolved from established support mechanisms as the role of R&D has rapidly developed over the past number of years. Considering the expected future impact of R&D as a key economic driver, a clear vision for innovation and R&D must be developed and implemented, including policies, strategies, structures, systems and processes which are custom-designed specifically to meet the long-term challenge of maximising the potential for Northern Ireland businesses and academia at all levels to take advantage of the existing and future opportunities for innovation, research and development (Recommendation 1).

20. There is considerable evidence that the appropriate structures are not in place to fully support innovation and R&D in a holistic and coordinated manner. Despite the best efforts of DETI and Invest NI, the absence of an appropriate structure is a major barrier to Government developing a more holistic and coordinated approach. Many respondents have suggested the establishment of a single organisation or single point of contact with direct links to business and academia, tasked with supporting all types of organisations. There would be a role for this organisation or unit in gathering market intelligence on R&D from all available sources including benchmarking against regions considered leaders in the field. It would also be the appropriate location for developing, streamlining and improving programmes and processes for innovation and R&D and for ensuring these programmes and processes meet the needs of businesses of all sizes, universities, FE colleges and research institutions. In the first instance, there is a need for a high-level steering group to oversee and set the strategic direction for all R&D activity. A high-level steering group should be established comprising Government, business and academia to advise on policy and oversee the integration and coordination of all R&D activity across all three sectors at all levels (Recommendation 2). The steering group should be involved in setting the vision for innovation and R&D.

21. Below this level a completely new structure is required in the form of a single unit to integrate and coordinate all innovation and R&D activity. It should have four key responsibilities:

i. Improving Government knowledge and information on innovation and R&D by gathering knowledge and information through, research, networking and collaboration to identify and learn from good practices; and to identify the contribution that can be made at all levels by Government, business and academia.

ii. Developing programmes systems and processes to meet the needs of business and academia by providing programmes of assistance for innovation and R&D; providing support to understand and navigate programmes; and providing support for administering programmes from application to evaluation.

iii. Implementing support for innovation and R&D through promotion of opportunities, educating and mentoring, practical support through projects, awareness programmes for support available and for specific programmes (such as Horizon 2020 and the Small Business Research Initiative).

iv. Developing and supporting a culture of innovation and R&D across Government, business and academia at all levels in Northern Ireland (Recommendation 3).

Integration and Coordination of Innovation and R&D

22. It is not considered necessary to wait until the establishment of a new structure in order to progress the four key responsibilities outlined above. Innovation and R&D are key priorities for Government and work should commence now to integrate and coordinate the approach. This should be done in a manner that will enable these responsibilities to be integrated into the new structure as it is developed.

23. It is essential that there is understanding of the contribution that can be made by Government, business and academia at all levels in order to develop programmes, systems and process that can take advantage of the opportunities that exist both now and in the future. Information and knowledge of good practice in other regions needs to be gathered and applied to the Northern Ireland situation. Northern Ireland must become more connected in Europe. The required knowledge and understanding must be gained and shared in order to enable business and academia to work with EU programmes for R&D including FP7 and Horizon 2020. Other sources of support for R&D coming from outside Northern Ireland also need to be developed. This includes developing the venture capital opportunities to help meet growing demand and involvement in the Small Business Research Initiative. It is also important to look inwardly to understand the capabilities, the weaknesses and the potential that exist inside Northern Ireland. There must be a comprehensive knowledge and understanding of what Government, business and academia can contribute to increasing the level and quality of innovation and R&D. Learning from good practices in other countries, developing the ability for Northern Ireland to engage in Europe and understanding the capabilities, the gaps and the potential that exist inside Northern Ireland are the three critical elements to provide the knowledge and understanding required to assist in developing the appropriate infrastructure for innovation and R&D. Therefore, a mechanism should be put in place and resource allocated to undertake the following functions:

i. To identify and learn from good practices in innovation and R&D in other countries and regions.

ii. To engage regularly with other sources of support such as EU institutions, venture capital firms and the Technology Strategy Board to gain a comprehensive understanding of and influence the initiatives and support programmes that are available for R&D.

iii. To gain a comprehensive understanding of the strengths, weaknesses, and potential that exists in Government, business and academia in Northern Ireland to contribute to innovation and R&D.

iv. To use the knowledge and understanding gained to inform the development of appropriate systems and processes, to support and improve the capacity and capability of organisations at all levels to participate in innovation and R&D (Recommendation 4).

24. For Northern Ireland to make the most of the opportunities available for innovation and R&D, the programmes, systems and processes that are put in place to implement and support those opportunities must be appropriate to the needs of the wide variety of businesses which may wish to avail of them. They must also meet the needs of universities, FE colleges and research institutions. This must be done efficiently and effectively. Given the large number of respondents from all sectors and of all sizes who are experiencing difficulties in accessing and availing of opportunities, there is much still be done to align programmes, systems and processes to the needs of those who seek to use them. Programmes for innovation and R&D meet the needs of users. Therefore, Government, business and academia should work together to review and, where necessary, improve programmes developed within Northern Ireland and influence programmes being developed elsewhere, so as to balance the needs of business and academia with those of the Executive (Recommendation 5). In order to ensure that the processes in place to support those programmes are appropriate to the users' needs, Government, business and academia should work together to review and improve existing support processes and, where appropriate, develop new practical measures of support for all innovation and R&D programmes (Recommendation 6). In order to ensure that the level of bureaucracy associated with the administrative processes for innovation and R&D are sufficient to meet accountability requirements without being overly complex or unnecessary, Government, business and academia should work together to review and, where necessary, improve the administrative processes for R&D programmes developed within Northern Ireland so as to balance the needs and capabilities of business and academia with the needs of the Executive (Recommendation 7).

25. The level of awareness and understanding of innovation and R&D needs to be increased. Programmes of education and mentoring are required and awareness sessions will be required for new programmes such as Horizon 2020 and the Small Business Research Initiative and practical support measures will be required to assist business and academia throughout programmes. A long-term strategy and implementation plan should be developed with appropriate resources provided for promotion of opportunities for R&D, educating and mentoring, practical support through projects and awareness programmes for support available for specific schemes (Recommendation 8).

26. Recommendations have been made for a vision and strategic approach to innovation and R&D. New structures have been recommended from the top down to support innovation and R&D, to develop and implement new and improved programmes and support mechanisms and to raise awareness, knowledge and understanding of innovation and R&D at all levels across Government, business and academia. However, for Northern Ireland to achieve long-term success in R&D as a region and for R&D to make the contribution needed to drive and develop the economy, there must be a culture of R&D across all sectors at all levels. A clear and consistent message and approach must be continuously promoted by Government, business and academia across Northern Ireland to the effect that innovation, and R&D are key drivers for economic growth and will be supported at all levels (Recommendation 9).

Short-Term Measures to Improve Uptake of R&D

27. Throughout the course of the inquiry there were a number of issues raised which the Committee believes can and should be addressed individually. These are largely 'quick fixes' which can be implemented without undue delay. By addressing these issues the message will be sent out that Northern Ireland is serious about addressing the barriers to organisations becoming involved in innovation and R&D.

28. The need for mentoring has been established for all programmes including Framework Programme 7. Mentoring would be particularly welcomed by SMEs and micro-businesses to assist in identifying the type of support best suited to individual companies and to support companies throughout the process. Invest NI should explore ways to open up innovation and R&D mentoring schemes to all businesses which need it. This should include consideration of the contribution that could be made by third parties such as local councils, FE colleges and Local Enterprise Agencies (Recommendation 10).

29. The Committee recognises the high levels of expenditure that businesses undergo to become involved in R&D and the impact this high expenditure can have on cash-flow. Government also recognises this as a problem and, in recognition, has cut the target period for payment of invoices by Government departments from 30 days to 10 days. In the same spirit, the target time period for payment of grants, following receipt of an accurate record of expenditure should be reduced immediately to 30 days with consideration given to how this can be reduced further in the future (Recommendation 11).

30. The Committee was impressed with the high level of success of Northern Ireland companies tendering under the Small Business Research Initiative. The Committee was however disappointed to learn that opportunities do not exist for these progressive companies and others to tender under the SBRI for contracts within Northern Ireland. This constitutes a significant gap in both the innovation and R&D infrastructure here and in the procedures for procurement. The Department of Finance & Personnel must take steps to introduce and promote the Small Business Research Initiative across Government departments, agencies and NDPBs (Recommendation 12).

31. Given the importance of venture capital to small, early-stage, high-technology, knowledge-based companies, there seems to be little resolve to deal with the issue as a priority. DETI recognises that venture capital is critical and has informed the Committee that it is committed to growing a flourishing venture capital environment. The Department of Enterprise, Trade & Investment must work with others including the universities, NISP, AFBI and venture capital companies to develop a strategy and plan to increase the level of venture capital available in Northern Ireland (Recommendation13).

32. Some respondents have indicated the need to take advantage, at the earliest stage, of the opportunities available in Horizon 2020. This should involve a process of matching Northern Ireland's research base to the funding priorities of Horizon 2020. Focus should be on the knowledge and experience achieved and business networks created through EU participation. Therefore, preparation for Horizon 2020 should commence immediately, including an assessment of what Northern Ireland can offer, in business and academia, in relation to the funding opportunities available through Horizon 2020 (Recommendation 14).

33. A number of respondents, including Invest NI have suggested that there would be benefits in appointing a Chief Scientific Officer to advise on policy and to lobby on behalf of the Northern Ireland research base and maximise its strengths. There have been calls for a high level science steering committee to lead a science strategy for Northern Ireland. The Executive should explore the benefits of establishing high level structures for science including the appointment of a Northern Ireland Chief Scientific Officer and a science steering committee (Recommendation 15).

Summary of Recommendations

Vision for Innovation and R&D

1. A clear vision for innovation and R&D must be developed and implemented, including policies, strategies, structures, systems and processes which are custom-designed specifically to meet the long-term challenge of maximising the potential for Northern Ireland businesses and academia at all levels to take advantage of the existing and future opportunities for innovation, research and development.

Structures to Support Innovation and R&D

2. A high-level steering group should be established comprising Government, business and academia to advise on policy and oversee the integration and coordination of all R&D activity across all three sectors at all levels.

3. A completely new structure is required in the form of a single unit to integrate and coordinate all innovation and R&D activity. It should have four key responsibilities:

i. Improving Government knowledge and information on innovation and R&D by gathering knowledge and information through, research, networking and collaboration to identify and learn from good practices; and to identify the contribution that can be made at all levels by Government, business and academia.

ii. Developing programmes systems and processes to meet the needs of business and academia by providing programmes of assistance for innovation and R&D; providing support to understand and navigate programmes; and providing support for administering programmes from application to evaluation.

iii. Implementing support for innovation and R&D through promotion of opportunities, educating and mentoring, practical support through projects, awareness programmes for support available and for specific programmes (such as Horizon 2020 and the Small Business Research Initiative).

iv. Developing and supporting a culture of innovation and R&D across Government, business and academia at all levels in Northern Ireland.

Improving Government Knowledge and Information

4. A mechanism should be put in place and resource allocated to undertake the following functions:

i. To identify and learn from good practices in innovation and R&D in other countries and regions.

ii. To engage regularly with other sources of support such as EU institutions, venture capital firms and the Technology Strategy Board to gain a comprehensive understanding of and influence the initiatives and support programmes that are available for R&D.

iii. To gain a comprehensive understanding of the strengths, weaknesses, and potential that exists in Government, business and academia in Northern Ireland to contribute to innovation and R&D.

iv. To use the knowledge and understanding gained to inform the development of appropriate systems and processes, to support and improve the capacity and capability of organisations at all levels to participate in innovation and R&D.

Improving Programmes, Systems and Processes

5. Government, business and academia should work together to review and, where necessary, improve programmes developed within Northern Ireland and influence programmes being developed elsewhere, so as to balance the needs of business and academia with those of the Executive.

6. Government, business and academia should work together to review and improve existing support processes and, where appropriate, develop new practical measures of support for all innovation and R&D programmes.

7. Government, business and academia should work together to review and, where necessary, improve the administrative processes for R&D programmes developed within Northern Ireland so as to balance the needs and capabilities of business and academia with the needs of the Executive.

Implementing Support

8. A long-term strategy and implementation plan should be developed with appropriate resources provided for promotion of opportunities for R&D, educating and mentoring, practical support through projects and awareness programmes for support available for specific schemes.

Developing and Implementing a Culture of Innovation and R&D

9. A clear and consistent message and approach must be continuously promoted by Government, business and academia across Northern Ireland to the effect that innovation, and R&D are key drivers for economic growth and will be supported at all levels.

Additional Short-Term Measures to Improve Uptake of R&D

10. Invest NI should explore ways to open up innovation and R&D mentoring schemes to all businesses which need it. This should include consideration of the contribution that could be made by third parties such as local councils, FE colleges and Local Enterprise Agencies.

11. The target time period for payment of grants, following receipt of an accurate record of expenditure should be reduced immediately to 30 days with consideration given to how this can be reduced further in the future.

12. The Department of Finance & Personnel must take steps to introduce and promote the Small Business Research Initiative across Government departments, agencies and NDPBs.

13. The Department of Enterprise, Trade & Investment must work with others including the universities, NISP, AFBI and venture capital companies to develop a strategy and plan increase the level of venture capital available in Northern Ireland.

14. Preparation for Horizon 2020 should commence immediately, including an assessment of what Northern Ireland can offer, in business and academia, in relation to the funding opportunities available through Horizon 2020.

15. The Executive should explore the benefits of establishing high level structures for science including the appointment of a Northern Ireland Chief Scientific Officer and a science steering committee.

Introduction

Background

16. The Independent Review of Economic Policy (IREP), which reported in September 2009 noted,

"The promotion of innovation and R&D – including business sophistication and, at the regional level, technology transfer – is the most important long term driver of productivity. This is essential for NI to move up the value chain."

17. The report recognised the time-limited availability of Selective Financial Assistance due to changes in EU State Aid rules. It highlighted the need to incentivise innovation and R&D and to produce business-led, commercially relevant results. The report recommended that most assistance, currently delivered through SFA should be redirected to provide greater levels of support to innovation and R&D.[4]

18. Following a briefing from Assembly Research and Information Services in June 2011, the Committee agreed to commission research into Research and Development (R&D) activity in Northern Ireland and the level of R&D in Northern Ireland within a UK/European/global context. Following consideration of Research Reports the Committee agreed that it would be appropriate to conduct an inquiry into the future role innovation, research and development can play in developing the Northern Ireland economy.

19. In agreeing the Terms of Reference for the Inquiry, the Committee agreed to include provision for the use of a Rapporteur to lead the collection and analysis of evidence and to oversee the drafting of the Inquiry report. The Rapporteur role included taking evidence at informal meetings with key stakeholders. This approach enabled the Committee to widen the range of stakeholders from whom evidence was taken without increasing the duration of the Inquiry.

20. "Europe's average growth rate has been structurally lower than that of our main economic partners, largely due to a productivity gap that has widened over the last decade. Much of this is due to differences in business structures combined with lower levels of investment in R&D and innovation, insufficient use of information and communications technologies, reluctance in some parts of our societies to embrace innovation, barriers to market access and a less dynamic business environment".[5]

Terms of Reference

21. The Committee critically examined the mechanisms in place in government for providing assistance to micro businesses, small and medium sized enterprises, large businesses and academia to avail of opportunities for innovation, research and development at international, EU, UK, cross-border, Northern Ireland and local government levels. The Inquiry identified barriers faced by organisations here in availing of opportunities for support for innovation, research & development and makes recommendations on how policies, procedures and practices can be improved in order to maximise opportunities to support innovation, research and development for the benefit of the Northern Ireland economy.

22. Specifically, the Committee:

  • Examined the current policies, programmes and opportunities available to support innovation, research and development at international, EU, UK, cross-border, Northern Ireland and local government levels;
  • Examined the current policies, procedures and practices being deployed to assist organisations to avail of those opportunities;
  • Compared the assistance provided in Northern Ireland with that provided at regional level in England, in the other devolved administrations, in the Republic of Ireland and in other EU member states;
  • Assessed the appropriateness of current policies, procedures and practices in assisting organisations to avail of opportunities for innovation, research and development; and
  • Identified actions to be taken by the UK Government, Northern Ireland Executive, DETI, other NI departments, IntertradeIreland, universities, businesses and business support organisations and local councils.

Approach to the Inquiry

23. The Committee made a specific call for evidence from identified key stakeholders and a general call for evidence through the Assembly website. On the basis of written evidence submitted, the Committee decided which organisations and individuals to invite to provide oral evidence to the Committee.

24. The Committee undertook visits, as appropriate, to gain a practical understanding of the issues involved and the problems faced by key stakeholders.

25. The Assembly Research and Library Services undertook research into the following areas to inform the Committee:

  • Research & Development strategy, expenditure and constraints in Northern Ireland;
  • Assistance provided to support organisations to avail of research and development opportunities at regional level in England, in the other devolved administrations, in the Republic of Ireland and in other selected EU member states;
  • Identification of the best performing universities in the UK and RoI for Research and development.
  • Identification of international best practice in research and development.
  • Identification of both regional and sector-specific initiatives in the UK.

26. The Committee used the services of a Rapporteur in conducting the inquiry. However the Committee harnessed the knowledge and experience of all its members in collecting, and analysing the evidence for the inquiry and in determining conclusions and recommendations.

27. Those providing written evidence to the Committee were asked to respond by 16th December 2011. Oral evidence was taken between 9th February 2012 and 29th March 2012.

Key Issues and Findings

Current Policies, Programmes and Opportunities for R&D

Local Government

28. Local authorities have implemented a number of schemes under the various European Structural Funds aimed at providing early stage R&D support to micro-businesses.[6] This type of support is principally aimed at encouraging businesses to engage in R&D for the first time and provides direct mentoring support for the participant businesses.[7]

29. According to the Northern Ireland Local Government Association (NILGA) councils are involved in the process by signposting local businesses to opportunities which they otherwise would not be aware of. Their experience of dealing on a one-to-one basis with their local business community allows them to identify opportunities which can be harnessed and developed through appropriate programmes and contacts which can be essential to the development of innovative concepts and turn them into exploitable products.[8]

30. Lisburn City Council's Innovation Networks Programme aims to place innovation and research at the core of local business development activity and to develop strategic innovation partnerships between businesses located in the Lisburn City Council area and third level education and research centres. Local companies will be encouraged to increase levels of R&D by identifying and developing appropriate new technologies, new processes, new systems and new products that will add value, and improve overall business competitiveness and profitability. In the 2009-2010, the Innovation Networks Programme assisted sixteen local companies to grow their business through increased levels of investment in R&D. The project also enabled businesses to have access to the world class research and new technologies developed by the University of Ulster staff which will provide opportunities to launch new commercially viable products and enter new markets. In the past year, the programme has resulted in one business achieving an Energy & Environment Innovation Award at the 2010 Sustainable Ireland Awards. In addition, another business reported an expected turnover of £60k generated directly from the project over the next five years. Moreover, cumulative collaborative R&D funding secured over next 5 years is anticipated to be £317k.[9]

31. Castlereagh Borough Council offers an Economic Development Services Function to local businesses. For local businesses this offers:

  • Grants advice and support; Business development programmes and mentoring;
  • Links to partner programmes offering support and development; and
  • Tourism development and collaborative support and marketing projects.

32. In September 2011, Castlereagh Borough Council launched the 'Evolution Project'. The project maximises the support available through www.nibusinessinfo.co.uk by the facilitation of an audit benchmarking process. It also puts in place an itinerary of support built around the specific needs of business participants/applicants. All stakeholders have signed up to a memorandum of understanding with a lead consultant managing a pool of 'specialist associates on behalf of the Council.

33. Belfast City Council's Stepping Stone program is principally aimed at encouraging businesses to engage in R&D for the first time and provides direct mentoring support for the participant businesses The Stepping Stone to Success Program helps companies, in particular micro-businesses working in technologically isolated environments, to bridge the technology competency gap and facilitate innovation. It provides face-to-face contact with experienced professionals who can advise on routes to innovative solutions which are specifically tailored to the needs of the individual company. Immediate advice is available on industry best practice, equipment specification, process improvement and on general technical problem solving. The program identifies areas which are blocking growth or disadvantaging companies relative to their competitors.[10]

34. Craigavon Borough Council's 'You Can Develop It' programme works to encourage and support Craigavon companies to implement significant improvements that will help accelerate their growth; and develop their capacity in an increasingly competitive marketplace. Companies are guided on how to think strategically and behave innovatively to take their product/service forward. This will mean the concurrent development of new products and the development of management resulting in the accelerated growth.[11] The programme provides mentoring and coaching to assist companies in innovation strategy, assist local companies in the research and development lifecycle and encourages local business to develop their capacity.

35. Newry and Mourne District Council has an active role in economic development. Its Economic Development Unit is involved in sourcing all aspects of funding and this includes, EU (INTERREG, Rural Development). Furthermore, the Council is actively on board with all relevant Government Departments. Newry and Mourne District Council has dedicated officials to advise, signpost, apply for funding and implement projects.

36. These projects have been framed with the aim of establishing sustainable relationships between the local research communities within universities and colleges and business base.

Northern Ireland

37. Up until 2011, Northern Ireland's key R&D strategy document wass the Regional Innovation Strategic Action Plan 2008-2011. The plan sought to meet Public Service Agreement 1 – 'promote higher-value added activity through innovation and the commercial exploitation of R&D'.[12] Delivery on this agreement was measured through average annual growth in business expenditure on R&D (BERD). There were two central targets related to this:

  • Increase SME annual growth in BERD by 8%; and
  • Increase larger company growth in BERD by 5%.[13]

38. The Action Plan's strategic objectives are at Table 1 in Assembly Research paper NIAR 281-11 at Appendix 5. The range of objectives presented combines a multi-sectorial approach covering the private, public, and education sectors, with a multi-level outlook that is regional, national and international.[14] The financial contribution committed in the Action Plan is £360m over a three-year period; this includes £170m from Invest Northern Ireland and £90m from the innovation fund.

39. Invest NI's corporate plan (2008-2011) set targets similar to those outlined by the Department above. The plan made a commitment to:

  • Secure Research & Development investment commitments of £120m;
  • Assist 300 companies to engage in Research & Development for the first time;
  • Increase the commercialisation of intellectual property from Northern Ireland's university and company research base; and
  • Support MATRIX (the NI Science and Industry Panel), which will advise DETI on policies to better target resources to technology areas of greatest future potential and exploit core niche strengths in the R&D and science base.[15]

40. The Committee considered the final progress report on the RISAP at its meeting on 1st December and wrote to the Minister welcoming the achievement of the Plan's objectives. The Committee is currently awaiting the successor to the RISAP, the Action Plan for R&D, Innovation and Creativity. The Committee suggested to the Minister that, when this plan is developed, it would be appropriate to include objectives which demonstrate clear outcomes and benefits including objectives, with annual targets, directly related to increasing the number of companies, the number of locally owned companies and the number of SMEs investing in R&D as well as objectives for increasing the overall spend on R&D in Northern Ireland.

41. MATRIX is a Northern Ireland business led expert panel which advises government on the commercialisation of R&D and science and technology. MATRIX provides advice across areas such as key R&D and science and technology affecting business innovation and emerging strategic technology issues affecting the Northern Ireland economy. MATRIX also plays a role in promoting a culture of innovation and raising the profile of R&D and science and technology, with particular regard to commercial activities. The panel's key objectives range from increasing the economic return from science and technology to promoting the importance of R&D and science and technology in Northern Ireland.

42. The Programme for Government (PFG) introduced three targets, which impacts on Northern Ireland's R&D landscape. The first is to 'support £300m investment by businesses in R&D, with at least 20% coming from Small and Medium sized Enterprises'. Should the 20% target for small and medium enterprises be reached this would equate to £60m in R&D investment from companies of this size over the three year life span of the PFG.[16]

43. A second business focused target is to 'support 200 projects through the Creative Industries Innovation Fund'. This target is to be brought forward by the Department of Culture, Arts and Leisure. Whilst not exclusively linked to business R&D, the Creative Industries Innovation Fund (CIIF) has assisted in the development of innovation within business in Northern Ireland.[17]

44. The final target focuses on the higher education sector and sets a target of increasing places in courses of economic relevance in the subjects of Science, Technology, Engineering and Mathematics. The increase equates to 1180 additional places staggered over a period of three years.[18] The additional places will be spread across Northern Ireland's universities and further education institutes.

45. R&D is seen as key to rebalancing and rebuilding the Northern Ireland economy, The Department of Enterprise, Trade and Investment's Economic Strategy details how this can be achieved. The Economic Strategy identifies the challenges to R&D and innovation in Northern Ireland such as the need for diversification in target areas and the need to provide greater emphasis on the support of high technology manufacturing industries. The Strategy indicates that R&D and innovation are cross-departmental and presents strategies that reflect this. It also highlights the cross-departmental key actions for further development and contains medium to long-term goals for R&D including:

  • The evolution of the NI Science Park into an Open Innovation Centre;
  • Ensuring there is an alignment of publically funded research with economic goals to increase potential for knowledge transfer between business and academia;
  • Exploration into the commercialisation of publicly funded research and public sector Intellectual Property;
  • Nurturing innovation through public procurement; identification of areas of collaboration between the health sector and business; and
  • Examining the establishment of an Innovation Council.[19]

46. There is a range of resources available to Northern Ireland businesses wishing to participate in R&D. These include NI specific resources such as Invest NI grants. A summary of funding available for R&D and innovation in Northern Ireland is detailed in Assembly Research Paper NIAR 921-11 at Appendix 5.

Cross-Border

47. InterTradeIreland works on a cross-border basis supporting SMEs in North/South trade and business development. The organisation has a particular focus on R&D and Innovation through the Innova programme, which offers businesses an opportunity to participate in cross-border R&D partnerships. Additionally, FUSION is an all-island technology transfer programme that offers support packages worth up to £29,500 to undertake a 12 month innovation project. It also offers businesses general advice on R&D and innovation whilst offering assistance with some EU funding programmes such as Framework Programme 7. InterTradeIreland has established an All-Island Innovation Programme which plays an important role in the organisation of innovation lectures and workshops. More detail on the support offered by InterTradeIreland is included in the organisation's written submission to the Inquiry at Appendix 4.

48. Although there are no structures in place at regional level to support cross border cooperation on innovation and R&D at a local level an example was provided to the Committee of a cross border partnership between two local councils. A European economic development office has been established in Newry to work with an existing office in Dundalk. A Memorandum of Understanding (MoU) has been agreed between Newry & Mourne District Council and Louth Local Authorities in order to support and promote the economic development and competitiveness of the region.[20] The MoU should provide opportunities for cross border cooperation on innovation and R&D.

United Kingdom

49. R&D and Innovation policy for the UK Government was outlined in the Blueprint for Technology, published in November 2010. The strategy aims at making the UK Government the 'most technology friendly in the world' and seeks to drive economic productivity through 'high-growth, high-tech innovative businesses'.[21] The strategy seeks to remove barriers to and incentivise Innovation and R&D by establishing the right framework for enterprise and investment; maintaining competitive advantage through industries which already possess and have potential to maintain competitive advantage; and reducing the gap between innovation and commerciality.[22] The Strategy outlines measures to ensure delivery of these objectives:

  • A consultation on the taxation of intellectual property, R&D Tax Credits, the potential for creating a Patent Box and the Dyson Review recommendations;
  • Maintaining the science budget in cash terms of the Spending Review period with resource spending of £4. 6 billion a year;
  • A series of regulation simplifications;
  • a 'one-in-one-out' rule whereby no regulation is brought in without another regulation being cut by at least the same amount;
  • ending the culture of 'tick-box' regulation;
  • 'sunset clauses' for regulations and regulators to ensure that the need for each is regularly reviewed;
  • Afford the public 'the opportunity to challenge the worst regulations'; and
  • Bringing 'new discipline to the implementation of EU rules, so that British businesses are not disadvantaged relative to their European competitors and ensure gold-plating is stopped'.
  • The provision, over four years, of £200m to fund the establishment of ' an elite network of Technology and Innovation Centres';
  • Creating 'the most competitive environment in the developed world for venture capital and early-stage investment';
  • The establishment of the UK Innovation Fund, which comprises of £150m government and £175m of private investment; and
  • Introduce a Small Business Research Initiative (SBRI) to provide R&D procurement contracts to businesses to develop new and innovative products and services.[23]

50. Equity gaps in R&D can be addressed using Enterprise Capital Funds (ECF). They are temporary funds, subject to specific deadlines and take the form of public and private money. The ECF has no specific regional or sectorial targets, nor, is it specifically a research and development/ innovation focussed project. Rather it is targeted at encouraging enterprise and productivity growth. The government will contribute up to £25m to a specific fund, or twice the private capital, whichever is lower.[24] Investments from Enterprise Capital Funds must be in UK based SMEs or to fund the UK operations of SMEs.

51. Research and Development Tax Credits is a scheme administered by HMRC which permits businesses to claim corporation tax relief on expenditure on R&D that has been undertaken by the business. Under the SME Scheme (businesses with fewer than 500 employees) 200% corporation tax relief is allowed for. Under the Large Company Scheme, businesses can claim 130% corporation tax relief on qualifying R&D costs.[25]

European Union

52. Programmes and policies at regional, national and European level operate under an umbrella concept called The European Research Area (ERA). The ERA involves all R&D activities in Europe which involve a transnational perspective.[26] The ERA seeks to create a European wide market for research that meets the needs of industry, the scientific community and citizens, and which is characterised by a flow of highly mobile competent researchers. The ERA seeks a research infrastructure that is fully integrated and accessible to research teams from Europe; Research institutions engaging in public-private cooperation and partnerships forming research clusters and networks for knowledge transfer; research programmes and priorities, that emphasise jointly-programmed public research investment; and a research area that is open to the world.[27]

53. Framework Programme 7 (FP7) is the principal delivery mechanism of research policy and funding at a European level. FP7 has a lifespan of seven years between its implementation in 2007 and its completion in 2013. The budget for the programme over its seven year cycle is €50.5bn with an additional €2.7bn made available for its first five years through the Euratom programme.[28] Activities funded through FP7 must have a 'European Added Value'. To meet this objective projects often have a transnational element, incorporating consortia of participants from different member and non-member states.[29]

54. FP7 is made up of five programmes: The Cooperation Programme; The Ideas Programme; The People Programme; The Capacities Programme; and The Eurotom Programme. Of these, the greatest proportion of funding is earmarked for the Cooperation Programme - €32,365m. This programme focuses on research into areas such as Health, Energy and Environment.[30]

55. As of 1 April 2011, Northern Ireland organisations have participated in 110 projects, with a requested financial contribution of €30m. Northern Ireland Participation in FP7 has been highest in the Higher Education sector which makes up 65% of total participation.[31]

56. A detailed analysis of Framework Programme 7 can be found in Assembly Research paper NIAR 636-11 at Appendix 5.

57. Horizon 2020 will be the successor to FP7 running from 2014 to 2020. It will bring together all existing EU research and innovation funding currently provided through FP7, the Competitiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT). The different types of funding provided by the existing programmes will be brought together into a single coherent, flexible framework. It will provide funding for every stage of the innovation process from basic research to market uptake, in line with the EU's commitments under the "Innovation Union".[32] Horizon 2020 will have three strategic objectives:

  • Strengthening the EU's position as a world leader in science;
  • Ensuring Europe is an attractive location to invest in research and innovation; and
  • Tackling the major societal issues affecting the lives of European citizens.

International

58. The US Ireland R&D Partnership is highlighted in the written submission from InterTradeIreland at Appendix 4. It is considered a unique alliance between the three jurisdictions to address common research challenges in nanotechnology, sensor technology, telecommunications, energy & sustainability and a range of health areas. In oral evidence, InterTradeIreland representatives stated that although the process has been slow to get established, it is now at the stage that participants in the programme are branded as being world-class in whatever area they are working.[33]

Summary of Assistance Provided for R&D in Other Regions

England

59. In England local areas are offered the opportunity to take control of their future economic development. Local Enterprise Partnerships are locally-owned partnerships between local authorities and businesses and play a central role in determining local economic priorities and undertaking activities to drive economic growth and the creation of local jobs. They are also a key vehicle in delivering Government objectives for economic growth and decentralization, whilst also providing a means for local authorities to work together with business in order to quicken the economic recovery. As Local Enterprise Partnerships are based on more meaningful economic areas, they will be better placed to determine the needs of the local economy along with a greater ability to identify barriers to local economic growth[34] The UK Government's coalition programme supports the creation of Local Enterprise Partnerships as replacement of the Regional Development Agencies (RDAs).

60. There have been 39 partnerships announced thus far. Priorities relating to innovation and R&D include:

  • Greater Manchester Local Enterprise Partnership: Capitalizing on the area's world class research, science and innovation capability;
  • Cumbria Local Enterprise Partnership: Driving enterprise, innovation and growth in the Cumbrian economy, delivering real long-term growth in the most efficient and effective ways possible through both our rural and urban based businesses; and
  • North Eastern Local Enterprise Partnership: Promoting productivity, enterprise and business growth through developing innovation and exploiting research and development capabilities.[35]

61. A Local Enterprise Partnership Network has been established to enable Local Enterprise Partnerships to come together to discuss shared issues, engage with Government and share knowledge and best practice. It is also intended to be a gateway to news and information of importance to Local Enterprise Partnerships.

Scotland

62. The Scottish Economic Strategy places R&D and innovation amongst a number of broader strategic objectives. It seeks to:

  • Support the development of innovation and its commercialisation;
  • Invest in universities and the creative industries, and tailor Scottish life sciences to assist in the development of key sectors – creative industries; energy (including renewables); financial and business services; food and drink (including agriculture, and fisheries); life sciences; sustainable tourism; and universities;
  • Develop a skills base that is responsive to the needs of business; and
  • Support innovative low carbon technology to assist transition to a low-carbon economy.

63. R&D and innovation policy is driven by a number of agencies. The first is the Scottish Science Advisory council (SSAC). The SSAC advises the Scottish Government's Chief Scientific Officer on specific issue and science related policy with a view to promoting economic growth and ensures that it has a diverse membership across a range of stakeholders. Scottish Enterprise (SE) is a development agency that facilitates R&D and innovation policy. SE offers a range of grants and supports including SMART Scotland, R&D Grants, Seven Framework Programme, R&D Tax Credits and access to the Winning through Innovation Programme. The Highlands and Islands Enterprise (HIE) is a development agency that focuses specifically on these regions in Scotland. The HIE offers finance and support through funding schemes, Small Business Research Initiatives and grants aimed at supporting collaboration between businesses and academia. The Scottish Funding Council (SFC) is the final agency. The SFC is the main funding body for Scottish universities and colleges. Funding from the SFC supports strategic initiatives in universities including research activities and general funding for teaching activities.[36]

Wales

64. The 2011 policy document 'Economic Renewal: A new direction' outlines the Welsh Government's current policy on R&D and Innovation. Welsh policy includes a range of measures intended to encourage innovation and R&D. It contains commitments to:

  • Address under-used business incubation capacity; and
  • Adopt a more focused approach, talking barriers to investment in R&D and innovation.

65. Funding for R&D in Wales supports industrial research, experimental development, and exploitation. This funding is labelled as repayable finance, it is however, not repayable. Funding is also available at a local level through the Local Investment Fund, tailored toward SMEs. Private investment is facilitated through Finance Wales. Early stage finance is focussed upon technology businesses. Funding for the Higher Education Sector is delivered by The Higher Education Funding Council for Wales. Funding is broken down into teaching, research and postgraduate research.[37]

Republic of Ireland

66. There are a number of actors involved in the delivery of R&D and innovation policy in RoI. The Department of Jobs, Trade and Innovation published the key strategy document, Science for Technology and Innovation (2006), containing measures they seek to promote:

  • Academic research;
  • Graduate schools;
  • Commercialisation;
  • Industrial research;
  • Public sector research;
  • Public awareness; and
  • Cross-border and international cooperation.

67. In the RoI 50% of R&D funding is drawn from business enterprises, with the government providing 31% of funding. The largest share of Government funding is allocated to the higher education sector through the Higher Education Authority. Funding and support for R&D and innovation in business is offered through Enterprise Ireland. This includes:

  • R&D Stimulation Grant;
  • R&D Fund: Small Projects;
  • R&D Fund: Large Projects;
  • Innovative High Potential Start Up support;
  • Funding for collaborate on Research and Development Projects with Colleges and/or Companies;
  • Innovation Vouchers;
  • R&D Advocates Scheme;
  • Innovation Partnership Programme;
  • Applied Research Enhancement;
  • Technology Centres; and
  • Support accessing FP7 funding and other EU streams.[38]

68. IDA Ireland and InterTradeIreland both offer support and funding opportunities through grant aid. However, InterTradeIreland offer programmes such as the FUSION programme - offering companies the opportunity to employ graduates – and The Innova programme which offers business grants for carrying out an innovation programme in partnership with a company from Northern Ireland.

69. Enterprise Ireland is the government organisation responsible for the development and growth of Irish enterprises in world markets. They provide supports for both companies and researchers in Higher Education Institutes to develop new technologies and processes that will lead to job creation and increased exports. Services provided by Enterprise Ireland include:

  • Incentives to stimulate in-company R&D – new product, service and process development to ensure sustainability, and growth through the evolution of products and services.
  • Assistance with R&D collaboration - with research institutions, to develop and bring to market new technologies, products or processes.

70. Companies in RoI can also claim for 25% R&D tax credit.

Finland

71. The Ministry of Employment and the Economy and Ministry of Education and Science are responsible for the Finnish innovation system at departmental level. VEKKES is the main funding agency proving grants of €600m annually. Finland performs well across a number of indicators: The region's human resource performance is strong; the region is marked by high business investments; and Finnish SME cooperation in innovation has been growing at a faster rate than the EU average. The National Innovation Strategy (2008) outlines the current research and innovation policy. It is based on ten principles:

  • reinforcing the competence base;
  • broad-based innovation activity;
  • internationalisation of the innovation environment and operating in a world without borders;
  • strong and networked innovation centres;
  • internationally competitive system of training and higher education;
  • developing the Finnish environment to support growth businesses;
  • strengthening demand and user orientation;
  • central government's corporate steering and a systemic approach;
  • resources for innovation activity; and
  • International review of the innovation system.[39]

Sweden

72. The Ministry of Enterprise, Energy and Communications and the Ministry of Education are both responsible for innovation and research policy. The Swedish Research Council and the Agency for Innovation Systems (VINNOVA) are the agencies responsible for delivery of innovation and research policy. VINNOVA has a range of responsibilities in the delivery of innovation policy:

  • Investing in research and innovation;
  • Improving the innovation capacity of SMEs – which includes coaching and facilitating their promotion in international partnerships;
  • Promoting global links – through bilateral linkages and through participating in EU R&D programmes;
  • Policy development; and
  • Utilising the Country's innovation infrastructure – which includes a strong research and innovation environment, testing and demonstration sites, incubation facilities, and the relationship that exist amongst the 'triple helix'.[40]

73. The country's research and innovation system has a number of strengths:

  • High-levels of investment in R&D – in 2009 total Swedish R&D investment amounted to 112bn Swedish Krone (SEK);
  • A concentration of large global corporations with a culture of R&D investment;
  • An internationally linked economy (although with some distance to market);
  • An export orientated market that is fuelled by innovation; and
  • A long tradition of cooperation within a 'triple helix' – Academia, Government and Industry.[41]

74. Sweden's research and innovation focus is on health, biotechnology and transport with a focus on promoting excellence in Universities and linking academia to business.

Germany

75. In Germany, the federal government and the 16 L?nder each has roles and responsibilities in the delivery of innovation policy. At federal level, the Federal Ministry of Education and Research and the Federal Ministry of Economics and Technology are responsible for research and innovation. There are more than 20 organisations - across Germany's governance system - responsible for the delivery of policy formulated at federal or state level. Current policy is a response to specific research and innovation challenges:

  • Funding innovation - German policy is to offer a range of financial support mechanism to SMEs including venture capital (the High-tech start-up fund), loan programmes and grants. In 2008 the Central Innovation Programme for SMEs (ZIM) was launched. In 2009 and 2010 ZIM had an annual budget of €300m, rising to €500m from 2011.
  • Keeping pace with global technology trends – federal government launched a series of 17 'Thematic R&D Programmes', which target policy and funding at specific technological areas.
  • Adapting Germany's education system to meet the needs of rapidly evolving requirements of technology and innovation – the Federal Government has have reformed vocational training courses, introducing new, 'modern' courses and improving the supply of further education, including additional financial incentives for employees.
  • Continuing the strong tradition of industry-science link ups – A number of policies have been adopted to ensure this tradition continues. The region has also introduced the Research Bonus to strengthen the ability of universities and public research institutions to co-operate with SMEs.[42]

76. Case studies on regional innovation systems – including Baden-Württemberg, Germany - can be found in Assembly Research paper NIAR 850-11 are included at Appendix five.

Academia Involvement with Business in R&D

Further Education Colleges

77. Further Education Colleges engage with business through a range of projects and initiatives. The aim of these is to increase collaboration with business in a knowledge sharing capacity.

78. The Belfast Metropolitan College (BMC) has used the Knowledge Transfer Partnership (KTP) as a vehicle for research engagement between the College and local businesses. The experience gained from the KTP has led to an exploration of Framework Program 7 initiatives. BMC contend that the establishment of networks for sharing information and developing ideas is crucial to supporting R&D. BMC's own knowledge network - Club Met - facilitates business to business engagement and access to a range of resources at the college which provide research and development support.

79. The Northern Regional College (NRC) has outlined an Economic Engagement Strategy. The strategy aims to develop relationships between the college and organisations through value added services. The college's engagement with business is classified into three categories: Strategic Partners; Stakeholders; and Consumers.

80. The South West College (SWC) has provided an on-the-ground practical R&D support presence through its InnoTech Centre. The Centre is assisting business to become more competitive through research and development. An example of the SWC's involvement with business is illustrated in the Kilkeel Development Association, where nine SMEs have partnered to research a sustainable vision, incorporating renewable technologies and sustainable development.

Queen's University Belfast

81. In the written evidence submission, QUB indicated that there are a variety of funding schemes that currently exist to incentivise collaboration between business and academia. QUB have been successful in many of these schemes including the Knowledge Transfer Partnership, which has been beneficial to university collaboration with business.

82. A major factor in QUB's success is QUBIS Ltd which, over the past 25 years, has created more than 50 high technology companies and over 1,000 jobs, and is continuing to make a very significant contribution to the local economy generating an expected turnover of £104m in 2010.[43]

83. In exchange for an entrepreneur's time and initial investment QUBIS Ltd will provide an investment, the use of university facilities and university intellectual property.

84. QUB contends that having a level of expertise closer to academics and businesses linked into academia makes a huge difference.

"It has allowed us, since November 2011, to put forward 11 funding applications to a value of up to £30 million.'"[44]

85. QUB considers it important to engage with business much earlier in the research process and insists collaboration is about;

"understanding what the problems of industry and companies are and ensuring that our research pieces are tuned to those needs and that we work in partnership"[45]

University of Ulster

86. In the oral briefing from the University of Ulster (UU), representatives reported that they have witnessed a higher degree of engagement from business into university research and a higher outflow of research into the economy.[46]

87. Furthermore, UU noted that there is a much higher degree of engagement from academics in business activities. They indicated:

"We reckon that, in 2011, around 37% our academics are working with companies today'[47]

88. As a result of this engagement, academics are seeing the institutional benefits from engaging with industry, both to their teaching and research activities.

89. UU indicate that the criteria have changed in the Research Assessment Exercise (RAE) and Research Excellence Framework to place a higher emphasis on impact. UU explained what the changes meant:

'That is the translation of research outputs into the economy, including providing competitiveness for industry; policy inputs and impacts; and societal inputs and impacts.'[48]

90. The success of UU in collaborating with business is a result of their work with spin-off companies. Innovation Ulster Ltd is a legally constituted vehicle through which the University of Ulster engages commercially with the business community and investors.[49] Profits and surpluses from commercial activity are brought back into the University for distribution to the academic community and associated faculties and schools.

91. Innovation Ulster Ltd is evidence of UU's commitment to play a key role in Northern Ireland's economic and social development.

92. The primary role of the Innovation Services Team within the Office of Innovation is to translate the University's knowledge and technology (Intellectual Property) into marketable products and services in the most effective and timely manner possible. This is achieved primarily through the following mechanisms:

  • Spinouts / New Business Ventures
  • Technology Licences
  • Consultancy
  • Collaborative Development Projects[50]

Universities in the Republic of Ireland

93. Trinity College Dublin nurture strong research capabilities and develop new ways to exploit this resource, an Innovation Centre was founded in 1986. In addition to fostering links between industry and the academic research base, the Innovation Centre also serves as an incubator for small businesses which spin-off from research.[51] Over 40 companies have been set up, creating over 1,000 jobs.

94. Nova UCD, the Innovation and Technology Transfer Centre, is the hub of innovation and knowledge transfer activities at University College Dublin. Nova UCD's vision is to become an international leader in the commercialisation of research and other knowledge-intensive activity for the benefit of the economy and society. Since 2004, €3.6 million has been generated from commercialisation research and 56 start-ups have availed of Nova UCD's incubation facilities. Furthermore, 16 new spin-offs have been incorporated with Changing Worlds, a technology company, acquired by Amdocs for $60 Million.[52]

Appropriateness of Current Mechanisms for R&D

General Appropriateness of Opportunities

95. There was general support among respondents for most of the programmes in place for supporting R&D. Both QUB[53] and Banbridge District Council[54] believe that generally, programmes are appropriate to support R&D that is both research driven and business led. NILGA believes that there are ample opportunities for businesses and academia to become involved in research and development.[55] However, in its written submission, QUB stated that the current range of programmes to support R&D is sometimes disconnected, overly complex and can operate in isolation. They state that programmes could benefit from being considered holistically and comprehensively with a focus on greater simplification.[56] NILGA supports the contention that programmes may be disconnected when it states that too many potentially crossover and compete with one another.[57]

96. In the opinion of Almac representatives, in order to ensure commercial return for R&D, more opportunities are required for business-led initiatives to facilitate industrial organisations opportunities to lead more programmes. The company states that, compared to the number of academic-led opportunities, there is a substantial shortage of opportunities for business to take the lead.[58] In relation to the type of support offered, Almac states that much of their research is long-term. They state that the available support is for too short a period and the models do not generally suit the type of research the company does. For example, they are presenting pipelines that run for seven or eight years. They informed the Committee that funding is typically for two to three years duration. They are left with a deficit to fund to try to get products to market. Work is being held back because, although some projects are very good, they cannot take them forward as they do not have the finance. They believe a five to six year programme would be more suitable.[59]

97. ADS informed the Committee that small companies require market driven projects to achieve a faster return on their investment. They believe that collaboration with universities can provide small companies an effective means of R&D participation. However, they state that, according to SMEs with which they have contact, this is not always practical for business as some programmes are focused more on academic research than on market driven opportunities.[60] In oral evidence to the Committee, ADS stated that their members believe more focus needs to be centred on funding for SMEs.[61]

98. Opportunities are not very appropriate for micro-businesses with fewer than 25 employees according to Cirdan Imaging.[62] They state that such companies constitute over half of the businesses in Northern Ireland. They consider the systems too bureaucratic and state that micro-businesses have difficulty with cash-flow constraints, showing matching funding and the grants are often too low a level to sufficiently cover the real cost of innovation. Hence, they are not attractive for many small businesses. Northern Regional College also believe that measures to ensure compliance with criteria for funding can act as a barrier to smaller companies.[63]

99. There are a large number of support programmes available for R&D. DETI officials informed the Committee that a number of programmes in Invest NI could be clustered together and in that way, would work much more effectively together than they do apart.[64] In response to a question from the Committee relating to the potential for confusion arising from the wide range of support available from a range of public and private providers, the Department responded that an exercise is currently underway to map the key programmes and the support for organisations wishing to become involved in R&D.[65] In its written evidence to the Committee, Invest NI highlighted its 'Innovation Escalator' approach to providing support for R&D through its range of interventions. This is outlined at Appendix 4, in Appendix A to the written submission from Invest NI. In oral evidence, Invest NI representatives defended the organisation's programme for R&D stating that they consider it one of the most flexible in the UK. The Committee was informed that Invest NI has revised its support to maximise its flexibility through the introduction of a single grant for R&D. It has also allocated a growing proportion of its budget to activity incentivising R&D with 80% of the R&D budget going directly to businesses through R&D grants.[66]

Innovation Vouchers

100. Innovation vouchers were seen by many respondents as an appropriate means for businesses to get on to the Innovation ladder. For example, Belfast Metropolitan College stated that they represent a very credible first step into the research arena for businesses.[67] They consider the process simple, and informed the Committee that Invest NI has tried to make it as easily accessible as possible.[68] The CBI agree with this, stating that Innovation Vouchers almost force an initial engagement that can lead to a Knowledge Transfer Partnership or a Fusion Programme and, eventually, on to larger research grants such as Invest NI funding or Innova.[69]

101. A number of organisations, including Northern Regional College,[70] Newry & Mourne District Council[71] and Belfast City Council[72] report that many local micro-businesses can be excluded through what they see as over rigorous conditions in relation to eligibility criteria for the scheme such as the requirement to hold a current valid Company Registration Number.

102. While supporting the concept, Belfast Metropolitan College suggest that the current model for awarding Innovation Vouchers could be reviewed. They state that vouchers are awarded in three £4k sums to a business however they believe that, if a business could acquire £12k in one lump sum it would allow for greater depth of research study and more effective outcomes. If this model was then rolled out through a clustering approach within sectors, they believe much greater returns could be achieved. They consider FE colleges to be well equipped to undertake such an approach.[73]

Research and Development Tax Credits

103. There was much support among respondents for R&D tax credits. ADS state that it is widely viewed as an efficient mechanism for incentivising R&D and stimulating investment in innovation.[74] The CBI believe they take some of the risk out of innovation and the process seems to work well.[75] ADS consider them key for both large and small businesses investing in R&D and have been a tremendous boost for such companies.[76] UCD state that, within the UK, the R&D tax credit system has been seen to be beneficial to both large and small companies. They suggest Northern Ireland could lead the way in expanding these schemes.[77] Manufacturing Northern Ireland believe the awareness of R&D tax credits needs to be improved.[78] Asidua Ltd informed the Committee Chairperson that there is a lot of confusion regarding the availability of tax credits to those companies which have received assistance from Invest NI for the same R&D project. They indicated that most companies are not aware of how the tax credit system works and called for Invest NI to clear up the confusion on the matter.[79]

104. Invest NI acknowledge that there has been a misconception that support for R&D from Invest NI cannot be accessed along with tax credits. They concede that the level of uptake of tax credits is low but that it is increasing. The reasons may be a combination of two factors: firstly, companies may not realise that tax credits are available for the R&D work they are undertaking; and secondly, organisations may not realise that the work they are doing actually counts as R&D from the perspective of Her Majesty's Revenue & Customs (HMRC). Invest NI representatives informed that Committee that there is an awareness issue that needs to be addressed. Invest NI have started to address this through the production of a booklet on R&D tax credits in association with HMRC.[80]

Knowledge Transfer Partnerships

105. The CBI consider Knowledge Transfer Partnership programmes a useful step on the R&D ladder. They informed the Committee that KTPs provide good opportunities for businesses.[81] Invest NI consider KTPs an excellent means of starting to get companies involved in collaborating with the research base.[82]

106. QUB state that the recent evaluation of KTP programmes, has resulted in a significant drop in KTPs between the universities and SMEs within Northern Ireland. They believe that, as a result, QUB, which led the UK by a considerable distance, has seen other UK regions catch up dramatically. They informed the Committee that the evaluation and appraisal is still going on over a year later.[83] Belfast Metropolitan College state that additional KTP funding should be provided which is set against regional criteria and supports the types of projects emerging from the FE sector.[84] In oral evidence to the Committee, the College stated that it was one of the most successful colleges in the UK in respect of KTPs.[85] Representatives outlined how they have developed the programme to make it more suitable to SMEs. They informed the Committee that recent changes to the criteria have meant that it has gone back to being more pure research-driven and more academic resulting in the KTP proposals of many companies not being considered innovative enough. They informed the Committee that they have been told that the success of a KTP programme is now based on the quality of the resulting journal paper rather than on commercial success. QUB informed the Committee that KTPs in Northern Ireland have declined by 30% since the start of an additional review in October 2010 and the absence of funding at regional level. They believe the national assessment framework currently employed is not necessarily attuned to the needs of Northern Ireland as a region.[86] The University of Ulster is of a similar view. They informed the Committee that the University has lost two years of enhanced funding to industry which means that opportunities have been lost for Northern Ireland companies to have an Impact. They stated that they have reduced the level of activity by 16% at a time when the importance of innovation to the economy is being highlighted.[87] QUB did, however, inform the Committee that a regional scheme will be launched later in the year and the changes made are likely to be positive.

107. In an interview with the Chair, the CEO of TSB outlined the current position with the Knowledge Transfer Partnership.[88] There are currently 44 live KTPs in Northern Ireland. They are considered a good means of transferring knowledge in universities to SMEs. Northern Ireland excels in KTPs with QUB the number one university in the UK in this area. There is an excellent economic return of £3 for every £1 invested. The UK review of the scheme ran alongside a reduction in budget and Invest NI conducted a Value for Money exercise following the review. The Scheme was relaunched in April 2012. According to the CEO of TSB, Northern Ireland's strength lies in the excellent higher education systems, strong SME base and expertise of Invest NI. Northern Ireland is now in a good place to take full advantage of KTPs and has a huge opportunity to be the UK exemplar for KTPs.

Venture Capital

108. The University of Ulster informed the Committee in oral evidence that venture capital is a very important tool to help exploit the economic value of research. Representatives explained that in order for spin-out companies to start on the back of R&D and engage with early-stage, high-technology, knowledge-based companies, there is reliance on private equity. They consider venture capital to be a key source of capital and believe a lot more is required in Northern Ireland. Representatives also informed the Committee that there has never been a greater demand for venture capital or so little available.[89] This view was supported by Cirdan Imaging Ltd.[90] NISP also consider the lack of venture capital to be a problem. They state that, when considered in isolation, Northern Ireland does have a venture capital scene with money deployed into early stage companies but when considered against that required to develop the entrepreneurial knowledge economy and the scale, structure and skill required to build new world class companies, it is entirely inadequate and insufficient. They believe there is a gap where researchers face difficulty finding early stage funding to develop and test prototypes and conduct market research.[91] QUB agrees that addressing the lack of venture capital investment in Northern Ireland must be a priority.[92]

109. In oral evidence to the Committee, representatives from NISP compared provision here with that in the Republic of Ireland.[93] Representatives from NISP reported that Northern Ireland is still far behind both the RoI and Scotland. They consider Northern Ireland to be too small and to have the disadvantage of not having any venture capital companies. They informed the Committee that, any comparison with other regions shows that Northern Ireland has a serious problem and that,

"…if we do not fix that problem, it will be the number one constraint to growing the types of company in the knowledge economy…"

110. NISP representatives explained to the Committee that quite a lot can be done to address the situation. NISP runs a venture capital forum to reach out to, and build relationships with, venture capital companies in Dublin and London. They believe offices could be established by these companies in Northern Ireland.

111. AFBI state that consideration should be given to easing the regulatory burden on venture capitalists and angel investors.[94]

112. DETI officials acknowledged the importance of venture capital in oral evidence when they informed the Committee that venture capital is critical.[95] In response to a follow-up question from the Committee, the Department stated that, through Invest NI, InterTradeIreland and its support for NISP Connect, the Department is committed to growing a flourishing venture capital environment.[96]

Higher Education Innovation Fund

113. In oral evidence QUB informed the Committee that HEIF is a critical funding mechanism as it allows the universities to have in place an infrastructure of people and expertise, working alongside academics and brokering on gaps with industry and business.[97] In its written evidence, the University states that the Higher Education Innovation Fund has been recently reviewed in England and maintained at existing levels despite the economic downturn due to good returns on investment. QUB further state that, despite this, recent funding within Northern Ireland over the current CSR period was reduced for HEIF. The University believes that, if collaborative R&D between academia and companies, together with the commercialisation of research (i.e. licensing and spin-outs) is to be taken seriously within Northern Ireland, then HEIF funding must be recognised as the core funding mechanism through which academia-business related R&D is brokered and developed.[98]

114. In its oral evidence to the Committee, AFBI representatives reported that, because it is an NDPB rather than a university, the organisation is not eligible for several research and innovation support programmes in Northern Ireland, GB and RoI, including the HEIF. Representatives informed the Committee that the gap between R&D and commercialisation and innovation is well filled by HEIF. Representatives hoped something could be done to address the anomaly and suggested that a review could be undertaken to see whether support such as HEIF could be provided to research organisations such as AFBI.

NISP Connect

115. In oral evidence to the Committee, representatives from the Northern Ireland Science Park outlined details of the NISP Connect Programme. Around one thousand experienced business people in Northern Ireland have been enlisted. These business people are prepared to provide help, support, advice and expertise on a pro bono basis to help young, developing companies to grow and develop. NISP representatives explained that the programme understands that the researchers with whom business people are dealing are intelligent and fully competent in their field but need encouragement and enticed into the world of business. Part of the programme is about people learning to trust and respect each other so that when capital and business support is needed it can be provided in the most appropriate way.[99] QUB state that NISP Connect should continue to focus its activities on developing entrepreneurs and developing productive networks in partnership with stakeholders within the innovation ecosystem.[100] Representatives from AFBI were very supportive of the NISP Connect programme in their oral evidence to the Committee.[101]

Small Business Research Initiative

116. The Small Business Research Initiative is a UK wide programme which brings innovative solutions to specific public sector needs, by engaging a broad range of companies in competitions for ideas that result in short-term development contracts. UCD called for the roll-out of the Small Business Research Initiative across government departments in Northern Ireland. They stated that this would incentivise Government departments to engage with small science-based businesses. Measures such as support for specific R&D projects will help to extract the maximum value from science-based industries.[102]

117. In oral evidence to the Committee, NISP representatives stated that the Small Business Research Initiative is not used enough. They acknowledge that there are proposals in place to increase its use and stated that it would allow Government to procure at an early stage of development and, at the same time measure the benefits before going into real procurement.[103]

118. Cirdan Imaging Ltd suggested in their written submission that the SBRI could be expanded with a regional version established. They suggest that Government should insist that public bodies set aside a portion of their budget to conduct R&D in conjunction with SMEs.[104] UCD supports a more creative approach to public sector procurement suggesting that a fixed proportion of public expenditure should be directed to foster science based businesses and support innovative solutions.[105]

119. The CEO of the TSB outlined the role of the SBRI in laying down the challenge to businesses and looking for their ideas on how to find solutions to the challenges Government is facing. Government defines the problem and presents the opportunity for companies to come up with an appropriate solution. It is about Government articulating to small businesses the challenges Government departments are trying to resolve. He informed the Chairperson that Northern Ireland companies are geared up for SBRI in GB but are not yet getting the opportunities here. Northern Ireland companies account for 3% of SBRI applications in GB but constitute 11% of successful applicants and 12% of total funding.[106]

EU Framework Programme 7

120. AFBI were positive about the value of funding from EU Framework Programme 7 for early stage research. They state, however, that programmes under FP7 appear to be less well subscribed to by local businesses.[107] A number of other responses also cited problems for organisations in Northern Ireland. QUB stated that there is little dedicated or coordinated assistance available within Northern Ireland to support consortia building and navigating through the complexities of Framework applications.[108] They consider Invest NI's EU support service too small and suggest that there is little coordinated support across Northern Ireland. In common with many other respondents they compare provision in Northern Ireland to arrangements in the RoI, where, they state, there has been long-standing national level resource available to assist with Framework funding. In oral evidence to the Committee, QUB commented on the lack of infrastructure and expertise to support academics and business in drawing down EU funding. They stated that there is a lack of expertise embedded close to the research base and research institutes in Northern Ireland and believe that expertise that is closer to the research base can make a huge difference to the drawdown of EU funds.[109] In their oral evidence, DETI officials highlighted to the Committee that the UK has similar support mechanisms to the RoI so that to compare Northern Ireland as a region with the RoI as an EU Member State was not a fair comparison. However officials recognised the need to improve coordination across Government.[110] Invest NI also acknowledge that, as a region, Northern Ireland currently underperforms in the uptake of FP7 funding. They attribute this, in part, to the low uptake by SMEs and to the limited number of large indigenous companies in Northern Ireland.[111] Information from DETI highlights the role played by Invest NI in running workshops across Northern Ireland on opportunities for FP7 funding and refers to its dedicated support team to help companies with the process.[112]

121. ADS asked their members for views on the appropriateness of FP7 funding.[113] Many companies responded that the programme is too resource intensive. ADS report that only large companies tend to benefit from FP7 and that Northern Ireland is a region of small companies. Belfast City Council state that the complexity and difficulties inherent in accessing FP7 have created considerable barriers for Northern Ireland SMEs. The Council cites the substantial support structure in the RoI, as an example of how to facilitate business access to FP7 with support for bid writing and partner sourcing for example. They state that the lack of practical support in Northern Ireland has resulted in only a 20% success rate of applications.[114] AFBI representatives commented on the complexity of the processes involved in applying for EU funding stating that in their experience the process can demotivate staff. They also commented on the support mechanisms in the RoI, stating that their scientific colleagues in the RoI have a much closer understanding of the systems in Europe because of their closeness to the departments and because of the departments' closeness to the EU systems. Representatives told the Committee,

"In the Republic, they benefit from having a body of national contact points that are very closely integrated into Europe through the funding programmes and through the different thematic areas whereas here, we basically share with other regions in the UK, and that obviously dilutes the amount of contact that we have with them."

122. They believe this needs to be worked on in Northern Ireland. However, AFBI representatives also commented on the success rate of the organisation in attracting EU funding, having had 13 successful FP7 and INTERREG applications and 6 unsuccessful since 2008[115] (representing a success rate for the organisation of over 68%). Invest NI outlined to the Committee, steps the organisation is taking to engage with the Department of Jobs, Enterprise and Innovation in the RoI, with DETI and with other Northern Ireland departments to look at how they can work together on opportunities from FP7. Invest NI representatives highlighted to the Committee the advantages of having another Member State so close and informed the Committee that they consider the strengths of the two jurisdictions to be closely aligned.[116] InterTradeIreland highlighted the work it is doing on FP7 including initiatives developed and consideration of additional new initiatives to stimulate participation in EU research programmes on a cross-border basis. These are outlined in the InterTradeIreland written submission at Appendix 4.

123. The CBI believes too much time is wasted by companies having to find suitable partners to satisfy geographical and numerical requirements and that this reduces responsiveness and produces oversized and unwieldy consortia. The organisation states that funding to support Framework applications is only available to Invest NI clients or potential Invest NI clients. The CBI maintains that this results in a gap in funding support for those companies or organisations which are not Invest NI clients. They do, however, state that the promotion of the Framework Programme to businesses should continue to be targeted, thematic and co-ordinated with external partners and interested bodies.[117]

124. In its oral evidence to the Committee, the CBI provided a detailed description of the hurdles faced by SMEs in accessing FP7 funding.[118] They believe that only a small percentage of SMEs are aware of what FP7 is and how they can become involved in it. The time scales involved in the Programme are considered a barrier for SMEs as it is at least four years from initial idea to possible commercial returns. The proposal document is a 120 page technical document for which SMEs would require considerable assistance to complete. A fee of around £35,000 was mentioned for assistance for completing the proposal. The average success rate is about 20% therefore considerable effort may result in no return. In addition, if the proposal is accepted there will be a large, in-kind contribution from the SME. This could be one full-time post at a fairly senior level in a SME. Coordination is also considered a challenge with several organisations across Europe having to be coordinated. In oral evidence, Invest NI representatives informed the Committee of the difficulties faced by SMEs in getting involved in FP7 due to the long lead-in times. They stated,

"You are asking SMEs to start committing to a project which is not even officially launched, because you need to get them involved to find the partners before the launch."

125. Representatives briefly outlined the complexities involved for SMEs in becoming involved in FP7.[119]

126. The CBI also contend that, because at least three quarters of the resource will be going to academic institutions, there tends to be a drift towards the technical and academic side rather than the commercial side. They contend that, if care is not taken, this can result in a project that is technically good but commercially useless. The CBI suggests that there should be somebody in an organisation who is responsible for most of the administration relating to the funding application especially proposal writing. The CBI suggests that a company could partner with a technology developer or a university to write the proposal but they suggest that those partners may write the proposal with a focus on their own interests. They also believe companies need to be assisted in dealing with the EU Commission.

127. InterTradeIreland consider many of the issues SMEs have regarding bureaucracy associated with EU funding to be related to perception. They believe that the perception exists that processes are very complex, cumbersome and bureaucratic and that going through the processes is time consuming. Representatives did not contend that the process is not bureaucratic but outlined to the Committee that organisations can play a role in a project as a partner without having the same level of rigorous administrative burden as a project coordinator would have. They consider it important that these perceptions are broken down and that people are educated and encouraged to become involved in European projects.[120] Cirdan Imaging Ltd also considers the possibility of SMEs acting as suppliers or sub-contractors on EU funded programmes.[121]

Horizon 2020

128. Looking to the future, AFBI suggested to the Committee that when developing the research agenda for Northern Ireland, all departments must be mindful of the bigger European agenda and must make sure that the R&D that is being promoted internally fits with the EU research agenda. In this context, the CBI believes opportunities exist now for Northern Ireland to prepare for the advent of Horizon 2020. They state that consideration should be given to the appointment of Horizon 2020 thematic lead such as ICT and agri-food.[122] InterTradeIreland consider it an ideal time to analyse what can be done and to put in place relevant structures to grow participation in Horizon 2020. The organisation's research indicates that stakeholders see an opportunity for businesses and research institutes to form strong alliances to increase success in targeting EU funding.[123] They believe the demand for EU Framework funding for cross-border applications is increasing and will continue into Horizon 2020. InterTradeIreland's research also demonstrates that such applications have a higher success rate.[124] In oral evidence, DETI officials informed the Committee that the building blocks are there to ensure that draw down from Horizon 2020 will be greater than is currently the case with FP7 and that work in being undertaken to establish thematic leads under priority areas.[125]

129. The CEO of the Technology Strategy Board (TSB) informed the Chairperson of the need to do more to avail of the opportunities to engage in the European agenda and Horizon 2020.[126] Jim Nicholson, MEP[127] agrees that there is a need for greater emphasis on preparation for Horizon 2020 before its inception in 2014. He recommends that smaller companies should concentrate on Horizon 2020 rather than FP7 and that this should specifically include micro-businesses which do not have the resources to apply for funding. This view is supported Diane Dodds, MEP, who considers it important to place greater emphasis on micro-businesses perhaps even with a specific category allocated them.[128] Mr Nicholson believes there is still time for Northern Ireland to influence the thematic elements of Horizon 2020 to suit the needs of Northern Ireland Industry. However, he contends that Northern Ireland must get better connected in Europe and must develop the structures and knowledge to work with Horizon 2020 and transfer that knowledge back to the right people in Northern Ireland. He considers it important for Northern Ireland representatives to lobby much more in Europe. The EU Commission, Belfast representative suggests Northern Ireland is not in a position to influence the programme at this stage but should concentrate efforts on increasing awareness of Horizon 2020. He contends that emphasis should be on trying to achieve research excellence instead of trying to draw down as much funds as possible. He informed the Chair that currently, Northern Ireland does not have many organisations capable of undertaking the Horizon 2020 level of research. He suggests starting with those companies which could provide services as a supplier or sub-contractor.[129]

130. Invest NI representatives updated the Committee on the work that organisation is doing in Brussels in relation to the European Regions Research and Innovation Network (ERRIN) and the European Innovation Platforms (EIPs) in order to become more connected with Horizon 2020 and laying the foundations for its introduction in 2014.[130]

INTERREG Funding

131. In relation to INTERREG funding, QUB informed the Committee that, although the University has an ambition to increase the level of EU funding, the management of those funds has a high overhead. They stated that INTERREG is a very costly scheme to administer and that they believe both universities are considering the amount of engagement they will have in the future because of the amount of bureaucracy that is involved.[131]

Other Support

132. The CBI informed the Committee that the Innova Programme is used by companies with experience in accessing funding because they have already established cross-border contacts. They suggested to the Committee that there is a need to make organisations aware of what is involved and whether it is right for them. They believe people can be afraid to get involved in the Programme when they first consider it and, with some assistance can come to realise that it is within their capability.[132]

133. In oral evidence, InterTradeIreland highlighted the benefits of its all-island Business Seed-corn competition where, each year, over 200 companies compete for funding. The Committee was informed that such companies would normally have difficulty in attracting funding but that they have found that companies which reach the finals may have attracted over €120m in funding.[133]

134. There is a range of other programmes available to support R&D. There is broad support for these programmes from those organisations taking part. In its written submission, AFBI states that DARD's Research Challenge Fund is an important source of funding for research and development in the agri-food and rural sectors in Northern Ireland.[134] Asidua Ltd has taken part in Invest NI's Compete Programme. They state that both the Programme and the Client Executive support they have received has been excellent.[135] Invest NI's Proof of Concept Programme has provided an important bridge for AFBI between research outputs and commercialising that research through innovative processes and products. It has also assisted Automated Intelligence with early stage research work.[136] The University of Ulster informed the Committee that the Proof of Concept programme, helps de-risk projects and validates the scalability of the technology arising from research. They consider the scheme to have been very effective.[137] Belfast Metropolitan College believe great strides have been made in recent years with the introduction of both the Connected Fund, and the Higher Education Innovation Fund and this has led to industry-focussed applied research in areas such as renewables, composites and bio-business. They state that this applied research has led to increased collaboration between universities and FE Colleges and has a direct, immediate and measurable impact on companies, including SMEs.

Organisation Awareness, Understanding, Capacity & Capability

Organisation Awareness

135. A large number of respondents cited a lack of awareness and understanding of opportunities for research and development as a key barrier to organisations becoming involved. Many respondents, including Craigavon[138], Belfast[139] and Castlereagh[140] councils believe many companies, especially small businesses, are not aware of the supports available to them and therefore do not consider research and development as an option available to them. This view was supported by small businesses such as Pure Roast Coffee Ltd[141] and Qwizdom UK Ltd[142], both of which stated in their written submissions that lack of awareness about the sources of support available was one of the main barriers faced by organisations in accessing opportunities to be involved in R&D. ADS, many of whose members are small businesses, found that lack of confidence in local companies in investing in R&D stems from a lack of awareness of opportunities.[143] QUB maintain the major problem is often a lack of awareness and understanding of how each programme fits into a wider context and of a Northern Ireland strategy for optimising returns from regional, national and international programmes.[144]

Organisation Knowledge and Understanding

136. A number of respondents raised the issue that, although organisations may be aware that opportunities exist for research and development they do not have an understanding of those opportunities and may often not realise that they may be eligible to avail of them. DARD believes that the understanding of what support is available and from whom is a barrier.[145] Newry & Mourne District Council and South West Regional College[146] both report a lack of knowledge and information available on existing programmes.[147] Banbridge District Council believes this extends, in most cases, to a lack of knowledge and understanding of the processes involved.[148] NISP supports this assessment. The organisation states that small companies do not know how to access the Knowledge/R&D networks. They believe there is a requirement for efficient support with the minimum overhead and bureaucracy.[149] Research undertaken by InterTradeIreland also supports this. It was found that the role of intermediary bodies which can help connect businesses to the resources they need was poorly understood and poorly utilised within the system.[150]

137. ADS informed the Committee that a lot of R&D happens within a company that is not viewed as R&D. They suggest many companies are undertaking R&D without realising it.[151] South West Regional College consider the main barrier facing SMEs to be an absence of previous experience in undertaking research and development. They state that many businesses do not realise that their product development and product improvement is a form of research and development or that they can avail of funding assistance to help them capitalise on their innovative ideas. The College attributes this lack of understanding in part, to a lack of available information.[152] The response from Manufacturing Northern Ireland supports this. They believe that many companies make a presumption that research and development is only applicable to new products and do not recognise that support is equally available for process development in their existing product range.[153] NILGA agree that small companies often do not feel that they qualify for any assistance or may consider that the process allowing them to become involved is too cumbersome. They state that most SMEs with the potential to innovate also lack the necessary contacts to create meaningful and efficient partnerships with bodies and institutions allowing them to create, what they refer to as, an "innovation chain".[154] Manufacturing NI suggest there is a need to expand the understanding of R&D among SMEs and micro-businesses.[155] In this context, Diane Dodds, MEP highlighted the lack of involvement of Local Enterprise Agencies (LEAs) in the promotion of opportunities for R&D and in the development of ideas. She believes LEAs could play an important roles in this regard in the future.[156]

Organisation Capacity and Capability

138. As well as issues relating to a lack of awareness and understanding of available opportunities, a number of respondents believe that many companies do not have the capacity or the capability to undertake research and development. Banbridge District Council consider it difficult for isolated small firms to generate, acquire and apply knowledge and technology in a planned and coherent manner. They state that this makes it difficult to plan and encourage their participation in essentially medium to long-term activities such as R&D.[157] Craigavon Borough Council suggest that many lack the scale and resources and need assistance from outside[158]. South West Regional College believes the FE and HE sectors are well placed to provide such assistance.[159]

139. Both Banbridge District Council[160] and DARD[161] suggest businesses including many micro-businesses and SME's lack the absorptive capacity and knowledge to access the support available. Belfast City Council state that SMEs are more constrained by the availability of resources and the need to plan on a shorter term basis with an impetus on shorter payback periods, which is not always appropriate for R&D investments. The Council has undertaken a survey which has shown that SMEs are more likely than larger businesses to require support for innovation, product development and research & development.[162] This is supported by other respondents. NISP state that small companies cannot usually afford the overhead to both navigate the opportunity and to make the speculative bid.[163] Automated Intelligence Ltd have found that, where a lack of capacity and capability exists within a company, access to appropriate skilled personnel can be difficult and costly.[164] ADS believes that SMEs can have very good ideas but, because they lack the capacity and capability to undertake appropriate R&D, the idea is set aside and not developed.[165] Castlereagh Borough Council consider key barriers to SME involvement in R&D to be time commitment necessary for businesses to avail of the support, limited human resources and, in many instances, no staff employed in a strategic development role for the business.[166] AFBI representatives reported, in their oral evidence, that as an organisation, they found the process arduous, even though they have a number of scientists with experience in applying for R&D projects. They noted that SMEs find it difficult to keep their heads above water. They commented that it must be impossible for them to take on the administrative burden of applying for R&D support. AFBI believes SMEs would need much more support to undertake R&D than organisations such as themselves.[167]

140. NILGA points out the need to promote Innovation among SMEs, highlighting that SMES need to learn that: successful innovation requires a company-wide innovation culture which they must lead, and may involve working with external parties such as third level institutions and suppliers to access skills and other resources not available in-house.[168] This supports the contention of South West Regional College that the FE and HE sector is well placed to provide such assistance. However, NILGA also contests that the key to delivering this culture is to provide SMEs with the capacity and the capability to develop it.

141. QUB believes the key issues are demand-side oriented with too few active R&D companies in the region. They state that those sectors with R&D active companies are currently below critical mass. They also state that entrepreneurial ambition remains below the level of critical mass needed to drive a highly effective knowledge economy in technology intensive sectors. According to QUB, businesses are often not sufficiently engaged to identify knowledge and opportunities. They suggest that mechanisms should be established to better coordinate business engagement and create greater simplification and accessibility to the research base.[169] AFBI representatives supported this contention. In oral evidence they stated that the lack of critical mass of R&D active companies creates difficulties and is holding back productivity. They acknowledge the need to attract more R&D intensive companies.[170] DETI officials suggested to the Committee that this may be an accurate assessment. They stated that there is a systematic problem with the business base in Northern Ireland in that respect.[171] Invest NI representatives also commented on systemic weaknesses in the business base, stating that these need to be addressed if the desired and necessary levels of economic growth are to be achieved. They cited R&D as a key driver for economic growth.[172] InterTradeIreland research suggests that business have issues in terms of internal capabilities to manage innovation. However, the organisation states that indications from its research are that a large majority of businesses consider themselves to be innovative.[173]

Improving Awareness, Understanding and Capacity and Capability

142. Many organisations which commented on the lack of awareness and understanding of available opportunities brought forward suggestions for how these opportunities could be promoted in the future. Belfast Metropolitan College suggest that promotional campaigns highlighting relevant research opportunities should be targeted at all employers with regular feedback on the changing needs of local businesses through FE/HE business consultative forums.[174] Almac Ltd suggest that proactive promotion of funding opportunities to all types of organisations from academic to SME and large industry would be highly beneficial.[175] Belfast City Council believe that improvement of business awareness of opportunities could be achieved through a series of funding clinics, seminars and workshops and an enhanced engagement programme with businesses at all levels.[176] Many respondents report that there are specific difficulties faced by SMEs. Manufacturing Northern Ireland state that further work should be done with Councils and Local Enterprise Agencies to capture those companies which are not Invest NI clients but are looking for structures to support their research and development activity.[177]

143. AFBI believe that organisations such as themselves and other public sector research establishments could, if supported, do more to increase awareness of resources, facilities and services available to the private sector and to increase awareness of the benefits associated with exploitation of Intellectual Property. AFBI also state that the research and knowledge capabilities available to the private sector in Northern Ireland could be better promoted by universities and public sector research establishments working together to jointly promote research and development opportunities through single points of contact.[178]

144. The CBI suggest that marketing material and communication portals could be updated with local success stories to inform Northern Ireland stakeholders of those who are active in Europe and the type of projects that are being undertaken.[179] Manufacturing Northern Ireland mirror this in their suggestion that case studies should be developed which show how companies have made use of research and development in a difficult economic climate.[180]

145. Belfast Metropolitan College calls for a review of how research and innovation is defined and interpreted by local businesses including the terminology used in literature targeting local businesses in relation to research opportunities.[181] NILGA believe the capabilities of smaller firms with low technological capability must be improved. They believe a proactive approach is needed within such companies to broaden awareness, develop people, increase networking, improve management and develop learning processes.[182]

146. Both Belfast City Council[183] and the CBI[184] believe there is considerable potential for more participation with, and learning from, good practices in other regions, notably the RoI, and their approach to encouraging investment in R&D and innovation. The consideration of the RoI as a model of good practice is also supported by UCD which states that the experience there over the past two decades has shown that the availability of highly qualified, technological able graduates has been critical to the country's success in attracting foreign direct investment.[185]

147. In order to improve awareness and knowledge of R&D, Invest NI has put in place 16 Innovation Advisors of which three are involved in providing support to businesses starting out on R&D activity.[186] The organisation informed the Committee that it has built mutually beneficial relationships with regional, national and international stakeholders to help provide a joined up picture for businesses.

148. InterTradeIreland highlighted the support that some companies require to create the capability to leverage connections and collaborations. The organisation is piloting the Innovation Challenge Programme, to embed a capability in companies to create markets and launch new products and services at reduced time, money and risk. Representatives informed the Committee that improving connectivity within the system and developing the capability of companies to connect with the system can help increase participation in international R&D programmes.[187]

Barriers to Resourcing Support for R&D

Structural Barriers

149. QUB commented positively on the support structures for programmes managed through Invest NI. They state that these programmes are adequately resourced with support for organisations wishing to engage and apply. According to QUB, standard materials, advice, application templates are accessible and dedicated staff are in place to support access to programmes. However, they go on to state that the current incentives and resources are not sufficient for universities and FE colleges to fully engage in knowledge transfer and exchange activities with locally based companies. The University believes such activities are critical to ensure that the regeneration of the local knowledge based economy can occur.[188] Issues were raised by a number of other respondents. Belfast City Council considers the current structure confusing.[189] AFBI believes the current EU support team in Invest NI works with limited resources when compared with other regions and similar bodies.[190] Dr Chris Lundy considers Northern Ireland slow to respond to the opportunities presented by developments in the Chinese economy. He considers the lack of strategy for dealing with and responding to Chinese R&D investment in Europe and its evolution is undesirable, and potentially harmful to the EU's own innovation system. He states that the Confucius Institute may provide opportunities to bring together academia and business to explore and develop R&D opportunities both for companies within Northern Ireland and for Chinese companies seeking R&D opportunities in Europe.[191]

Barriers to Accessing Funding

150. Access to finance was considered by a number of respondents to be a key barrier to organisations becoming involved in R&D. Banbridge District Council consider the limited financial resources and reducing sources of funding to be a barrier.[192] DARD considered this and the lack of other specialist resources and time to conduct R&D to be barriers to organisations becoming involved.[193] Automated Intelligence believe the timing of support could be changed to benefit companies. They state that R&D activities require an up-front investment before they can commence. They believe this can be difficult for companies especially those in a start-up phase.[194]

151. South West Regional College consider the lack of consistent research and development funding to be one of the main barriers faced by them in assisting companies accessing opportunities to be involved in research and development. They believe the low level of funding available to industrial organisations that only covers a small proportion of costs creates difficulties. They also cite difficulty in obtaining research funding for projects which are not high profile or lengthy as a barrier.[195] Almac Ltd have a different view on this. They state that it is often the case that projects further advanced on the R&D pipeline are given a smaller percentage of costs compared to those at the early stages of research. They would like to see support available for longer duration projects.[196] This suggests a need to provide more flexibility in funding opportunities to suit the wide range of organisations that may apply.

Barriers to Business-Led R&D

152. Belfast City Council believes a disproportionate amount of funding for R&D in Northern Ireland is allocated to universities with little success achieved in commercialising the results of research.[197] AFBI believe there is not enough support available for the non-university public sector research base. They added that there is a need for more direct support for promoting and engaging in collaborative research and the commercialisation of its knowledge base.[198] Diane Dodds, MEP suggested that, although universities are benefiting from EU funding, commercialisation of research is where the economic benefits lie.[199] Almac Ltd agrees, stating that there is no support available for the commercialisation of R&D. In oral evidence, the company informed the Committee that it takes around two years to sell new technology to a pharmaceutical company and that support should be available for this.[200] ADS found that many of the opportunities for R&D are not market-driven.[201] They informed the Committee that small companies need market-driven opportunities that will provide a return on investment fairly quickly. ADS explained to the Committee that, if a small company has invented something or developed a new process and it needs to commercialise it, it may need to grow its business or buy new equipment. This is not considered R&D, however, if the company cannot obtain support for this phase it can prevent the commercial development of the opportunity.[202] The University of Ulster agrees that there should be much more emphasis placed on the translation of research outputs into the economy.[203]

Barriers to SMEs

153. It seems that, at every hurdle, barriers are faced by SMEs in trying to engage in research and development. There is a lack of awareness among SMEs of opportunities, a lack of knowledge and understanding of the opportunities, a lack of capacity and capability to become involved in those opportunities and, according to some respondents, a lack of resources available to support SMEs that want to become involved in R&D. Belfast City Council believe the bulk of opportunities and attention are focused on larger businesses and inward investors. They consider this to be to the detriment of the majority of businesses in Northern Ireland.[204] UCD state there is an acute shortage of funds accessible to smaller science-based businesses seeking investment. They believe these companies play a key role in the innovation economy bringing science knowledge and disruptive technologies to the market.[205] NISP agree when they state that there is a lack of genuine Knowledge/R&D funding for innovative start-ups to help develop their products.[206]

154. Cirdan Imaging Ltd presents a range of resource issues which can inhibit SMEs from becoming involved in R&D. This includes lack of grant support for overheads, excessive and unnecessary bureaucracy, complex support documentation and difficulties in attracting match funding.[207] ADS believes SMEs need to have an easier way to access support for R&D in areas that will make a difference to their businesses.[208]

155. DETI considers it important to get more micro-businesses to be innovative through skills, leadership and management so that when companies recognise the opportunities coming their way in the future, innovative companies can be encouraged to take them. They do however believe that many micro-businesses must consider innovation and R&D a cost. Department officials informed the Committee that those businesses do not really recognise that, although R&D may initially be a cost, it brings long-term benefits.[209]

Barriers Associated with the Current Economic Climate

156. ADS believes that many SME's in Northern Ireland have a poor or cautious view of the market in the current climate and have little confidence in investing in R&D at present.[210] Manufacturing Northern Ireland believe that the current economic climate, coupled with the continuing lack of private sector finance, make growth through R&D more difficult.[211] Diane Dodds, MEP agrees that there are issues for small businesses in obtaining capital to develop ideas at a time when financial lenders are less willing to lend.[212]

Suggestions for Overcoming Barriers to R&D

157. There was a wide range of suggestions from respondents on the provision of resources to organisations to become involved in research and development, including

  • Awarding grants to prepare grant claims and submissions.[213]
  • Providing an effective grant assistance programme for micro-businesses.
  • Paying a proportion of grants up front to ease cash flow problems of businesses.
  • Increasing the level of financial support available to companies for R&D projects to at least 50%.[214]
  • Supporting recruitment costs to help attract personnel with the right skills from inside and outside Northern Ireland.[215]
  • Supporting small scale projects by several grant and academia partnerships and supporting large scale projects through more applied and tailored packages depending on the sector.[216]
  • Improving efficiency through reduction in the amount of expenditure on consultancy activities and increased accountability within organisations funding/ delivering collaborative R&D.[217]
  • Increasing the limit of existing innovation vouchers to further reduce the commercial risk to businesses.[218]
  • Making grants competitive to drive up quality by awarding only the best 40% to 50% of projects but providing them incentives such as greater than 60% grant support and support for overheads.[219]
  • Providing enhanced all-Ireland support for European funding to leverage funding more effectively at a European level.[220]
  • Providing strong national R&D programmes to complement and thereby unlock EU funding.[221]
  • Raising the level of investment into the Invest NI EU support team, including awareness raising, training, mentoring and funds to assist with project consortia building and bid writing.[222]
  • Topping up financial support on funding obtained from European funding. Alternatively, if an application is not successful, due to a limitation on numbers of projects funded rather than on the quality of the application, some form of funding could be provided from the Government to cover at least part of the application such that the programme can advance and be in a stronger position to apply for additional external funding in subsequent years.[223]
  • Mainstreaming the DEL Employer Support Programme - with block funding given to FE colleges to increase research lecturing time enabling a significant up-take in the time available to engage with employers.[224]
  • Providing long-term investment in start-ups through a large-scale, research-focused venture capital fund to assist young companies in Northern Ireland to innovate and expand and working to ease the regulatory burden on venture capitalists and angel investors.[225]

158. NISP suggest there is a fear factor and a lack of mentoring available to SMEs. They contend that when a grouping such as NISP is produced, meetings are held in a non-threatening environment and people get to know each other and start to link with experienced people who have knowledge that they do not possess. This leads to a more natural process of mentoring. They suggest that the answer may, in part, lie in a model similar to that already developing in NISP.

159. Invest NI concede the need to overcome the barriers and increase the level of high quality innovation, research and development in Northern Ireland. Representatives informed the Committee that the organisation is committed to increasing the scale, quality and speed of R&D from the initial concept through to full commercial application. They informed the Committee that, because participation in FP7 was not happening at the expected level, a mentoring scheme has been introduced specifically to look at the needs of the research base.[226] The organisation has also introduced a range of practical measures which are outlined later in this report.

Risk for Organisations Becoming Involved in R&D

Risk Awareness and Management

160. There will always be risk involved in participation in R&D projects and this cannot be eliminated. However, a number of respondents do believe more could be done to assist businesses to become aware of the risks and to manage them. DARD states that the perceived risk provides barriers to effective R&D, if any at all.[227] Belfast City Council states that there is a perception that the existing support comes with a heavy price tag in terms of the potential risk to the applicants' businesses.[228] NISP believes that companies are afraid to apply their limited resources to R&D when there is not enough certainty of success.[229] Dr Chris Lundy concurs stating that there is unwillingness by companies to engage in R&D due to the prospect of failure and the impact that may have on confidence within the business.[230] Almac Ltd states that the low level of assistance available is often not sufficient to offset the risk involved and, as a consequence, higher risk/higher return projects are de-prioritised.[231]

161. Awareness and understanding of risk was also considered from a Government perspective. According to Almac, there needs to be a greater understanding of what Almac does. They informed the Committee that, without this, funding bodies can find it very difficult when they do their commercial assessment as they are not fully aware of the risks.[232]

Intellectual Property Risks

162. NISP,[233] Almac Ltd[234] and Castlereagh Borough Council[235] cite risks relating to a fear among business that they may lose intellectual property rights. Almac Ltd believe that this alone may be sufficient to deter potentially suitable SME partners from getting involved. Asidua Ltd, as a small business, confirmed this view. They indicated that the process of collaboration with larger companies is highly risky for companies such as themselves due to the fear that such collaboration may result in the loss of a product. They explained that the field in which they work does not allow for the provision of a patent early in the process, therefore risks are inevitable regarding IP rights.[236] Manufacturing Northern Ireland supports this view and states that there is a natural reluctance for companies to share new ideas with other companies which may also be competitors in other markets.[237] ADS informed the Committee that IP can often be sold on and that large numbers of job opportunities can be missed as a result.[238] The CBI states that there is a big challenge regarding the review of IP agreements. They believe that most SMEs know almost nothing about IP agreements and that some assistance in this area would be very valuable.[239]

163. DETI considers it important for companies to collaborate on innovation and R&D in sectors in which they could potentially be competitors. They acknowledge that IP can become an issue. They refer to innovation centres being opened in Sweden, Finland and Israel within which such risks can be managed. Environments are provided to help overcome concerns and risks that companies have with each other when they see the potential for growth through exports.[240] InterTradeIreland considers collaboration to be key to R&D success. Representatives informed the Committee that the organisation's programmes are demonstrating the benefits of a collaborative approach.[241]

Risk Culture

164. Dr Chris Lundy suggests that the governance culture and framework within which R&D is to be encouraged and sustained needs to be considered. He states that innovation, creativity and entrepreneurship must be further celebrated and encouraged, while failures must be seen as learning experiences.[242] Automated Intelligence Ltd supports this perspective. The organisation believes that people need to be driven to take risks and engage in R&D projects. They state that personal and wider benefit of R&D needs to be publicised and encouraged in Northern Ireland in order to create this cultural change.[243] In oral evidence, representatives from NISP informed the Committee of the need for a greater acceptance in Government that business will involve risk as long as the appropriate steps are taken to mitigate risks. The NISP Chairperson said,

"The Public Accounts Committee looms large in the minds of public servants and I think there has to be a change of attitude and an acceptance that risk is part of doing business."[244]

165. AFBI informed the Committee in oral evidence that there is a need at all levels in the public sector, to embed R&D into daily work and to recognise that R&D and innovation are not additions to normal work. They stated that the bureaucracy in Northern Ireland is cautious and risk-averse and commented,

"We need to look at that culture and realise that, if we are to compete internationally, we…need to…take a more enlightened approach [to risk] and not allow our concern about the Public Accounts Committee and the Northern Ireland Audit Office's requirements to police public sector spending to stifle innovation and stop us taking any chances in investing and developing our economy."

166. DETI officials outlined to the Committee some of the steps being taken by the Department including, as recommended in the IREP report, looking at how projects are evaluated and assessed. They informed the Committee that changes have been made to Invest NI's appraisal mechanisms in order to better manage risk and to look at how the wider benefits from innovation and R&D projects can be captured and applied again. Officials highlighted the MATRIX recommendation that there should be a portfolio approach to risk. However, officials also stated that, a knowledge-based economy will bring more risk because of the requirement to invest in areas where the future revenue streams are uncertain.[245]

Bureaucracy Associated with Support for R&D

General Bureaucracy

167. A large number of respondents commented on what was perceived to be unnecessary bureaucracy associated with a wide range of support for R&D. Respondents were from the private, academic and public sectors. Issues related to all aspects of the process from application to appraisal to monitoring and reporting and related to time scales, administration processes, documentation, funding criteria and payment criteria. For example, one of Northern Ireland's most technically engaged SMEs, Cirdan Imaging Ltd states that there are problems regarding cash-flow with grants typically not being paid until 60 to 90 days after submission and 120 days after major expenditure. They believe this cripples micro-businesses. They state that the administration processes are excessively bureaucratic and are too time consuming and that the necessary support documentation required by Invest NI is difficult for micro-businesses to prepare.[246]

168. QUB believes that Northern Ireland is disadvantaged compared to other regions because, it believes, funding schemes are:

"mired by prevarication, time-consuming appraisal processes and an over-emphasis upon process-driven audit. Such schemes should be grown exponentially but with much greater emphasis upon outcomes rather than process and with significantly reduced bureaucracy."[247]

169. South West Regional College considers the difficulty in meeting funding criteria; the level of documentation required and length of the approval processes as barriers.[248] Craigavon Borough Council concurs stating that the process for achieving support and funding is slow, cumbersome and bureaucratic.[249] This is also supported by Newry & Mourne District Council[250] Asidua Ltd[251], Belfast Metropolitan College[252] and by the CBI, which states that a greater sense of urgency must be introduced in administrative processes to reflect the competitive pressures faced by businesses as they seek to take research through to commercialisation. The CBI believes bureaucracy must be cut substantially and trust must be increased. It believes this could be achieved through the introduction of a two-stage application process, development of more flexible trust-based contracts, the harmonisation of rules governing different instruments and acceptance of average labour rates and company auditing processes.[253]

170. The Chairperson visited two small businesses with technology backgrounds and considerable experience in the field of innovation, research and development, namely. Asidua Ltd and Cirdan Imaging Ltd. Notes on these visits are at Appendix 3. Both Asidua Ltd and Cirdan Imaging Ltd outlined a number of issues regarding the administrative burden for small businesses. The payment schedule is considered unreasonable with 90-100 days taken between money being spent and reimbursed. This creates considerable cash-flow problems for small companies. Currently, a business develops a significant business plan to support the application, there is then an appraisal followed, if successful, by a letter of support. Research work is then undertaken and the money is spent. Only then can a claim be made. Additional time is then spent auditing and checking. Cirdan Imaging Ltd suggested that, if funding could be delivered up-front this would assist cash-flow. Grants are designed to deliver 40% of direct costs but, due to application costs and time in the process the actual figure is closer to 30% of direct costs.

171. Both AFBI[254] and ADS[255] believe the EU funding in particular requires a lot of resource and that this limits the engagement from private sector in Framework Programme 7. The Committee recognises that the requirements of FP7 are EU requirements, however there may be scope for providing support to organisations to assist in managing those requirements.

172. As stated earlier, InterTradeIreland believe organisations can participate in projects as a partner without having the same level of rigorous administrative burden as a project coordinator would have.

Bureaucracy in Application Processes

173. The application process for support is considered overly bureaucratic and overly time consuming by a number of respondents including ADS which calls for it to be simplified and streamlined,[256] and Belfast City Council which comments on what they see as negative perceptions surrounding the bureaucratic structures organisations need to navigate in order to avail of the support.[257] Almac Ltd agreed with this stating that the EU funding element is both complex and time consuming and, considering the low likelihood of success, it is not worth completing the application. The company believes there is a need for a more relevant programme that can be applied more quickly.[258] ADS has been able to avail of support from Government for setting up projects and writing R&D proposals. However, this is not a service of which respondents were universally aware, as a number of respondents have stated that such support would be welcome. ADS does however, state that the fact that external support is required, in itself, demonstrates that the process to access opportunities is too complex and time consuming.[259] Automated Intelligence Ltd considers the process required to obtain grant support to be highly administrative. They state that it can divert the company from its normal day to day operations.[260] Northern Regional College comment on the lack of flexibility relating to the strict qualifying times for entry to programmes and completion of projects. They believe this can act as a barrier for some companies.[261]

174. Craigavon Borough Council suggests that the funding process should better match the capacity and needs of indigenous SMEs to ensure that the funding support available is fully utilised and the benefit to the local economy is maximised. They state that, if the process cannot be simplified, more hands on support and mentoring is required for companies going through the process.[262] QUB informed the Committee in oral evidence that, R&D engagement is generally fairly low in Northern Ireland, and is not helped by the bureaucracy of the schemes. They believe that, if R&D is to increase:

"Finding a balance of accountability is incredibly important and is inherent in the system. Government must balance a little autonomy and freedom with accountability in the system, in an area that is inherently flexible and unpredictable in its nature."[263]

Time Constraints

175. As well as issues relating to the time-consuming nature of the process, a number of respondents raised issues relating to turnaround times from application to commencing work to obtaining funding. QUB believes the approval process takes too long. They state that too many approvals, often repeated several times, are carried out with little or no added value. They consider this too slow for most business outcomes.[264] The CBI and Almac Ltd[265] agree that the turnaround times represent a severe limitation and are ineffective for responding to market developments and the exploitation of short-term opportunities for innovation.[266] The CBI believes the time from application to grant support should be reduced to no longer than six months.[267]

176. ADS suggests the timeline for calls for R&D projects should be more market driven. They state that applications take more than a year to approve for projects of three to five years in duration. They state that this results in a minimum time of five to eight years to bring a product to market and in real terms the opportunity is likely to have been lost by then.[268]

Bureaucracy in Appraisal, Monitoring and Reporting Processes

177. QUB contend that the level of bureaucracy required dissuades potential applicants and the use of appraisal techniques should be more flexible. They consider the application of Green Book appraisals to some R&D project proposals to be inappropriate as it leads to highly speculative and largely meaningless assumptions on income streams. The process of monitoring, reporting and financing R&D activities is also considered overly bureaucratic by QUB. They state that audit demands are stifling and time consuming and can prevent talented people from driving innovation.[269] Cirdan Imaging Ltd considers the costs of monitoring too high. They suggest that if monitoring costs more than 10% of the grant this should be looked at.[270]

Government Assistance to Access R&D Opportunities

Strategic Level Approach

178. At a strategic level, there were a number of calls for a more holistic approach to the way in which support for R&D is coordinated by Government. QUB believes that work to generate Foreign Direct Investment would benefit from a more coordinated and better planned approach. The University believes this should be founded upon clear knowledge of the strengths of the research base. They state that companies invest in R&D where genuine research strengths exist. QUB goes onto state that the current range of programmes to support R&D is sometimes disconnected, overly complex and can operate in isolation. They believe programmes could benefit from being considered holistically and comprehensively with a focus on greater simplification.[271] NISP suggest a more proactive approach with, what they call an open process like MATRIX. They believe certain sectors should be prioritised with some programmes of special interest and with a fast, transparent competition to help small firms through the process.[272]

179. In oral evidence, QUB informed the Committee that funding schemes seem to be put in place in isolation of each other and that they are not always cohesive and aligned. They state that they do not believe anybody has stepped back and considered elements of good practice across other economies. They suggest there is a need to look at R&D as a holistic area and develop a sustained long-term plan and a sustained long-term investment. They believe there has to be long-term ambition rather than, what they call, the current "short-term, three-year turnaround."

180. In its written submission to the Inquiry, DETI outlined work being undertaken to encourage more companies to be innovative and to invest in R&D. These included an innovation strategy which is currently under development and actions to attract Foreign Direct Investment. The key actions are outlined in the Department's written submission at Appendix 4. In giving oral evidence, DETI officials acknowledged that more needs to be achieved at a strategic level. They informed the Committee that a steering group has been established by the Department to consider what aspects of the support mechanisms for R&D are not working as well as they should and agree on improvements required.[273] In its briefing to the Committee on recommendations to encourage increased participation in Framework Programme 7, the Department confirmed the establishment of a Steering Group specifically to identify actions required to support increased participation in FP7[274]. The briefing also contains recommendations for the development of support mechanisms for Horizon 2020. The Department outlined the key areas for prioritisation in its written submission to the Inquiry. These are:

  • Telecommunications & ICT
  • Live & Health Sciences
  • Agri-Food
  • Advanced Materials
  • Advanced Engineering[275]

181. In oral evidence, officials outlined how these priorities are included in the Programme for Government and how they arose from the Independent Review of Economic Policy (IREP) carried out in 2009 and from work conducted by MATRIX. Officials explained that other UK regions and other countries are carrying out similar prioritisation and investment exercises. They informed the Committee that companies which are active in those priority areas already account for more than three quarters of the Northern Ireland spend on R&D. The Department is now working to align these priority sectors with its economic and innovation strategies. Officials consider a key driver for future success in R&D to be the alignment of its marketing for Foreign Direct Investment to sectors where strengths already exist. They also believe the devolution of corporation tax varying powers would be an important policy lever in attracting large companies to establish in Northern Ireland.[276]

Structures for Delivering Government Assistance

182. There were calls for a more coordinated structure within Government to lead an overall strategy for R&D. AFBI suggest there is a structural problem in Northern Ireland that must be addressed.[277] Dr Chis Lundy suggests that the roles of a number of organisations might be re-aligned to:

"provide an efficient, effective, responsive and innovative 'one-stop-shop' for R&D activity. The resultant unit would have direct links into not only business and our universities but other research institutions such as Loughry and Greenmount Colleges etc., and the Confucius Institute. It would be responsible for exploring new R&D opportunities and developing R&D investment strategy; exploring opportunities for securing international venture capital; co-ordinating the development of R&D clusters and rapidly assessing applications for R&D funding."[278]

183. Almac Ltd supports this and states that an official group should be established and tasked with supporting all types of organisations. They believe such a group would benefit the whole of the Northern Ireland economy. They state,

"this group could be government or academic based and would participate in information dissemination as well as training of individuals on the completion of applications for the variety of R&D funding opportunities that are available internationally as well as locally."[279]

184. The University of Ulster suggests that such a structure could bring together market intelligence about research opportunities and could provide practical assistance in enabling access to funding and remove many barriers that currently exist between applicants and funds.[280] AFBI also suggested a one-stop-shop to which they, the universities, and SMEs who find it difficult to navigate the EU R&D process could obtain assistance. They suggest the organisation could also conduct market intelligence and find out what is available and guide organisations through the process. They suggested either Invest NI or NISP as a base for such a function.[281]

185. UCD believes that, above this level, a necessary step is to have a politically high-level science steering committee comprised of ministers and senior civil servants from each of the relevant government departments in addition to, what they refer to as the 'chief science champion.'[282]

186. The representative from the EU Commission in Belfast believes our universities should be at the forefront of making a concerted effort to take the lead in R&D and that NISP should also be part of this spearhead using their contacts and knowledge to identify opportunities and drive forward proposals. He also states that the agricultural and food sectors need to become more closely engaged in a more structured way.[283] QUB concurs stating that improved linkages between universities, colleges and the business community can be a useful mechanism in facilitating early stage R&D. They believe this will be particularly beneficial for first time engagers.[284] In their oral evidence to the Committee QUB representatives stated that there is a need to have dedicated expertise close to the research base and also people on the ground who understand the schemes and networks and who can help academics and businesses to navigate a range of complex funding areas. QUB representatives suggest this should form part of an integrated approach. They also informed the Committee that the need is not for an additional mechanism to drive R&D but for a change to the system with a more flexible structure. They informed the Committee that:

"Sometimes, we get the impression that there is an excessive tendency to try to direct things, as though it were possible to steer things to particular places, when what Government should be doing is creating an enabling environment that allows creative opportunities to emerge." [285]

187. Representatives stated that there is too much risk-aversion with too many audits built into the system as a result and that the length of time required to make decisions can drive creativity out of the process. They believe that a more enabling environment, rather than a directive approach, may make a huge difference. The University of Ulster agreed with QUB that the main area for improvement is in the implementation of R&D.[286]

188. In oral evidence, DETI made reference to the Economic Strategy where the potential of having an Innovation Council is highlighted. They informed the Committee that such a council would be, not only Government led, but would include businesses and universities at a high level. They informed the Committee that this is the sort of action being taken elsewhere. Officials also referred to consideration by MATRIX of a "first stop shop" to help navigate through the various support mechanisms for R&D. Department officials believe that what is needed is knowledge of how to navigate the various support programmes and advice and guidance available on those programmes. They believe such a structure would allow the system to work more efficiently. To achieve this, a management structure would have to be put in place to oversee and encompass the various sectors and the various ways of doing things. They told the Committee,

"The challenge that we are looking at in the next step of that is how we put in place a system of management that makes it seamless to tie those support programmes together and put in place a team or series of individuals who are capable of understanding the full plethora of what is available."

189. They informed the Committee that this should include what business can contribute. They consider other issues to be important apart from funding, including advice, knowledge, mentoring, association with other businesses and working into supply chains.[287]

190. Invest NI agreed that there should be some organisation with overall responsibility for driving R&D. Representatives explained to the Committee that some central organisation should have an overview of what is happening in the R&D arena. However, they went on to state that to have this organisation within Invest NI would create difficulties because the organisation should have a cross-cutting remit. The Committee was told that the idea of an Innovation Council was under consideration. They suggested such a council should not be within Government but would be aligned to Government.[288] It is believed that this positioning would enable an Innovation Council to have a cross-government remit and a much stronger influence on Government as it would not be perceived as coming from any particular perspective.

Specific Assistance to SMEs and Micro-Businesses

191. A number of respondents believe that support mechanisms for SMEs should be established or improved. Cirdan Imaging Ltd suggest more needs to be done to support indigenous SMEs to engage in R&D in order to retain jobs in the long-term. They feel there is too much pressure in Invest NI to work towards inward investment.[289] In giving oral evidence to the Committee, the University of Ulster highlighted the difficulties for SMEs with many of the funding programmes on offer. They commented,

"We are a large university, and we have a very skilled team of research administrators, but those programmes are still difficult for us, never mind how difficult they must be for a start-up company or an SME."

192. InterTradeIreland consider the attention paid to smaller businesses in traditional economic sectors to be insufficient under the current support system. Research by the organisation indicates that there is a requirement of improved information and access to intermediaries with appropriate skills and experience to mentor would-be innovators.[290] Belfast City Council suggest that new support mechanisms should be aimed predominantly at ensuring that SMEs and micro-businesses have the capacity and capability to engage in the R&D process. The Council believes that simplification of the existing support structures could lead to enhanced investment in R&D.[291] NILGA calls for more involvement from district councils in the support mechanisms they believe councils have the experience and understanding of local SME knowledge and needs to develop long-term economic investment and job creation. They state that councils are already encouraging SME innovation and R&D transition to export markets.[292] The CBI believes the best way to get SMEs involved is to exploit linkages with larger companies and to third-party participation in projects easier.[293] The EU Commission in Belfast suggests the appointment of an R&D champion.[294] Belfast City Council suggests the identification and promotion of R&D role models, mentors and advisors within the SME sector.[295]

193. QUB believes that, aside from assistance from Government, there may be a role for trade associations to provide assistance to SMEs. They believe universities can assist if there are particular consistent needs but across the wide range of SME sectorial needs, trade associations may be better placed.[296] This approach was also suggested by representatives from the Northern Ireland Science Park when they gave oral evidence to the Committee.[297]

Practical Assistance from Government

194. In addition to improvements in infrastructure, knowledge and networking to support and improve R&D, many respondents called for more practical assistance to help organisations to engage in R&D activity. Diane Dodds, MEP commented that companies know that there are funds available but they need to get practical assistance to get access to those funds.[298] Suggestions for practical assistance included:

  • More dedicated or coordinated assistance to support consortia building and navigate through the complexities of Framework applications.[299]
  • Use mentoring schemes to strengthen the capacity of indigenous businesses and researchers to submit quality applications to FP7 and provide assistance throughout the lifecycle of a project.[300]
  • Increase Government support for FE colleges to help SMEs to understand the process of new product and service development to identify market niches and unique selling points for their proposed new innovations.[301]
  • Increase local Government decision making and delivery powers in relation to R&D as local councils are best placed working on the ground with businesses and have the experience of implementing and delivering small and major programmes and projects.[302]
  • The R&D funding providers must become involved in practical measures to entice SMEs to embrace innovation to increase the uptake of the existing support that is available.[303]
  • Practical support for writing applications and for training, similar to what happens in the RoI rather than only advice as is currently the case in Northern Ireland.[304]
  • Additional support for 'IP knowledge forums' to broker knowledge transfer/ exchange from within the academic research base to potential implementers (businesses and entrepreneurs) would facilitate better mutual understanding.[305]
  • Provide more incentives for universities to collaborate with SME's, especially micro-businesses. Link HEIF funding to real results for SME's.[306]
  • Creation of a management tool that allows all stakeholders to view businesses requesting support and offer timely, co-ordinated strategic interventions.[307]
  • Provide better support for developing a business strategy and developing and submitting grants.[308]
  • Provide R&D support for the large companies and tailored support for small companies as SMEs can only thrive in the presence of successful large companies to pull through their products to market and large companies need strong, innovative supply chains to remain globally competitive.[309]
  • Increase the signposting (ie not just INI clients) of companies and individuals towards Knowledge/R&D support and investment/funding.[310]
  • R&D intensity is located in too few companies within Northern Ireland and efforts to incentivise this in key market sectors should be encouraged.[311]

195. Invest NI outlined some of the practical measures it is taking to support organisations to become involved in R&D.[312] These include:

  • The appointment of Innovation Advisors to reach out to local businesses to raise awareness of the support available and to assist them to become involved in R&D including assistance through the application process.
  • Involvement in the Enterprise Europe Network; an EU programme providing international collaboration opportunities and information for any organisation but with a focus on SMEs.
  • The appointment of two Northern Ireland based Collaborative Executives to respond to queries from client companies, the wider business community, universities and other public bodies and to proactively target companies currently in receipt on Invest NI funding for Industrial R&D.
  • The introduction of a pilot mentoring scheme to provide funding to enable applicants to contract hands-on advice from FP7 experts.
  • Advice to businesses on applications to Technology Strategy Board programmes.
  • Attendance at networking events with the TSB, the UK Enterprise Europe Network and the UK FP7 National Contact Points.
  • Representation on the TSB Horizon 2020 Steering Group with a view to ensuring that the views of Northern Ireland stakeholders are considered in the development of the UKs proposals for the implementation of the Horizon 2020 programme.

Networking and Coordinated Knowledge Development in R&D

Networking Between Business, Government and Academia

196. There is general consensus among respondents that more networking is required and that all parties involved need to develop a much greater understanding of the needs of others. InterTradeIreland sees R&D as part of a wider ecosystem which includes other firms, customers, suppliers and other supporting stakeholders including Government which provide companies with resources such as finance, technological expertise, market access support, intellectual property advice and other R&D support.[313] Belfast Metropolitan College calls for the establishment of stakeholder forums to enable government to work closely with FE and HE sectors;[314] Banbridge District Council believes it would help the process if the Local Enterprise Agencies were to focus on establishing appropriate implementation networks as a mechanism for getting firms engaged.[315] Jim Nicholson, MEP considers it essential for Government to work more with the universities as they have lot of experience in working with Europe.[316] DETI officials informed the Committee that the Department is currently looking at how greater collaboration can be achieved between universities, business and Government.[317]

197. Almac Ltd provided an excellent example of collaborative working during their oral evidence session to the Committee.[318] They informed the Committee that the company is working with QUB to meet the needs of both the business and the University. They are collaborating on an initiative to try to improve research from the laboratory through to the clinic. They believe that academia can educate people in Almac. They want to generate the next generation of entrepreneurs at QUB who will develop their own companies.

198. Almac maintains that it is an important linkage but that many businesses have difficulties dealing with academia. They went to QUB with a very firm proposal that was industry led with clear deliverables. It took them about a year working with QUB to facilitate a structure that they needed. Almac states that business must be able to 'speak the right language' when working with academic groups in order to achieve acceptance. They state that too hard-nosed commercial approach will result in academics retreating into an 'ivory tower of academia'. The same may apply from a university perspective in that universities must be able to speak the language of business.

199. The Company contends that if proper research is undertaken with a proper commercial end point, it will get commercial returns and benefit patients but will also be the research that gets into the good academic publications. Almac believes that QUB also understands this to be the case. According to Almac, US companies are far ahead of Europe on this. They are engaged with academia and they have academic people who are commercially minded and who undertake research with an eye to the market. This view is supported by the CEO of TSB who contends that UK universities in general need to do better out of large EU R&D programmes. There may be an opportunity for a R&D focused organisation in Northern Ireland to drive a similar approach here and get ahead of what is happening in Europe. This may be an advantage of having only two universities as it means there are only two groups of academics to convince in order to develop the appropriate culture.

200. Commenting on the relationship that exists between QUB and Almac, Invest NI representatives acknowledged the benefits of such a relationship. They agreed that there was much to be learned from such relationships and that they were working on other such partnerships including the Northern Ireland Advanced Composites & Engineering (NIACE) Centre.[319]

201. In the experience of the Northern Ireland Science Park, relationships with the universities are reported as being very good. They also informed the Committee that DETI is always available to provide advice and support when required. However, they believe Government could make much more use of the expertise that exists in the universities. As outlined by Almac regarding the relationship between business and academia, NISP also contends that the USA is far ahead in terms of the relationships between Government and business. They believe that existing structures such as MATRIX and the Science Park itself are beneficial but do not extend far enough into the operational day-to-day level. They believe there could be great value in such an engagement.[320]

202. Belfast Metropolitan College provided a practical example of how the College has networked through its Club Met Knowledge Network to establish a renewable energy steering group and subsequently develop appropriate courses in the renewable energy sector.[321] Belfast City Council highlighted the potential importance of Belfast Metropolitan College's E3 Campus in offering a connection between business and the College by providing an Incubation Centre.[322]

203. Practical suggestions came from a number of respondents for how knowledge development in R&D can be coordinated across organisations. UCD recommends that there should be enhanced support for collaboration and people-exchange between universities and industry. They believe NISP provides many good examples of the value of such interactions and state that QUB is the UK leader in the KTP scheme.[323]

Business to Business Networking

204. NILGA suggest that expertise in innovation needs to be cultivated to highlight the need to provide skills training in innovation process management. They also suggest that a portal should be developed to facilitate sharing of best practice linking marketing and innovation. They believe this would allow firms to network and learn from each other and to learn through case studies"[324] Banbridge District Council state that, in the RoI, the larger R&D performing firms have organised themselves into the Industry Research and Development Group (IRDG) which is affiliated to the Irish Business and Employers Federation. The Group acts as a discussion forum and lobby for the interests of R&D performing organisations. The Council believes that there is an opportunity for Northern Ireland organisations to do something similar.[325]

Networking Within Academia

205. In oral evidence, South East Regional College informed the Committee that a number of examples exist of FE colleges working together and that all the FE colleges are keen to progress further on collaboration in R&D.[326] Mr Jim Nicholson, MEP believes that such collaborative working by FE colleges should be encouraged to increase applications for EU funding.[327] South West Regional College also calls for greater collaboration from businesses, academia and government agencies to support and exploit opportunities for R&D.[328] The CBI believes that much depends on the level of interest there is within individual departments in the local universities, in collaborating with industry. They state that some departments are very involved while others are interested only in writing academic papers.[329]

Networking Outside Northern Ireland

206. NILGA states that regional, cross border and European networks should be facilitated and that the perceived or actual difficulties associated with the building of these should be addressed in the next round of European funding to ensure maximum transfer of knowledge and innovation leading to creating of wealth and quality employment.[330] Invest NI outlined steps the organisation is taking to improve networking at EU level with the appointment of an Invest NI representative in Brussels to support Northern Ireland R&D stakeholders and influence EU R&D policies by developing relations with the key individuals in the EU institutions.[331] Asidua Ltd suggest that clusters of companies should be identified for collaboration on cross border basis.[332]

207. Many respondents have made comparisons with support provided in the RoI in areas such as EU funding, venture capital funding and the support mechanisms that have been put in place by Government. Jim Nicholson, MEP states that lessons should be learned from the RoI and that meetings should be considered with counterparts in Dublin to learn from their success.[333] The comparison with the RoI is acknowledged by the Department. Officials recognise the challenge and state that the RoI economy is different with more academic institutions, more value-added companies and a key policy lever in low corporation tax. The Department considers it an unfair comparison due to the nature of the Northern Ireland business base and the low number of universities.[334]

Framework Programme Evaluators

208. The CBI suggested that Northern Ireland must increase the number of evaluators in the evaluation process for Framework funding. They consider the benefits from being an evaluator to include the ability to fully understand how the evaluation and assessment process works and the insight gained to the types and level of applications which are being submitted.[335] In oral evidence to the Committee they stated that the evaluators make the decision as to which projects will be successful and that these evaluators, when they come back to a region, are in a position to provide feedback on projects that were not successful. They suggest there is a need to encourage more academics and people from industry, with existing success in specific areas, to become evaluators to help increase success rates.[336] This view was supported by Jim Nicholson, MEP. He suggests that more should be done at a local level to encourage greater involvement of evaluators.[337]

Improving Government Knowledge of R&D

209. Suggestions were made for how Government knowledge of R&D could be improved and shared. QUB believes specific, dedicated, skilled resources should be allocated to understand R&D intensive and innovative economies such as Finland, Sweden and Israel. The information and understanding gained could subsequently inform public policy within Northern Ireland. They believe focus on implementation and long-term patience is critical to success and call for the development of a ten-year strategy which focuses firstly upon drafting a new policy with clear ownership and buy-in from stakeholders across Northern Ireland and across Government departments. They state that allocation of resources to support the strategy should be aligned carefully and that the strategy must be implemented through clear implementation plan and clear accountability structures.[338]

210. Both AFBI[339] and DARD[340] advocate increased joint working between departments to develop strategies in key sectors. DARD considers one of the most important outcomes to be an increase in business to business and business to researcher collaboration so that organisations can pool resources and skills for their mutual benefit. The University of Ulster commented on the lack of available high level scientific advice in the form of a scientific advisor to the Assembly and Executive. The University believes this is something that should be provided for.[341] DARD believes it is important to ensure a joined up approach across Government departments to develop a science and innovation strategy led by a Chief Scientist.[342] Invest NI considers the value of a Chief Scientific Officer as,

"somebody who can lobby strongly on behalf of the research that needs to be done to maximise the strengths of the Northern Ireland research base, of which there are many. Such an Officer could also identify where we should prioritise our research activities…"[343]

211. DETI acknowledges the need for Government to improve its knowledge and understanding of R&D. Officials informed the Committee that the UK may not be a good comparator. Their evidence demonstrates the UK spend on R&D, relative to its economic output is much less than countries such as Sweden, Finland and Israel.[344]

212. The EU Commission Belfast representative highlighted the positive action taken by the Executive with the establishment of the Executive Office in Brussels and by Invest NI putting a representative in Brussels. He considers it essential to have an in-depth understanding of what is happening in the EU and that needs to be matched with knowledge in Northern Ireland. He believes there is a need to build on the knowledge in DETI, Invest NI and the universities and determine how Northern Ireland's strengths fit into Horizon 2020.[345]

Competence Centres

213. QUB welcomes the recent initiative from Invest NI to fund industry-led Competence Centres in key sectors. They believe more of these centres should be funded and state that, with a clearer, more focused strategy, more could be achieved through Competence Centre models.[346] AFBI also believes that Competence Centres provide an important vehicle for engaging the private sector in research and development. They state that the centres proposed by Invest NI will provide local companies with an opportunity to steer and direct programmes of research in the local research base.[347]

214. AFBI have been working with Invest NI on the establishment of Competence Centres for the agri-food sector and the renewable energy sector. In oral evidence, representatives informed the Committee that the centres would be industry led. They outlined the basic model as Invest NI providing substantial funding over a period of up to five years for the centres to carry out early-stage R&D. Companies will get together, work together and identify the R&D that they want to carry out. Representatives informed the Committee that they consider Competence Centres to be good forums and structures for bringing the industry together and listening to it, and getting it to take the lead to drive forward early stage R&D.[348]

Conclusions & Recommendations

The Current Position

215. Throughout the course of the Inquiry, in written and oral evidence and in meetings with stakeholders, evidence was provided of the excellent work being done by staff in Invest NI in providing advice and assistance to organisations involved in R&D at all levels. The work of organisations such as InterTradeIreland, the Northern Ireland Science Park, the Northern Ireland Advanced Composites and Engineering Centre, MATRIX and the Agri-food and Biosciences Institute have been rightly held up as examples of the progress being made in developing Northern Ireland's ability to undertake and succeed in R&D at the highest level.

216. The Committee has heard of the excellent work being undertaken by many progressive Northern Ireland companies of all sizes, the two universities, many FE colleges and local councils, to drive the innovation and R&D agenda and help Northern Ireland to succeed in this increasingly complex and demanding field. The Committee has also heard evidence from key stakeholders in business, academia and government to the effect that the programmes that are in place to drive R&D, including those from Europe, UK, cross-border and Northern Ireland level, are largely appropriate to the needs of business and academia.

217. Evidence gathered by the Committee clearly demonstrates the increasingly important role that R&D is playing and will continue to play as an important economic driver. As stated in the report of the Independent Review of Economic Policy, EU legislation will result in reduced levels of support for Selective Financial Assistance to businesses and, eventually, to Selective Financial Assistance coming to an end in 2013 as a means of attracting and retaining Foreign Direct Investment. The opportunity exists to make more of the support programmes for R&D to help drive the economy and develop the high value, high paid jobs needed to rebalance and rebuild the economy. Combined with increased levels of R&D, the proposed devolution of corporation tax powers, enabling the Executive to set the rate of corporation tax, will assist Northern Ireland to compete with those regions with well-established good practice in R&D.

218. In November 2011, the Committee considered the final progress report on DETI's Regional Innovation Strategic Action Plan. The Chair wrote to congratulate the Minister on the achievement of the objectives in the plan. It was also suggested that, when the new Innovation R&D and Creativity Action Plan is issued, it would be appropriate to include objectives which demonstrate clear outcomes and benefits including objectives with annual targets, directly related to increasing the number of companies, the number of locally owned companies, the number of SMEs investing in R&D and objectives for increasing the overall spend on R&D in Northern Ireland.

219. In November 2011, the Department of Finance & Personnel issued a press release detailing the level of R&D activity in Northern Ireland. Results included the highest ever R&D expenditure in Northern Ireland in 2010 with an increase in 8%.[349] While there is much to be positive about, there is still a lot of potential for increasing the level of R&D within Northern Ireland. The Treasury consultation on rebalancing the Northern Ireland economy noted the particularly low level of business expenditure on R&D. It further noted that R&D and innovation are particularly low when compared to successful small economies in Europe several of which are in more peripheral locations than Northern Ireland. Over the past five years business expenditure on R&D in Northern Ireland has averaged 0.69% of Gross Value Added (GVA) compared to 1.23% for the UK as a whole. Business expenditure on R&D in Northern Ireland is heavily focused on a small number of companies, with just 10 companies accounting for around 57% of all business R&D investment in 2009.[350]

220. The evidence gathered by the Committee demonstrates that, although much excellent progress has been made in developing capacity and capability in Northern Ireland to undertake high quality, high value innovation and R&D, there are still many significant barriers to organisations of all sizes becoming involved and taking advantage of the many opportunities that exist locally, at UK level, at EU level and internationally. These barriers include issues regarding awareness and understanding of the available opportunities, barriers to accessing funding and barriers to navigating and coping with the complexities of the programmes and the administrative processes associated with them. There are barriers which relate specifically to SMEs and, in some cases, barriers which specifically impact on the capacity and capability of micro-businesses to engage in the process. Many organisations have perceptions regarding the risks involved in becoming involved in innovation and R&D programmes and are unsure how to manage these risks or if they can be managed.

221. Many of these barriers will require changes in Government policies and procedures, if they are to be overcome. The current structures in place to support R&D are not as well connected as they should be and this is leading to considerable problems, not only with communication and information sharing but also in developing a strategic approach to innovation and R&D at a regional level. Structural changes will be required to the way in which innovation and R&D is managed at a strategic level in Northern Ireland. This will also require changes to the systems and processes that are in place to support innovation and R&D. An overall strategic vision is required, supported by policies and strategies within a structure designed specifically to meet the long-term challenges and maximise the potential of Northern Ireland to avail of the existing and future opportunities for innovation and R&D to help grow the economy.

Vision for Innovation and R&D

222. Although there is considerable good work being undertaken to support and undertake R&D at all levels across business and academia, the Committee did not find evidence of an overall integrated and holistic approach to R&D. The need for an integrated and holistic approach was a call from many respondents to the inquiry.

223. Such an approach should be all inclusive. It should include specific systems and processes, designed to meet the needs of large businesses, SMEs and micro-businesses. It should take account of the contribution that can be made by Government departments and district councils. It should encompass the work of Invest NI, InterTradeIreland and the universities. It should provide a strategy for involvement of FE colleges, research institutions and Local Enterprise Agencies.

224. The integrated and holistic approach to R&D must be outward looking and based on information gathered on what works well in other regions, EU Member States and internationally. It must consider existing support programmes provided through organisations such as the Technology Strategy Board and through the EU institutions. The approach must also look inward at the past and future potential contribution of Government at all levels including district councils, universities and FE colleges, business support organisations such as the CBI and FSB and trade bodies. It must identify and recognise the contribution that can be made across all sectors at all levels.

225. The infrastructure that is currently in place to support R&D has largely evolved from established support mechanisms as the role of R&D has rapidly developed over the past number of years. Considering the expected future impact of R&D as a key economic driver, a clear vision for innovation and R&D must be developed and implemented, including policies, strategies, structures, systems and processes which are custom-designed specifically to meet the long-term challenge of maximising the potential for Northern Ireland businesses and academia at all levels to take advantage of the existing and future opportunities for innovation, research and development (Recommendation 1).

Structures to Support Innovation and R&D

226. As stated above, there is much good work being undertaken to support and undertake R&D. The absence of an overall vision and integrated and coordinated approach is resulting in substantial barriers to the development of the R&D capability of Northern Ireland as a region. This gap impacts at every level across Government, business and academia. Government departments such as DETI, DARD, DHSSPS could be better connected. There is no evidence of a strategic level approach to involving local councils in the R&D agenda. There is evidence that the level of involvement in R&D at university level is dependent upon the level of interest and motivation within individual departments. There is little coordination or shared learning across the FE sector. Evidence suggests that, with some notable exceptions, businesses and business support organisations are largely not involved in developing the R&D agenda.

227. In order to develop and implement a vision and strategy for R&D there should be involvement of all sectors at all levels. The so-called 'triple helix' approach of involving Government, business and academia must include representation from district councils, business representatives from large businesses, SMEs and micro-businesses as well as input from the FE sector.

228. There have been a number of calls for a high-level steering group to oversee and set the strategic direction for R&D. The Committee considers this an essential element in establishing and implementing a vision and integrated approach to R&D. A high-level steering group should be established comprising Government, business and academia to advise on policy and oversee the integration and coordination of all R&D activity across all three sectors at all levels (Recommendation 2). The steering group should be involved in setting the vision for innovation and R&D. It may be considered appropriate to establish a new group to undertake this role. Alternatively, it may be considered suitable avail of existing knowledge and experience and to widen the remit and membership of the existing Framework Programme 7 Steering Group as its membership currently represents many of the key strategic level stakeholders.

229. Although the current programmes for supporting R&D are mostly considered appropriate, there are many and varied barriers to organisations becoming involved in R&D activities. The wide range of opportunities available and the complexities involved in the application process along with monitoring and reporting requirements make it extremely difficult for many organisations of all sizes to navigate the processes. Many companies do not know what opportunities may be open to them or where to go to find out about opportunities; some do not know that the work they are doing may be eligible for support; and many do not realise that the work they are doing actually constitutes R&D. A number of respondents cited the lack of opportunities for business-led research as a barrier as well as a lack of support for the commercialisation of R&D. There is strong evidence that small companies are not becoming involved in R&D because they do not have the capacity to devote the appropriate resource to the administrative burden required by the processes. Companies informed the Committee of barriers such as concerns with cash-flow, match funding requirements, intellectual property rights and internal knowledge and skills.

230. There is evidence of much confusion regarding the current support structures and what level and nature of support there is available to navigate the requirements of funding programmes. The Committee does not consider this to be problem that can be resolved solely by improving the information and communication mechanisms associated with R&D. Some respondents have suggested the formation of an Innovation Centre; a single organisation with responsibility for driving R&D in Northern Ireland. The Committee believes that, for Northern Ireland to achieve its potential as a region and maximise the potential of innovation and R&D to driving the economy in the long-term, a completely new structure is required in the form of a single unit to integrate and coordinate all innovation and R&D activity. It should have four key responsibilities:

i . Improving Government knowledge and information on innovation and R&D by gathering knowledge and information through, research, networking and collaboration to identify and learn from good practices; and to identify the contribution that can be made at all levels by Government, business and academia.

ii. Developing programmes, systems and processes to meet the needs of business and academia by providing programmes of assistance for innovation and R&D; providing support to understand and navigate programmes; and providing support for administering programmes from application to evaluation.

iii. Implementing support for innovation and R&D through promotion of opportunities, educating and mentoring, practical support through projects, awareness programmes for support available and for specific programmes (such as Horizon 2020 and the Small Business Research Initiative).

iv. Developing and supporting a culture of innovation and R&D across Government, business and academia at all levels in Northern Ireland (Recommendation 3).

231. It has been suggested by some that such an organisation should be a stand-alone entity. Others have suggested that it should be constituted as part of an existing organisation such as Invest NI or the Northern Ireland Science Park. The Committee believes that more work is required to determine how this unit should be constituted however its work should be overseen by the Steering Group for Innovation and R&D. It is considered a critical element in establishing Northern Ireland's long-term future regarding R&D; it is therefore essential that the structure is the most appropriate to the needs of Government, business and academia.

232. The recommendations above are the key strategic level recommendations from the inquiry. The remaining recommendations consider how the four key responsibilities outlined in Recommendation 3 above can be implemented in practice. Although recommendations 4 to 9 fit into the proposed structures above, it is not considered necessary to wait until the recommended structures are in place before planning to implement these recommendations. If Northern Ireland is to be considered a serious participant in innovation and R&D in the future, it is important that plans are put in place to implement the recommendations below with a view to integrating work into the new structures as they are established.

Improving Government Knowledge and Information

233. The need to collect and use information and knowledge of current good practices on R&D was raised by a number of respondents. Respondents referred to countries such as Sweden, Finland, Israel and the Republic of Ireland among others. The Committee agrees that there needs to be learning from the experience of countries which lead the world in innovation and R&D. However, consideration should be given to the most appropriate countries to benchmark against. The Global Innovation Index 2011 ranks countries across the world in relation to the enabling environment provided for innovation and on their innovation outputs.[351] Table 1 lists the top ten countries overall, the top ten in terms of innovation inputs and the top ten in terms of innovation outputs. The Outputs pillar includes statistics on trademark registrations, information on the use of ICT in business and a sub-pillar on creative goods and services. This pillar may therefore represent an indicator of performance on the commercialisation of research.

234. There are no specific statistics available for Northern Ireland however, evidence from the Inquiry demonstrates that improvements are needed here in to areas covered under the pillars of the Innovation Input Sub-Index pillar. This includes the political, regulatory and business environments, education, third level education, research and development, infrastructure and market sophistication. Much can therefore be learned from countries which rank high on this pillar. However, in the long-term, it is essential that innovation and R&D results in commercial returns to grow and develop the economy. It is therefore important that there is learning from the good practices of those countries which rank high on the Innovation Output Sub-Index pillar. For this to be achieved. Table 1 suggests appropriate countries may include Switzerland, Sweden, Finland and Denmark as they rank high on both the Input and Output pillars.

Table 1: Leading Countries for Innovation
Rank Global
Innovation Index
Innovation
Input Sub-Index
Innovation
Output Sub-Index
1 Switzerland Singapore Sweden
2 Sweden Hong Kong/China Switzerland
3 Singapore Switzerland Netherlands
4 Hong Kong/China Ireland Germany
5 Finland Sweden USA
6 Denmark Finland Finland
7 USA Denmark Denmark
8 Canada Canada Israel
9 Netherlands Luxembourg United Kingdom
10 United Kingdom United Kingdom Canada

Source: Global Innovation Index – Accelerating Growth and Development; Dutta, S. (Editor); INSEAD, 2011

235. From the evidence gathered, it is obvious that Northern Ireland must become much more connected in Europe. It is also crucial that the required knowledge and understanding is developed to work with EU programmes for R&D including Framework Programme 7 and Horizon 2020. The Committee supports the recommendations from the Framework Programme Steering Group and believes that, if fully implemented, will begin to address many of the concerns respondents had regarding the ability of Northern Ireland to engage with Europe and compete for EU funding for R&D. However, it is important that FP7 and Horizon 2020 are not considered in isolation. They must be integrated into the overall vision and strategy for innovation and R&D for Northern Ireland.

236. Other sources of support for R&D coming from outside Northern Ireland also need to be developed. This includes areas such as venture capital and the Small Business Research Initiative. The fact that Northern Ireland companies perform well in the SBRI in GB but do not have the opportunity to avail of the initiative inside Northern Ireland demonstrates a serious gap in the infrastructure here for supporting R&D.

237. As well as looking outwardly, it is important to look inwardly to understand the capabilities, the weaknesses and the potential that exist inside Northern Ireland. There must be a comprehensive knowledge and understanding of what Government, business and academia can contribute to increasing the level and quality of innovation and R&D. Government must know where the key barriers are to organisations becoming involved in programmes, whether this relates to tax credits, Knowledge Transfer Partnerships or taking the lead in strategic programmes under Horizon 2020. The potential of all public and business support organisations to contribute to improving the level and quality of innovation and R&D must be explored. This includes FE colleges, Local Enterprise Agencies, local councils and trade bodies. There must be learning from successes such as the NIACE Centre, NISP, AFBI's high success rate with EU funding applications and the collaborative efforts of Almac Ltd and QUB. This learning must be applied to help grow innovation and R&D in all sectors in Northern Ireland.

238. Learning from good practices in other countries, developing the ability for Northern Ireland to engage in Europe and understanding the capabilities, the gaps and the potential that exist inside Northern Ireland are the three critical elements to provide the knowledge and understanding required to assist in developing the appropriate infrastructure for innovation and R&D. Therefore, a mechanism should be put in place and resource allocated to undertake the following functions:

i. To identify and learn from good practices in innovation and R&D in other countries and regions.

ii. To engage regularly with other sources of support such as EU institutions, venture capital firms and the Technology Strategy Board to gain a comprehensive understanding of and influence the initiatives and support programmes that are available for R&D.

iii. To gain a comprehensive understanding of the strengths, weaknesses, and potential that exists in Government, business and academia in Northern Ireland to contribute to innovation and R&D.

iv. To use the knowledge and understanding gained to inform the development of appropriate systems and processes, to support and improve the capacity and capability of organisations at all levels to participate in innovation and R&D (Recommendation 4).

Improving Programmes, Systems and Processes

239. Respondents had concerns regarding programmes for R&D, the systems and processes for supporting organisations during programmes and the systems and processes associated with programmes. Work to become better informed through consideration of good practices in other regions, improved engagement with sources of support for R&D and improved understanding of the existing potential within Northern Ireland will provide the knowledge and understanding to develop and improve programmes, systems and processes. Programmes must be reviewed to ensure they are as 'business-friendly' as possible.

240. Concerns were expressed that programmes do not always meet the needs of business with the timing and duration of support not being flexible enough to meet business needs and not enough opportunities being provided for business-led R&D. Some respondents raised concerns that Invest NI does not provide support to a wide enough range of organisations, for example – not providing support for FP7 applications to non-client organisations and non-registered companies not being eligible to avail of innovation vouchers. Respondents raised concerns in relation to funding, with suggestions for increased levels of funding, up-front funding to assist with cash-flow problems, support for overhead costs and grant support to prepare complex applications. There were also suggestions for programmes to provide incentives for universities to collaborate with SMEs and micro-businesses and for robust Northern Ireland programmes to complement and link into EU programmes. The Committee understands and supports efforts by Invest NI to increase the capability of organisations to participate in R&D through its Innovation Escalator approach. This work should be built on and expanded. Government, business and academia should work together to review and, where necessary, improve programmes developed within Northern Ireland and influence programmes being developed elsewhere, so as to balance the needs of business and academia with those of the Executive (Recommendation 5).

241. Organisations of all types and sizes from business and academia expressed concerns about the complexities involved in navigating the systems and processes required by the range of R&D opportunities at all levels. There was general consensus that much more could be done to assist organisations through these processes and to thereby encourage more organisations of all sizes and all levels of experience to become involved. Suggestions for support included ideas for coordinating business engagement, consortia building, 'IP knowledge forums; and people exchange between universities and industry to increase awareness and mutual understanding. There were suggestions for practical support for capacity building, training, promoting and raising awareness of R&D and for development of ideas and products. The need for mentoring was raised by a number of organisations with one suggestion for the provision of opportunities for businesses to meet with experienced people in non-threatening environments to develop mentoring opportunities without the fear of loss of intellectual property. There were calls for assistance to manage the requirements of complex funding processes as well as calls for the improvement and simplification of processes for SMEs to become involved in R&D. The concerns raised are both real and significant. They act as substantial barriers to organisations becoming involved in innovation and R&D. It is in the interests of Government, business and academia to work to overcome these barriers and provide appropriate support mechanisms for organisations of all types and sizes to become involved in both the currently available and future R&D programmes. Government, business and academia should work together to review and improve existing support processes and, where appropriate, develop new practical measures of support for all innovation and R&D programmes (Recommendation 6).

242. The level of bureaucracy associated with the administrative processes for R&D support was considered excessive and unnecessary by many respondents. This applied to EU funded programmes but also applied to some programmes administered by Invest NI and InterTradeIreland. There are issues associated with the application process as well as processes for approving, monitoring and evaluating funding programmes. Specific problems related to the complexities of the processes and documentation, the time involved, repetition within the process, the number of audits in the system and the long delay in payment of grants leading to cash-flow problems for businesses. Government, business and academia should work together to review and, where necessary, improve the administrative processes for R&D programmes developed within Northern Ireland so as to balance the needs and capabilities of business and academia with the needs of the Executive (Recommendation 7).

Implementing Support

243. There is considerable evidence that the infrastructure is not yet in place to provide the level of support required by business and academia. Systems and processes will be required to promote opportunities for R&D and to encourage potential applicants, to educate and mentor business and academia and to provide practical support for organisations to navigate the various programmes and the administrative process involved. Much can be learned from initiatives such as the cross border initiative between Newry & Mourne District Council and Louth Local Authorities along with initiatives like Castelreagh Borough Council's Evolution Project. Learning can be used to help develop similar initiatives and to ensure continuity of approach. Awareness programmes will be required for schemes such as Horizon 2020, the Small Business Research Initiative, and others. Support staff will be required on the ground to help businesses, universities and FE colleges to navigate the complexities of the various schemes including providing support for applicants through the process and supporting successful applicants through programmes. A long-term strategy and implementation plan should be developed with appropriate resources provided for promotion of opportunities for R&D, educating and mentoring, practical support through projects and awareness programmes for support available for specific schemes (Recommendation 8).

Developing and Implementing a Culture of Innovation and R&D

244. The experience of the Committee in undertaking this Inquiry has been that there is a very varied level of awareness of innovation and R&D across Government, business and academia. Many businesses of all sizes are fully engaged in R&D but, equally, many more businesses of all sizes are not engaged. Some do not know how to engage, some do not have the capacity or capability to engage and some see the barriers as being too great for them to overcome. There is no consistent approach across the further and higher education sector with only patchy evidence of collaboration and knowledge sharing among FE colleges and evidence of an inconsistent approach at university level with some departments better engaged than others. There is strong evidence that the public sector is trying, within the knowledge, skills, structures and resources available however, there is little evidence of a coordinated approach among Government departments and bodies, among local councils or between the various levels of Government. A clear and consistent message and approach must be continuously promoted by Government, business and academia across Northern Ireland to the effect that innovation, and R&D are key drivers for economic growth and will be supported at all levels (Recommendation 9).

Additional Short-Term Measures to Improve Uptake of R&D

245. Throughout the course of the inquiry there were a number of issues raised which the Committee believes can and should be addressed in isolation. These are largely 'quick fixes' which can be implemented without undue delay. By addressing these issues the message will be sent out that Northern Ireland is serious about addressing the barriers to organisations becoming involved in innovation and R&D.

246. There were many calls from respondents at all levels for mentoring programmes to support organisations through the application process and throughout programmes. Invest NI has initiated a pilot mentoring scheme. The Framework Programme 7 Steering Group has recommended that, subject to positive evaluation, the scheme be expanded to include all NI research institutions with the possibility of involvement of FE colleges. However, the need for mentoring has been established for programmes other than FP7 and would be particularly welcomed by SMEs and micro-businesses to assist in identifying the type of support best suited to individual companies and to support companies through the process. Invest NI should explore ways to open up innovation and R&D mentoring schemes to all businesses which need it. This should include consideration of the contribution that could be made by third parties such as local councils, FE colleges and Local Enterprise Agencies (Recommendation 10).

247. Many of the problems raised by respondents related to financing innovation and R&D activities. There were calls for additional support programmes for projects and for increased levels of support. These are matters which can only be considered in the longer term. There is, however, one issue that can be addressed in the short-term. That is the matter of the 60 to 90 day period it takes to pay a grant following the submission of costs. The Committee recognises the high levels of expenditure that businesses undergo to become involved in R&D and the impact this high expenditure can have on cash-flow, especially for SMEs and micro-businesses but also for larger businesses. Government also recognises this as a problem and, in recognition, has cut the target period for payment of invoices by Government departments from 30 days to 10 days. In the same spirit, the target time period for payment of grants, following receipt of an accurate record of expenditure should be reduced immediately to 30 days with consideration given to how this can be reduced further in the future (Recommendation 11).

248. The Committee was impressed with the high level of success of Northern Ireland companies tendering under the Small Business Research Initiative. The Committee was however disappointed to learn that opportunities do not exist for these progressive companies and others to tender under the SBRI for contracts within Northern Ireland. This constitutes a significant gap in both the innovation and R&D infrastructure here and in the procedures for procurement. The Department of Finance & Personnel must take steps to introduce and promote the Small Business Research Initiative across Government departments, agencies and NDPBs (Recommendation 12).

249. The number of respondents highlighting the high level of demand for venture capital in Northern Ireland and the low level of availability was a matter of concern for the Committee. Given the importance of venture capital to small, early-stage, high-technology, knowledge-based companies, there seems to be little resolve to deal with the issue as a priority. DETI recognises that venture capital is critical and has informed the Committee that it is committed to growing a flourishing venture capital environment. The Department of Enterprise, Trade & Investment must work with others including the universities, NISP, AFBI and venture capital companies to develop a strategy and plan increase the level of venture capital available in Northern Ireland (Recommendation13).

250. Framework Programme 7 closes at the end of 2013 and will be replaced by Horizon 2020. Some respondents have indicated the need to take advantage, at the earliest stage, of the opportunities available in the new Framework. This should involve a process of matching Northern Ireland's research base to the funding priorities of Horizon 2020. Focus should be on the knowledge and experience achieved and business networks created through EU participation. Therefore, preparation for Horizon 2020 should commence immediately, including an assessment of what Northern Ireland can offer, in business and academia, in relation to the funding opportunities available through Horizon 2020 (Recommendation 14).

251. A number of respondents, including Invest NI have suggested that there would be benefits in appointing a Chief Scientific Officer to advise on policy and to lobby on behalf of the Northern Ireland research base and maximise its strengths. There have been calls for a high level science steering committee to lead a science strategy for Northern Ireland. The Executive should explore the benefits of establishing high level structures for science including the appointment of a Northern Ireland Chief Scientific Officer and a science steering committee (Recommendation 15).

[1] Rebalancing the Northern Ireland Economy; HM Treasury Consultation, March 2011

[2] Appendix 4, EU Commission, Belfast Office Written Submission

[3] Global Innovation Index – Accelerating Growth and Development; Dutta, S. (Editor); INSEAD, 2011

[4] Independent Review of Economic Policy; DETI and Invest NI, September 2009

[5] Appendix 4, EU Commission, Belfast Office Written Submission

[6] Appendix 4, Belfast City Council Written Briefing

[7] Appendix 4, Belfast City Council Written Briefing

[8] Appendix 4, NILGA Written Submission

[9] www.lisburncity.gov.uk

[10] www.belfastcitycouncil.gov.uk/businessprogrammes/steppingstones.asp

[11] Appendix 4, Craigavon Borough Council Written Submission

[12] www.detini.gov.uk/eco-dev-pubs-4

[13] Ibid

[14] Appendix5, R&D Policy, Peformance & Barriers, Assembly Research Paper

[15] Ibid

[16] Appendix5, R&D Policy, Peformance & Barriers, Assembly Research Paper

[17] Ibid

[18] Ibid

[19] Ibid

[20]www.newryandmourne.gov.uk/documents/Memorandumofunderstanding-finalVer8-24.9.10.pdf (Accessed 3rd May 2012)

[21] Appendix5, R&D Policy, Peformance & Barriers, Assembly Research Paper

[22] Ibid

[23] Appendix5, R&D Policy, Peformance & Barriers, Assembly Research Paper

[24] Appendix1, R&D and Innovation – strategy and support in the UK, Scotland, Wales and Republic of Ireland, Assembly Research Paper

[25] www.hmrc.gov.uk accessed 27th April 2012

[26] Appendix1, R&D and Innovation – strategy and support in the UK, Scotland, Wales and Republic of Ireland, Assembly Research Paper

[27] Appendix5, Framework Programme 7, Assembly Research Paper

[28] Ibid

[29] Ibid

[30] Appendix5, Framework Programme 7, Assembly Research Paper

[31] Ibid

[32] http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/11/848&format=HTML&aged=1&language=EN&guiLanguage=en

[33] Appendix 2, InterTradeIreland Hansard

[34] Regeneration and Economic Growth http://www.communities.gov.uk/regeneration/economicgrowth/localenterprisepartnerships (Accessed 24/04/12)

[35] Local Enterprise Partnerships Summaries, http://www.communities.gov.uk/localgovernment/local/localenterprisepartnerships/summaries/ (Accessed 24/04/12)

[36] Appendix1, R&D and Innovation – strategy and support in the UK, Scotland, Wales and Republic of Ireland, Assembly Research Paper

[37] Appendix1, R&D and Innovation – strategy and support in the UK, Scotland, Wales and Republic of Ireland, Assembly Research Paper

[38] Appendix1, R&D and Innovation – strategy and support in the UK, Scotland, Wales and Republic of Ireland, Assembly Research Paper

[39] Appendix1, EU Innovation Policy – Best Practice, Assembly Research Paper

[40] Appendix1, EU Innovation Policy – Best Practice, Assembly Research Paper

[41] Ibid

[42] Appendix1, EU Innovation Policy – Best Practice, Assembly Research Paper

[43] Appendix1, Identification of Best Performing Higher Education Institutions for R&D in the UK and ROI, Assembly Research Paper

[44] Appendix 2, QUB Hansard

[45] Appendix 2, QUB Hansard

[46] Appendix 2, UU Hansard

[47] Appendix 2, UU Hansard

[48] Appendix 2, UU Hansard

[49] Appendix1, Identification of best performing Higher Education Institutions for R&D in the UK and ROI, Assembly Research Paper

[50] Innovation Ulster Ltd, http://oi.ulster.ac.uk/office-of-innovation/what-we-do (Accessed 30/04/12)

[51] Appendix1, Identification of best performing Higher Education Institutions for R&D in the UK and ROI, Assembly Research Paper

[52] Appendix1, Identification of best performing Higher Education Institutions for R&D in the UK and ROI, Assembly Research Paper

[53] Appendix 4, QUB Written Submission

[54] Appendix 4, Banbridge District Council Written Submission

[55] Appendix 4, NILGA Written Submission

[56] Appendix 4, QUB Written Submission

[57] Appendix 4, NILGA Written Submission

[58] Appendix 4, Almac Ltd Written Submission

[59] Appendix 2, Almac Ltd Hansard

[60] Appendix 4, ADS Written Submission

[61] Appendix 2, ADS Hansard

[62] Appendix 4, Cirdan Imaging Ltd Written Submission

[63] Appendix 4, NRC Written Submission

[64] Appendix 2, DETI Hansard

[65] Appendix 4, DETI Written Submission No.2

[66] Appendix 2, Invest NI Hansard

[67] Appendix 4, BMC Written Submission

[68] Appendix 2, BMC Hansard

[69] Appendix 2, CBI Hansard

[70] Appendix 4, NRC Written Submission

[71] Appendix 4, Newry & Mourne DC Written Submission

[72] Appendix 4, Belfast City Council Written Submission

[73] Appendix 4, BMC Written Submission

[74] Appendix 4, ADS Written Submission

[75] Appendix 2, CBI Hansard

[76] Appendix 2,ADS Hansard

[77] Appendix 4, UCD Institute of Physics in Ireland Written Submission

[78] Appendix 4, MNI Written Submission

[79] Appendix 3, Interview with Asidua Ltd

[80] Appendix 2, Invest NI Hansard

[81] Appendix 2, CBI Hansard

[82] Appendix 2, Invest NI Hansard

[83] Appendix 4, QUB Written Submission

[84] Appendix 4, BMC Written Submission

[85] Appendix 2, BMC Hansard

[86] Appendix 2, QUB Hansard

[87] Appendix 2, UU Hansard

[88] Appendix 3, Interview with Mr Iain Gray, CEO TSB

[89] Appendix 2, UU Hansard

[90] Appendix 3, Interview with Cirdan Imaging Ltd

[91] Appendix 4, NISP Written Submission

[92] Appendix 2, QUB Hansard

[93] Appendix 2, NISP Hansard

[94] Appendix 4, AFBI Written Submission

[95] Appendix 2, DETI Hansard

[96] Appendix 4, DETI Written Submission No.2

[97] Appendix 2, QUB Hansard

[98] Appendix 4, QUB Written Submission

[99] Appendix 2, NISP Hansard

[100] Appendix 4, QUB Written Submission

[101] Appendix 2, AFBI Hansard

[102] Appendix 4, UCD Institute of Physics in Ireland Written Submission

[103] Appendix 2, NISP Written Submission

[104] Appendix 4, Cirdan Imaging Ltd Written Submission

[105] Appendix 4, UCD Institute of Physics in Ireland Written Submission

[106] Appendix 3, Interview with Mr Iain Gray, CEO TSB

[107] Appendix 4, AFBI Written Submission

[108] Appendix 4, QUB Written Submission

[109] Appendix 2, QUB Hansard

[110] Appendix 2, DETI Hansard

[111] Appendix 4, Invest NI Written Submission

[112] Appendix 4, DETI Written Submission, No.3

[113] Appendix 2, ADS Hansard

[114] Appendix 4, Belfast City Council Written Submission

[115] Appendix 2, AFBI Hansard

[116] Appendix 2, Invest NI Hansard

[117] Appendix 4, CBI Written Submission

[118] Appendix 2, CBI Hansard

[119] Appendix 2, Invest NI Hansard

[120] Appendix 2, InterTradeIreland Hansard

[121] Appendix 3, Interview with Cirdan Imaging Ltd

[122] Appendix 4, CBI Written Submission

[123] Appendix 4, InterTradeIreland Written Submission

[124] Appendix 2, InterTradeIreland Hansard

[125] Appendix 2, DETI Hansard

[126] Appendix 2, Interview with Mr Iain Gray, CEO TSB

[127] Appendix 3, Interview with Mr Jim Nicholson, MEP

[128] Appendix 3, Interview with Mrs Diane Dodds, MEP

[129] Appendix 3, Interview with Maurice Maxwell, EU Commission Office, Belfast

[130] Appendix 2, Invest NI Hansard

[131] Appendix 2, QUB Hansard

[132] Appendix 2, CBI Hansard

[133] Appendix 2, InterTradeIreland Hansard

[134] Appendix 4, AFBI Written Submission

[135] Appendix 4, Asidua Ltd Written Submission

[136] Appendis 4, Automated Intelligence Ltd Written Submission

[137] Appendix 2, UU Hansard

[138] Appendix 4, Craigavon BC Written Submission

[139] Appendix 4, Belfast City Council Written Submission

[140] Appendix 4, Castlereagh BC Written Submission

[141] Appendix 4, Pure Roast Coffee Ltd Written Submission

[142] Appendix 4, Qwizdom UK Ltd Written Submission

[143] Appendix 2, ADS Hansard

[144] Appendix 4, QUB Written Submission

[145] Appendix 4, DARD Written Submission

[146] Appendix 4, SWRC Written Submission

[147] Appendix 4, Newry & Mourne DC Written Submission

[148] Appendix 4, Banbridge DC Written Submission

[149] Appendix 4, NISP Written Submission

[150] Appendix 2, InterTradeIreland Hansard

[151] Appendix 2, ADS Hansard

[152] Appendix 4, SWRC Written Submission

[153] Appendix 4, MNI Written Submission

[154] Appendix 4, NILGA Written Submission

[155] Appendix 4, MNI Written Submission

[156] Appendix 3, Interview with Mrs Diane Dodds, MEP

[157] Appendix 4, Banbridge DC Written Submission

[158] Appendix 4, Craigavon BC Written Submission

[159] Appendix 4, SWRC Written Submission

[160] Appendix 4, Banbridge DC Written Submission

[161] Appendix 4, DARD Written Submission

[162] Appendix 4, Belfast City Council Written Submission

[163] Appendix 4, NISP Written Submission

[164] Appendix 4, Automated Intelligence Ltd Written Submission

[165] Appendix 2, ADS Written Submission

[166] Appendix 4, Castlereagh BC Written Submission

[167] Appendix 2, AFBI Hansard

[168] Appendix 4, NILGA Written Submission

[169] Appendix 4, QUB Written Submission

[170] Appendix 2, AFBI Hansard

[171] Appendix 2, DETI Hansard

[172] Appendix 2, Invest NI Hansard

[173] Appendix 4, InterTradeIreland Written Submission

[174] Appendix 4, BMC Written Submission

[175] Appendix 4, Almac Ltd Written Submission

[176] Appendix 4, Belfast City Council Written Submission

[177] Appendix 4, NISP Written Submission

[178] Appendix 4, AFBI Written Submission

[179] Appendix 4, CBI Written Submission

[180] Appendix 4, MNI Written Submission

[181] Appendix 4, BMC Written Submission

[182] Appendix 4, NILGA Written Submission

[183] Appendix 4, Belfast City Council Written Submission

[184] Appendix 4, CBI Written Submission

[185] Appendix 4, UCD, Institute of Physics in Ireland Written Submission

[186] Appendix 4, Invest NI Written Submission

[187] Appendix 2, InterTradeIreland Hansard

[188] Appendix 4, QUB Written Submission

[189] Appendix 4, Belfast City Council Written Submission

[190] Appendix 4, AFBI Written Submission

[191] Appendix 4, Dr Chris Lundy Written Submission

[192] Appendix 4, Banbridge DC Written Submission

[193] Appendix 4, DARD Written Submission

[194] Appendix 4, Automated Intelligence Ltd Written Submission

[195] Appendix 4, SWRC Written Submission

[196] Appendix 4, Almac Ltd Written Submission

[197] Appendix 4, Belfast City Council Written Submission

[198] Appendix 4, AFBI Written Submission

[199] Appendix 3, Interview with Mrs Diane Dodds, MEP

[200] Appendix 2, Almac Ltd Hansard

[201] Appendix 2, ADS Hansard

[202] Appendix 2, ADS Hansard

[203] Appendix 2, UU Hansard

[204] Appendix 4, Belfast City Council Written Submission

[205] Appendix 4, UCD Institute of Physics in Ireland Written Submission

[206] Appendix 4, NISP Written Submission

[207] Appendix 4, Cirdan Imaging Ltd Written Submission

[208] Appendix 2, ADS Hansard

[209] Appendix 2, DETI Hansard

[210] Appendix 4, ADS Written Submission

[211] Appendix 4, MNI Written Submission

[212] Appendix 3, Interview with Mrs Diane Dodds, MEP

[213] Appendix 4, Cirdan Imaging Ltd Written Submission

[214] Appendix 4, Automated Intelligence Ltd Written Submission

[215] Appendix 4, Automated Intelligence Ltd Written Submission

[216] Appendix 4, Banbridge DC Written Submission

[217] Appendix 4, QUB Written Submission

[218] Appendix 4, Castlereagh BC Written Submission

[219] Appendix 4, Cirdan Imaging Ltd Written Submission

[220] Appendix 4, Almac Ltd Written Submission

[221] Appendix 4, ADS Written Submission

[222] Appendix 4, AFBI Written Submission

[223] Appendix 4, Almac Ltd Written Submission

[224] Appendix 4, BMC Written Submission

[225] Appendix 4, UCD Institute of Physics in Ireland Written Submission

[226] Appendix 2, Invest NI Hansard

[227] Appendix 4, DARD Written Submission

[228] Appendix 4, Belfast City Council Written Submission

[229] Appendix 4, NISP Written Submission

[230] Appendix 4, Dr Chris Lundy Written Submission

[231] Appendix 4, Almac Ltd Written Submission

[232] Appendix 2, Almac Ltd Hansard

[233] Appendix 4, NISP Written Submission

[234] Appendix 4, Almac Ltd Written Submission

[235] Appendix 4, Castlereagh BC Written Submission

[236] Appendix 3, Interview with Asidua Ltd

[237] Appendix 4, MNI Written Submission

[238] Appendix 2, ADS Hansard

[239] Appendix 2, CBI Hansard

[240] Appendix 2, DETI Hansard

[241] Appendix 2, InterTradeIreland Hansard

[242] Appendix 4, Dr Chris Lundy Written Submission

[243] Appendix 4, Automated Intelligence Ltd Written Submission

[244] Appendix 2, NISP Hansard

[245] Appendix 2, DETI Hansard

[246] Appendix 4, Cirdan Imaging Ltd Written Submission

[247] Appendix 4, QUB Written Submission

[248] Appendix 4, SWRC Written Submission

[249] Appendix 4, Craigavon BC Written Submission

[250] Appendix 4, Newry & Mourne DC Written Submission

[251] Appendix 4, Asidua Ltd Written Submission

[252] Appendix 4, BMC Written Submission

[253] Appendix 4, CBI Written Submission

[254] Appendix 4, AFBI Written Submission

[255] Appendix 4, ADS Written Submission

[256] Appendix 2, ADS Hansard

[257] Appendix 4, Belfast City Council Written Submission

[258] Appendix 2, Almac Ltd Hansard

[259] Appendix 4, ADS Written Submission

[260] Appendix 4, Automated Intelligence Ltd Written Submission

[261] Appendix 4, NRC Written Submission

[262] Appendix 4, Craigavon BC Written Submission

[263] Appendix 2, QUB Hansard

[264] Appendix 4, QUB Written Submission

[265] Appendix 4, Almac Ltd Written Submission

[266] Appendix 4, CBI Written Submission

[267] Appendix 4, CBI Written Submission

[268] Appendix 4, ADS Written Submission

[269] Appendix 4, QUB Written Submission

[270] Appendix 3, Interview with Cirdan Imaging Ltd

[271] Appendix 4, QUB Written Submission

[272] Appendix 4, NISP Written submission

[273] Appendix 2, DETI Hansard

[274] Appendix 4, DETI Written Submission No. 3

[275] Appendix 4, DETI Written Submission No.1

[276] Appendix 2, DETI Hansard

[277] Appendix 2, AFBI Hansard

[278] Appendix 4, Dr Chris Lundy Written Submission

[279] Appendix 4, Almac Ltd Written Submission

[280] Appendix 2, UU Hansard

[281] Appendix 2, AFBI Hansard

[282] Appendix 4, UCD, Institute of Physics in Ireland

[283] Appendix 4, EU Commission, Belfast Office Written Submission

[284] Appendix 4, QUB Written Submission

[285] Appendix 2, QUB Hansard

[286] Appendix 2, UU Hansard

[287] Appendix 2, DETI Hansard

[288] Appendix 2, Invest NI Hansard

[289] Appendix 3, Interview with Cirdan Imaging Ltd

[290] Appendix 4, InterTradeIreland Written Submission

[291] Appendix 4, Belfast City Council Written Submission

[292] Appendix 4, NILGA Written Submission

[293] Appendix 4, CBI Written Submission

[294] Appendix 4, EU Commission, Belfast Office Written Submission

[295] Appendix 4, Belfast City Council Written Submission

[296] Appendix 2, QUB Hansard

[297] Appendix 2, NISP Hansard

[298] Appendix 3, Interview with Diane Dodds, MEP

[299] Appendix 4, QUB Written Submission

[300] Appendix 4, CBI Written Submission

[301] Appendix 4, SWRC Written Submission

[302] Appendix 4, Newry & Mourne DC Written Submission

[303] Appendix 4, NILGA Written Submission

[304] Appendix 3, Interview with Cirdan Imaging Ltd

[305] Appendix 4, QUB Written Submission

[306] Appendix 4, Cirdan Imaging Ltd Written Submission

[307] Appendix 4, Castlereagh BC Written Submission

[308] Appendix 4, Cirdan Imaging Ltd Written Submission

[309] Appendix 4, ADS Written Submission

[310] Appendix 4, NISP Written Submission

[311] Appendix 4, QUB Written Submission

[312] Appendix 4, Invest NI Written Submission

[313] Appendix 4, InterTradeIreland Written Submission

[314] Appendix 4, BMC Written Submission

[315] Appendix 4, Banbridge DC Written Submission

[316] Appendix 3, Interview with Mr Jim Nicholson, MEP

[317] Appendix 2, DETI Hansard

[318] Appendix 2, Almac Ltd Hansard

[319] Appendix 2, Invest NI Hansard

[320] Appendix 2, NISP Hansard

[321] Appendix 2, BMC Hansard

[322] Appendix 3,

[323] Appendix 4, UCD, Institute of Physics in Ireland

[324] Appendix 4, NILGA Written Submission

[325] Appendix 4, Banbridge DC Written Submission

[326] Appendix 2, SERC Hansard

[327] Appendix 3, Interview with Mr Jim Nicholson, MEP

[328] Appendix 4, SWRC Written Submission

[329] Appendix 2, CBI Hansard

[330] Appendix 4, NILGA Written Submission

[331] Appendix 4, Invest NI Written Submission

[332] Appendix 4, Asidua Ltd Written Submission

[333] Appendix 3, Interview with Jim Nicholson, MEP

[334] Appendix 2, DETI Hansard

[335] Appendix 4, CBI Written Submission

[336] Appendix 2, CBI Hansard

[337] Appendix 3, Interview with Mr Jim Nicholson, MEP

[338] Appendix 4, QUB Written Submission

[339] Appendix 4, AFBI Written Submission

[340] Appendix 4, DARD Written Submission

[341] Appendix 2, UU Hansard

[342] Appendix 4, DARD Written Submission

[343] Appendix 2, Invest NI Hansard

[344] Appendix 2, DETI Hansard

[345] Appendix 3, Interview with Mr Maurice Maxwell, EU Commission Office Belfast

[346] Appendix 4, QUB Written Submission

[347] Appendix 4, AFBI Written Submission

[348] Appendix 2, AFBI Hansard

[349] Statistical Press Release, NI R&D 2010 Headline Results; DFP, 9th November 2011

[350] Rebalancing the Northern Ireland Economy; HM Treasury Consultation, March 2011

[351] Global Innovation Index – Accelerating Growth and Development; Dutta, S. (Editor); INSEAD, 2011

Appendix 1

Minutes of Proceedings Relating to the Report

Thursday, 20 October 2011
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Stephen Moutray
Mr Mike Nesbitt
Ms Sue Ramsey

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Sohui Yim (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Dr Alasdair McDonnell
Mr David McIlveen
Mr Robin Newton

10.42am The meeting began in public session.

7. Inquiry into Research and Development

Members discussed the draft terms of reference for the Inquiry and a briefing note from the Clerk.

Agreed: To consider the proposal again at next week's meeting and to agree dates for the inquiry.

[EXTRACT]

Thursday, 27 October 2011
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Stephen Moutray
Mr Robin Newton

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Sohui Yim (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Paul Frew
Mr Mike Nesbitt
Ms Sue Ramsey

10.05am The meeting began in public session.

5. Research and Development: Assembly Research

10.14am The Assembly Research Officer joined the meeting.

Members received an oral briefing from Assembly Research. Key issues discussed included EU Innovation Policy, Research and Development and Framework Programme 7 (FP7).

10.36am Stephen Moutray left the meeting.

10.40am The Assembly Research Officer left the meeting.

Agreed: Rapporteur to consider the appropriate Assembly committees and universities in GB and the RoI to invite to give written evidence to the Inquiry.

Agreed: To write to Invest NI and InterTradeIreland to ask them to provide information on appropriate businesses (those that have successfully availed of opportunities for R&D and innovation) to invite to give evidence to the Inquiry.

Agreed: To make any necessary amendments to the Inquiry Proposal, as and when it is appropriate.

Agreed: To forward the Assembly Research papers to the Department.

Agreed: To contact MEPs to ask their views on Horizon 2020.

Members noted a report from Assembly Research on the Role of a Rapporteur for Committee Inquiries.

[EXTRACT]

Thursday, 19 January 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Stephen Moutray
Mr Mike Nesbitt
Mr Robin Newton

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Sohui Yim (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Paul Frew
Dr Alasdair McDonnell
Ms Sue Ramsey

10.35am The meeting began in public session.

9. Inquiry into Research and Development

10.53am The meeting moved into closed session.

Members discussed the Inquiry in Research and Development.

Agreed: To ask the Department for details of the organisations which account for R&D activity in Northern Ireland and invite them to provide written evidence to the Inquiry.

Agreed: To contact the Sector Skills Council for Science, Engineering and Manufacturing Technologies SEMTA and ask them to provide evidence to the Inquiry.

Agreed: To contact the businesses already invited to provide evidence by telephone to encourage them to avail of the opportunity to provide written evidence to the Inquiry.

Agreed: To ask the Federation of Small Business and Enterprise NI to ask their members to provide evidence to the Inquiry.

Agreed: To request details of the companies referred to by the local Councils in their submissions and ask them to provide evidence.

Agreed: To contact South Eastern Regional College (SERC) and the University of Ulster to encourage them to give evidence to the Inquiry.

Agreed: To ask the following organisations to provide oral evidence to the Committee:

  • Aerospace Defence Security
  • Almac
  • Confederation of British Industry
  • South East Regional College
  • Belfast Metropolitan College
  • Queen's University Belfast
  • University of Ulster
  • Northern Ireland Science Park
  • InterTradeIreland
  • Invest NI
  • DETI

Agreed: To schedule the Department to provide separate oral briefings on 29 March for both the draft action plan for R&D, Innovation and Creativity and the Inquiry.

Agreed: To provide InterTradeIreland, Invest NI and DETI with details of emerging issues before they give evidence.

Agreed: Rapporteur to undertake interviews with the following organisations and to report back to the Committee:

  • Asidua Ltd
  • Cirdan Imaging Ltd
  • EU Commission in Belfast
  • Belfast City Council
  • Agri Food and Biosciences Institute (AFBI)
  • Centre for Competitiveness

Agreed: To schedule further evidence sessions when remaining organisations provide written evidence to the Inquiry.

[EXTRACT]

Thursday, 2 February 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Sohui Yim (Assistant Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Daithi McKay (Deputy Chairperson)
Mr Robin Newton
Mr Mike Nesbitt

10.35am The meeting began in public session.

6. Assembly Research: Inquiry into Research and Development

Members received a research briefing from Assembly Research regarding papers for the Committee's Inquiry into Research and Development.

12.14pm Paul Frew returned to the meeting.

12.20pm Steven Agnew left the meeting.

Agreed: Content for Assembly Research to include more information pertaining to a research and development case study from an aeronautical company Holland.

[EXTRACT]

Thursday, 16 February 2012
Almac Group, 20 Seagoe Industrial Estate, Craigavon

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Ms Paula Best (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Steven Agnew
Mr Paul Frew
Ms Jennifer McCann
Dr Alasdair McDonnell
Mr Robin Newton

10.45am The meeting began in public session.

5. Inquiry into Research and Development: Almac

10.46am Officials joined the meeting.

Members received an oral briefing from Colin Hayburn, Executive Director, Professor Richard Kennedy, VP Experimental Medicine and Professor Tim Harrison, VP Discovery Chemistry, Aine Rafferty, Alan Armstrong CEO, John Irvine, Executive Director, Almac

Key issues discussed included an overview of the structures and work of Almac, the impact of the current European R&D funding and the new Horizon 2020, the need for partnerships between business and academia and the role of government and the legislature.

12.17pm Officials left the meeting.

[EXTRACT]

Thursday, 23 February 2012
South Eastern Regional College,
81 Victoria Avenue, Newtownards

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Dr. Alasdair McDonnell
Mr. Robin Newton

10.36am The meeting began in public session.

6. Inquiry into Research and Development: Confederation of British Industry (CBI)

12.00pm Officials joined the meeting.

Members received an oral briefing from Kirsty McManus, Assistant Regional Director, CBI, Dr Paul Beaney, Technical Director, Cherry Pipes Ltd and Stephen Sloan, Project Manager, Momentum.

Key issues discussed included CBI's response to the Inquiry into Research and Development, the Administrative burden in the application process, collaboration and networking on R&D projects, the low numbers of Northern Ireland Evaluators for R&D project applications and SME involvement in R&D.

12.15pm Stephen Agnew left the meeting.

Agreed: CBI to provide an analysis of Framework Assessors and a national report on Medium sized businesses.

Agreed: for officials to answer any further questions in writing that the Committee may have regarding this issue.

Members noted a record of an interview with the Chair and Jim Nicholson MEP regarding the Inquiry into Research and Development.

Agreed: to receive oral evidence from the Agri-Food and Bioscience Institute (AFBI) for the Inquiry on 22 March.

[EXTRACT]

Thursday, 1 March 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Mr Paul Givan
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Leanne Johnston (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Daithí McKay (Deputy Chairperson)
Ms Jennifer McCann
Dr. Alasdair McDonnell

10.40am The meeting began in closed session.

1. Inquiry into Research and Development

Members discussed the emerging findings to date from the Inquiry.

10.45am The meeting moved into open session.

5. Inquiry into Research and Development: Belfast Metropolitan College

Agreed: Members agreed to forward a Committee paper on the emerging findings of the Inquiry to date to the Department for consideration, prior to DETI, Invest NI and InterTradeIreland giving oral evidence on the Inquiry.

Members noted a briefing paper from the Department on the working group on Framework 7 and Horizon 2020.

10.48am Officials joined the meeting.

Members received an oral briefing from Damian Duffy, Director, Business Generation and Learner Services and Justin Edwards, Assistant Chief Executive.

Key issues discussed included the benefits of Knowledge Transfer Programmes, applied research and collaboration between business and academia on innovation, research and development.

11.15am Stephen Moutray left the meeting.

11.21am Paul Givan left the meeting.

Agreed: officials to provide examples of success stories as a result of working with organisations in the Republic of Ireland.

8. Inquiry into Research and Development: Aerospace Defence Security

11.46am Officials joined the meeting.

Members received an oral briefing from David Raymond, Chairman of BASE Aerospace and ADS NI Deputy Chairman, Ronnie Harrison, Technical Director, Thales Belfast and Dr Leslie Orr, Manager, ADS Northern Ireland.

Key issues discussed included access to research and development and the need for market driven research and development to assist small and medium sized enterprises to avail of opportunities for research and development

[EXTRACT]

Thursday, 8 March 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Paula Best (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Steven Agnew
Dr. Alasdair McDonnell

10.35am The meeting began in public session.

5. Inquiry into Research and Development: Queens University Belfast

10.45am Officials joined the meeting.

Members received an oral briefing from Scott Rutherford, Director of Research and Enterprise and Professor Tony Gallagher, Pro-Vice Chancellor, Queens University Belfast.

Key issues discussed included infrastructure and expertise requirements for research & development, changes to procedures for Knowledge Transfer Programmes and promotion and support requirements from government for research and development.

11.10am Paul Givan joined the meeting.

11.20am Phil Flanagan left the meeting.

11.26am Officials left the meeting.

11.26am Stephen Moutray left the meeting.

6. Inquiry into Research and Development: University of Ulster

11.27am Officials joined the meeting.

Members received an oral briefing from Tim Brundle, Director of Innovation and Tony Bjourson, Director of the Bio-Medical Sciences Institute.

Key issues discussed included implementation requirements for research and development, bureaucracy at all levels in the process, government structures to support research and development and the need for more opportunities for venture capital.

11.46am Paul Frew left the meeting.

12.00pm Daithí McKay joined the meeting.

12.00pm Paul Givan left the meeting.

12.14pm Officials left the meeting.

Agreed: In the absence of Mr Robin Newton, the Chair will act as Inquiry Rapporteur.

[EXTRACT]

Thursday, 15 March 2012
Northern Ireland Science Park,
The Innovation Centre, Belfast

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Steven Agnew
Mr Paul Givan
Dr. Alasdair McDonnell

10.40am The meeting began in public session.

5. Inquiry into Research and Development: Northern Ireland Science Park

10.44am Officials joined the meeting.

Members received an oral briefing from Dr Norman Apsley, Chief Executive Officer, NISP, Alan Watts, Director, Halo Business Angel Network and Frank Hewitt, Chairman, NISP.

Key issues discussed included the NISP Connect and Business Angel projects, opportunities for venture capital and relationships between NI and RoI and EU funding.

10.55am Gordon Dunne joined the meeting.

11.24am Stephen Moutray joined the meeting.

11.57am Paul Frew left the meeting.

12.07pm Officials left the meeting.

[EXTRACT]

Thursday, 22 March 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Steven Agnew
Mr Phil Flanagan
Mr Paul Givan

10.11am The meeting began in public session.

2. Inquiry into Research and Development: Agri-Food and Biosciences Institute

10.12am Officials joined the meeting.

Members received an oral briefing from Professor Seamus Kennedy, Chief Executive Officer, Dr Mike Camlin, Deputy Chief Executive Officer, Professor John Davis, Director of Economics and Joel Ferguson, Acting Head of Corporate Services, AFBI.

Key issues discussed included the role and work of AFBI, current structures for supporting research and development and centres of competence for research and development..

10.34am Daithí McKay joined the meeting.

10.39am Paul Frew joined the meeting.

10.50am Gordon Dunne joined the meeting.

11.02am Stephen Moutray left the meeting.

11.21am Officials left the meeting.

3. Inquiry into Research and Development: DETI

11.26am Officials joined the meeting.

Members received an oral briefing from Graeme Hutchinson, Head of Policy Division, Ciaran McGarrity, Principal, Innovation Policy Unit and Bernard McKeown, Principal, Foresight and Horizon Scanning Unit, DETI.

Key issues discussed included structural and cultural systemic problems relating to research and development, how larger organisations can support SMEs and the need for government to be less risk averse.

Members noted the lateness of papers from the Department and expressed concern at how this was occurring more frequently.

Agreed: for Officials to report this back to the Department and for Committee staff to monitor the situation.

Paul Frew declared an interest as a former member of the Public Accounts Committee.

12.10pm Paul Frew left the meeting.

Agreed: to provide results of mapping exercises on Research and Development undertaken by the Department.

12.37pm Officials left the meeting.

[EXTRACT]

Thursday, 29 March 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Phil Flanagan
Mr Daithí McKay (Deputy Chairperson)
Mr Stephen Moutray

10.34am The meeting began in closed session.

6. Inquiry into Research and Development: Invest NI

10.50am Officials joined the meeting.

Members received an oral briefing from Carol Keery, Director, Innovation, Research and Technology and Dr Joanne Coyle, Collaborative R&D Support Service, Invest NI.

Key issues discussed included the role of Invest NI and its comprehensive support to businesses including promoting and enhancing R&D, mobilising SME and firms to collaborate in R&D and the role of Innovation Advisers.

11.20am Paul Givan joined the meeting.

11.43am Paul Frew left the meeting.

11.43am Paul Givan left the meeting.

11.45am Sandra Overend left the meeting.

Agreed: for officials to respond in writing to any further questions the Committee may have.

11.52am Officials left the meeting.

7. Inquiry into Research and Development: InterTradeIreland

11.54am Officials joined the meeting.

Members received an oral briefing from Liam Nellis, Chief Executive, Aidan Gough, Strategy Policy Director, Dr Bernie MaGahon, Science, Technology & Innovation Manager and Dr Simon Grattan, EU Programme Co-ordinator, InterTradeIreland.

Key issues discussed included the role of InterTradeIreland in connecting businesses North and South for collaborative work, setting targets for Horizon 2020 and the innovation challenge programme.

12.07pm Paul Frew returned to the meeting.

12.15pm Sandra Overend returned to the meeting.

12.27pm Paul Frew left the meeting.

Agreed: for officials to respond in writing to any further questions the Committee may have.

12.39pm Officials left the meeting.

Agreed: to forward the additional questions on the Inquiry to the Department for a response by 18th April.

[EXTRACT]

Thursday, 19 April 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Phil Flanagan
Ms Sandra Overend

11.36am The meeting moved into closed session.

14. Closed Session: Inquiry into Research & Development

Members discussed a draft report of the Inquiry into Research & Development.

Agreed: For the Chair and Deputy Chair to meet with MATRIX representatives

Agreed: For the Chair and Deputy Chair to meet with Mr Iain Gray, Chief Executive of the Technology Strategy Board.

[EXTRACT]

Thursday, 3 May 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Phil Flanagan
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Mr Patsy McGlone
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Gordon Dunne
Mr Stephen Moutray

10.40am The meeting began in closed session.

1. Closed Session: Inquiry into Research & Development

Members considered the draft Inquiry report and noted a record of the informal meetings held by the Inquiry Rapporteur.

Agreed: to provide any comments on the draft report to the Clerk or to the Chairperson.

Agreed: to consider the final report at the meeting of 31 May.

Agreed: to schedule the debate in plenary during the week commencing 11 June.

10.53am Paul Frew joined the meeting.

[Extract]

Thursday, 17 May 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Ms Jennifer McCann
Mr Patsy McGlone
Mr Stephen Moutray
Ms Sandra Overend

In Attendance: Ms Cathie White (Assembly Clerk)
Ms Kate McCullough (Assistant Assembly Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr Paul Frew
Mr Paul Givan

10.09am The meeting began in closed session.

1. Closed Session: Inquiry into Research & Development

Members considered the draft Inquiry report

Agreed: to include a reference in the inquiry report to the Memorandum of Understanding (MoU) between Newry and Mourne District Council and Castlereagh Borough Council's Evolution Project.

Agreed: to table the draft motion for plenary debate on 11 June in the Business Office.

10.14am Daithí McKay joined the meeting.

10.15am The meeting moved into open session.

[EXTRACT]

Thursday, 24 May 2012
Room 30, Parliament Buildings

Present: Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Ms Jennifer McCann
Mr Patsy McGlone
Mr Stephen Moutray
Mr Robin Newton
Ms Sandra Overend

In Attendance: Mr Jim McManus (Assembly Clerk)
Ms Kate McCullough (Assistant Clerk)
Mr David McKee (Clerical Supervisor)
Ms Michelle McDowell (Clerical Officer)

Apologies: Mr. Paul Frew

10.05am The meeting began in closed session.

1. Inquiry into Research & Development

Members considered the draft Inquiry report

Agreed: to arrange a press pre-briefing for the morning of Monday 11 June prior to the debate on the Inquiry to invite press representatives and key stakeholders.

10.07am Sandra Overend joined the meeting.

2. Apologies

Apologies are detailed above.

3. Research and Development Inquiry: Final Report

Members considered the final report of the Research and Development Inquiry

Agreed: That the list of Abbreviations and Table of Contents stands part of the report

Agreed: That the Executive Summary at paragraphs 1–33 stands part of the report

10.15 am Jennifer McCann joined the meeting.

Agreed: That that the Summary of Recommendations at paragraphs 1-15 stands part of the report

Agreed: That the Introduction at paragraphs 16-27 stands part of the report

Agreed: That the Key Issues and Findings at paragraphs 28-214 stands part of the report

Agreed: That the Conclusions and Recommendations at paragraphs 215-252 stands part of the report.

Agreed: That the extract of the Minutes of Proceedings at Appendix 1 stands part of the report

Agreed: That the Minutes of Evidence (Hansards) at Appendix 2 stands part of the report

Agreed: That the Rapporteurs Meetings at Appendix 3 stands part of the report

Agreed: That the Written Submissions at Appendix 4 stands part of the report

Agreed: That the Assembly Research Papers at Appendix 5 stands part of the report

Agreed: For the Chairperson to approve an extract from today's minutes which reflect the read-through of the Report. These are needed for inclusion at Appendix 1, minutes of proceedings.

Agreed: The appendices 2 to 5 of the report will be included in the CD ROM in the public version of the report.

Agreed: To order 50 reports with a CD ROM and 15 full reports for printing.

Agreed: To write to the following Committees - Agriculture and Rural Development, Employment and Learning, Finance and Personnel and the First and Deputy First Minister - to inform them that some of the recommendations in the report concern their departments.

[EXTRACT]

Appendix 2

Minutes of Evidence

16 February 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Stephen Moutray
Mrs Sandra Overend

Witnesses:

Mr Alan Armstrong
Professor Tim Harrison
Mr Colin Hayburn
Mr John Irvine
Professor Richard Kennedy
Miss Aine Rafferty

 

Almac Group

1. The Chairperson: I remind colleagues that the purpose of the research and development inquiry is to identity barriers to innovation, research and development and to make recommendations on how those barriers can be overcome. Briefing the Committee today are Mr Colin Hayburn, executive director of Almac Group; Professor Richard Kennedy, vice-president of experimental medicine; Professor Tim Harrison, vice-president of discovery chemistry, and Miss Aine Rafferty. We are very grateful to you for allowing us to visit your headquarters to get a sense of what you do as a business and for your input into the entire area of research and development, which we see as crucial to transforming business in Northern Ireland. We believe that you are a good example of how we can build business and create high-value jobs that will bridge the productivity gap between here and Britain. It is very important to create a step change in our economy. One way to do that is through the development of research and the creation of innovative business here in Northern Ireland. We are absolutely delighted to be here. We look forward to your comments.

2. Mr Colin Hayburn (Almac Group): Thank you, Alban. The Committee is very welcome at Almac. It is great to see you all here. We have a brief presentation. We hope that it gives you a flavour of what we are trying to do. I know that a paper was submitted to the Committee. Our presentation will try to cover in a more specific and detailed manner some of the points in that paper. We are very informal bunch so please interrupt me or speak up. We will try to answer any questions as we go through the presentation. I will make some brief introductory comments. Then, these very clever professors will explain the complicated stuff. Some of this stuff is top secret. [Laughter.]

3. We were not quite sure whether any of you knew much about Almac. Our global headquarters are here in Craigavon. Principally, we operate a range of services to the pharmaceutical industry. That starts off with biomarker identification. A biomarker might be something in your blood or a solid tumour, which might indicate a particular prevalence, or response to therapy, or recurrence of disease. We take that right through to making an active pharmaceutical ingredient (API), which is the main subject matter of a drug. We make those for third parties. The pharmaceutical company would ask us to try to formulate it into a tablet or some sort of medicine. It is highly complex work. We package that medicine and prepare it to go into a clinical trial. Nowadays, if you want a drug to be approved, it involves a heavily regulated clinical process. It is a global process. You have to show that the drug works, is efficacious and is commercially relevant. Our clinical trials operations are involved in doing that. That is very much done on a global basis.

4. At present, we are in our 32-acre Craigavon campus. There are six main trading divisions, which cover the main services to the pharmaceutical industry, right through from biomarker identification, API manufacture, formulation and development, and the management of clinical trials. Our R&D arm is slightly different to that. It is trying to develop technology that will allow us to stand alone and trade with the pharmaceutical industry, rather than as a service provider partner. My colleagues will give a bit more detail on that.

5. We have also recently launched a new North American headquarters in Souderton, Pennsylvania. Slightly under 50% of our global revenue comes from America. If you want to be a player and a main entity in the pharmaceutical industry, it is essential that you have a presence in America. We opened that very impressive facility in 2011. It is a 40-acre site in Pennsylvania, which we hope will eventually replicate most of the services that we carry out here. It will not take any jobs away from here. It will make us a global player. If we are not a global player, we cannot compete.

6. In the past five years, we have had very strong growth in revenue and employment. We are very proud of our group turnover figures, which, in this day and age and competitive environment, are very impressive. It took a lot of money and investment to achieve those figures. It involved a lot of effort and challenge. We are in a global economy. In the past few years, low-cost and developing economies, such as India, China and the Far East have really challenged us on cost. Therefore, we have to be more innovative. We have to be very smart. We have to be smart from a governmental perspective too, because the companies that we compete against have no regulatory barriers. We have regulatory barriers here, which have to be complied with. Therefore, although we face strong competition, we have had strong growth nonetheless. It takes a lot of effort to keep it up.

7. Our employment numbers are around 2,000 people on site here in Craigavon and around 1,000 people in North America. In the past few months, we carried out a bit of research. We found that 80% of the people who are based in Craigavon are from Northern Ireland. The other 20% per cent are from overseas. The guys might share with you that, in order to get high-quality research and development staff, we have to have a global reach. There is a high cost to that. I am not sure what our recruitment costs are in a year to find a high-class scientist. However, to find quality candidates costs hundreds of thousands of pounds. These two boys do not come cheap. You are lucky to get them today for half an hour. [Laughter.]

8. I will now hand over to Tim and Richard. As I said, I hope that in the paper we submitted we addressed, in a practical and specific manner, some of the main points. Please feel free to engage with Tim and Richard as they go through the presentation and to talk through any points that you might want to raise.

9. Professor Tim Harrison (Almac Group): Thank you Colin, and thank you for the invitation to speak to you today. As Colin said, we work in a quite complex and high-tech industry. It is a high-risk and high-reward industry. However, it is also hugely worthwhile, because, ultimately, we are trying to produce drugs to improve people's quality of life. We are conscious that not everyone will be familiar with the details. Therefore, as Colin said, we will try to give to give you a context of the actual types of research that we do and identify some of the issues. We will also provide some real case studies and summary points that will hopefully lead to further discussion.

10. As I said, drug discovery and development is a complex and long-term process. To give you a quick overview of that process, it starts with discovery and then moves to a pre-clinical stage in which we work with animals, before moving to people. The first medical studies will be at the phase 1 level with healthy human volunteers. We then move to the first patient studies in phase 2, with expanded patient studies in phase 3. If we are very fortunate, drugs will be approved at the end of that process. Almac does not do the whole process, but you can see from the slide that 12 to 14 years would not be uncommon. On the latest estimates, the whole process costs around $1 billion.

11. I will now talk about one of the R&D divisions of Almac — Almac Discovery — which looks to develop new drugs. Richard will then tell you about our other main research division, Almac Diagnostics. In Almac Discovery, we look to develop new projects at the very beginning of the process. We look to identify new targets, and a current focus is on cancer. We bring those projects in, add value to them in a number of ways and license them out to bigger players who can afford to take them through the later stages of development. That is the business model: we get new projects, add value to them, and out-license them. We do deals to bring revenue into the company. Typically, there will be an upfront payment, milestones to success and, ultimately, royalties on sales. I will give you an example of what those numbers could look like later in the presentation.

12. The key point that I want to make is that we are selling oncology drug discovery programmes — not completed products. That is slightly different to some of the engineering-type R&D that you may be familiar with. Drug discovery requires a long-term investment, but the rewards can be very high when you get it right. Therefore, as we move further on in the process — if we can get to that point — revenues are really significant. Again, I will give you an example of that later.

13. Almac Discovery was a new venture for the Almac group. It is a drug discovery company. It is not a service company and we do not do research for anyone else. As I have described, it has a biotech-type business model. We got initial funding from Invest Northern Ireland (INI) and the McClay Trust to secure the company and established it in January 2008. Since then, we have created 31 new jobs at the Craigavon site. We took great care in recruiting an experienced management team from all over the world, and, as Colin alluded to, that was not the easiest thing to do. Getting those guys to move to Northern Ireland was not easy, but we waited and got the right team, and it is now in place. We also importantly established a strong network of technical and commercial outsourced contacts. We are very well linked into not only the UK and Europe but to America and the rest of the world.

14. As I will show you in a minute, we have established a number of innovative drug discovery programmes in the area of cancer with a potentially high value, and I will give you an indication of what those values could be. Our vision — it is grand, but I hope it is achievable — is to build a sustainable drug discovery R&D company in Northern Ireland. If can we achieve that, it could have real game-changing consequences for the economy.

15. The next slide shows our current portfolio. I will not dwell on it, but it shows the different phases of clinical development, beginning with the early pre-clinical and phase 1 stages. You will see that we have a product that has been through phase 1 and we partnered on that with a company for further development. The slide also shows our other two lead products. I will talk about one of those in a moment as a case study, and we hope that to be in the clinic this year. The other lead product is just behind that in the production process, and we also have a range of early-stage programmes. We also have another collaboration with a university in Sweden on column therapy, which is also in the clinic. Those projects represent possible partnering points according to the scenario that I showed you: we take it to a certain point and then partner it. Hopefully, you will see that we are not too far away from achieving potential value inflection points with some of those products.

16. I will show you an example of one of our programmes, which is the second one that will hopefully go into clinic. This is clinical cancer research. I picked this one because there was a bit of press around it last year. You may have seen some of that. A press release went out on the back of a paper published in the American Association for Cancer Research journal. The work was also presented at the American Association for Cancer Research meeting in the States in April. We have other publications to follow up, and this really made a splash last year. It was featured on local and national television and in the national press.

17. What was so interesting? It was a drug candidate to treat cancer: a so-called anti-angiogenic. Very briefly, if a tumour is going to develop, it needs blood vessels and nutrients to grow. Simplistically, if you can cut off that supply of nutrients, you can starve a tumour. I will show you some real data that we have to show that. The market leader in the anti-angiogenic area is a drug called Avastin, which you may have heard of. In 2010, the sales were worth around $7 billion; that figure represents one year's sales. Here is the first indication that, when you get it right, the kind of revenue you can bring in.

18. This drug was discovered at Queen's University and was licensed to Almac Discovery. It was a big protein, and we cut it down and found the active bit. It works through a different mechanism to Avastin. People get resistant to Avastin quite quickly, so we hope that this will be a differentiator. The sort of deal we did with Queen's included financing research staff there. The drug stops tumour growth in a range of pre-clinical models, and we plan to start clinical trials this year. As I said, if we can show good clinical data, we think there is the potential for a pretty big partnering deal after that.

19. I will show you this data slide, because I believe a picture is worth 1,000 words. This is a mouse model implanted with a tumor. These animals are dosed with vehicle and the tumour grows; you can see the size. This is two dosing schedules for our drug, either daily or three times a week, and you can see that not only does the tumour stop growing, but you start to see some regression. This is a simple animal model, and the hope now is that, when you take this drug into humans, you will see the same effect. We believe that this has application across a range of solid tumours because of the mechanism, so it is really quite an exciting drug.

20. What may something like this be worth? I am not going to walk you through the details. We got an independent company to build us a model for this and the projected revenue is shown on the slide. Peak sales are around $2·4 billion. The sort of deal that we might do on something like this would be worth, upfront, around $15 million, milestones with a total of $115 million, and then the 12% royalty on that would be something like as shown, so, it would be $300 million a year. Clearly, there is a long way to go with that drug; it has to go through those stages. However, if we are successful, this is the sort of revenue that can start to feed back into Northern Ireland on a long-term basis.

21. Mr Hayburn: Current INI funding will cover you for those three years, but just those three years. We are not making money until the time that I am pointing out. I will summarise this while that slide is up; there is a complete gap in funding from 2013 to 2020. We will touch on that later, but it is a very significant point. R&D funding is only a small part of our overall needs.

22. Professor Harrison: The other important point is that, the further you go along this axis before partnering, the bigger the deal will look.

23. Of course, there are potential risks. This is a risky business. This drug could show toxicity in the clinic; we may take it into humans and discover that it does not show efficacy, although it is showing efficacy in pre-clinical models; and we may not be able to find a commercial partner at this stage. If we are forced, because of funding to partner this early, we may not be able to find a partner. There are significant risks, but there is clearly also significant reward.

24. That is really just a flavour of Almac Discovery. Hopefully, it sets the context for the discussion at the end. We have summarised some matters and there are a few real case examples of some of the issues with R&D. I am going to hand over to Richard now to talk about Almac Diagnostics, which is the other major R&D division within Almac.

25. The Chairperson: Thank you very much.

26. Professor Richard Kennedy (Almac Group): Thank you for the opportunity to give evidence on our research today. I have a few comments especially on this first slide. I sit across a number of camps. I sit on a research group at Queen's University that I will talk about a little bit later; I am the vice president and medical director of Almac Diagnostics; and I also practice as a medical oncology consultant in Belfast City Hospital. There is rationale for doing all three, because it covers what is required to get something moved from basic science into the clinic. That is why I sit on that interface.

27. Almac Diagnostics, briefly, is a personalised medicine company. What we are trying to do is to develop tests in order to tell us the best treatment to deliver to patients. With increasing costs of drugs and therapies, we need to be able to target treatment better so that the right patients are benefiting. Unfortunately, at the moment, when I give chemotherapy in the clinic, probably only about 20% to 30% of people benefit from it; the rest are just getting the toxic effects, so we can do a lot better.

28. As part of the Almac Group, diagnostics has its own lab, which has all the quality systems to be able to deliver diagnostic tests internationally. It is one of the very few labs in Europe that can deliver tests to the US. The slide shows the research pipeline that I am responsible for. It is broken into two main groups: predictive and prognostic tests. Predictive tests predict the response to specific therapies, and prognostic tests predict the outcome for a patient following standard treatment such as surgery, so there is a slight difference between the two. I will not go into too much detail on that today, but they are two different programmes.

29. Today, I will focus on the test for stage II colon cancer. There has been quite a lot about this in the press and the media recently, so you may have heard a bit about it already. The issue is that, in patients who present with stage II colon cancer, the disease is confined to the bowel, which is a good thing. However, in that group of patients, about 20% will develop recurrence within five years, and that will, ultimately, lead to their death. We know that, if we offer chemotherapy to those patients, we can prevent recurrence of the disease. The problem is that we do not know who those 20% are. The options, then, are to treat everybody with chemotherapy, accepting that 80% of them will not benefit; or not to treat anybody, accepting that 20% will die from colon cancer. That is not a good situation to be in. Therefore, we have developed a test to try to sort that situation out.

30. Using technology developed by Almac, we have developed a test that can analyse the tissue from patients with colon cancer and predict the risk of recurrence within five years to help clinicians to make decisions on treatment. This was not straightforward. To do it, we had to collect a lot of tumour samples from a lot of different centres. There were about 16 or 17 centres involved. To give you an idea of the stretch that we had to make to get the samples, the slide shows the number of centres all over the world. The reason for doing that is that we did not want to develop a test just for Northern Ireland; we wanted to develop a test that would work throughout the world. To do that, we needed to collect patient material from throughout the world. A lot of work was needed to achieve that, but it was worthwhile.

31. The end result was that we developed a test that quite nicely separates patients between those who develop recurrence, and those who do not. The slide shows survival over time. It shows people who are predicted to have the worst outcomes, and you can see that they do badly.

32. This study was published by the American Society of Clinical Oncology. Its 'Journal of Clinical Oncology' is one of the premier journals on cancer medicine in the world. Our work got a splash in the journal, as well as an editorial. That was good advertising for Almac's capabilities.

33. The test has been licensed for a validation study in the US with a diagnostics company, and deal terms have been reached that I will talk about in a moment. The slide is just to give you an idea that developing one of these tests is not an entirely straightforward process. We started the process at the start of 2007. We are now in 2012, and we still probably have a year to go with the validation studies. It is a long process, which goes back to Colin's point: our funding covered about two years of it.

34. Mr Hayburn: We do not start making money at this point. The commercial return kicks in only five years from that point. The current structures in INI for funding, and even framework programme 7 (FP7), are a more traditional model. They do not suit this type of world-class research. The guys are maybe underselling themselves: there are countries around the world that are trying to do this, and we have been first in some cases. Those bigger companies have bigger support structures — they are massive billion-dollar companies. We do not have that. We have to work within tighter confines. The funding for two or three years really is vital for us.

35. Professor R Kennedy: I will not go through this in great detail. The slide shows a simplification of the process. The next slide shows the current deal terms and the projected returns on the test. That is just for the US markets — there is potential to take it into European markets as well. At 2016-17, you are looking at about $20 million coming back. That is the bottom line at that stage, coming back to Northern Ireland. That is an overview of the diagnostics.

36. While you are here, I thought that it was worth touching on the topic of this next slide. I think that it may be a good model for the way forward for some more basic research as well. Some of you may be aware of this, but Almac and Queen's University are collaborating on an initiative to try to improve research from the lab through to the clinic. That it funded by the McClay Foundation and Invest Northern Ireland. The idea is to facilitate the transition of innovation from academia to industry. Typically, what happens is that the academic will work up to a point, publish the data and that is it finished. Nobody is picking that up and taking it into the clinic, and there are numerous reasons for that. It may be that the research is not compatible with product development: it may have been done with the wrong technologies and in the wrong way; or it may be that industry and academia are just not talking properly.

37. To try to reduce those roadblocks, we are reflecting Allen McClay's vision, which is to streamline it. We are a small country. We have two universities, and one nearby that does this kind of work. Its work is highly compatible with the research that we are trying to bring into the market, so we are trying to streamline that process.

38. The other point is that it works both ways. Academia can educate the people in Almac research as well, to ensure that they do not end up in a bubble where they get disconnected from what is going on at the cutting edge of science, and they can share technologies. It is more than Almac. We are hoping to generate the next generation of entrepreneurs in Queen's University. Those are people who now have an idea of what industry is about and how to get products into the market. Hopefully, they will develop their own companies and have their own ideas. We are trying to encourage that way of thinking.

39. We are also building sustainable relationships. Those people will train up through the university, and they may go to other countries and become the CEOs of major pharmaceutical companies, for all we know. However, they know about Almac, our capabilities and what we can do, and, hopefully, that will create a sustainable business model.

40. Within the programme, we are developing a test for predicting the risk of dying from prostate cancer, which has been very successful. Queen's University has had a large input, and it looks like we will develop a test of worth. We are developing new drugs and lead compounds that fit into Tim Harrison's programme. We have a medicinal chemistry programme in Queen's University that is linked into this, which is helping to develop drugs. Hopefully, Almac will be able to pick up on the product-development pipeline and market. We are also developing new technologies for biomarkers and drug discovery in Queen's University.

41. That is what I wanted to cover today. I have partly addressed the questions that were originally put to us in the context of what was presented. Some of the discussion points may need to be addressed. Colin said that we are presenting pipelines, which can run seven or eight years. Typically, our funding is for two or three years. We are left with a deficit to try to fund — to try to get products to market. That is holding things back. Some of our programmes are very good but we cannot take them forward as we do not have the finance.

42. As regards the framework, when an application is put in, it can be two years before you get any funding. By that time, everything has moved on in basic research. What you put in is no longer relevant. That is an issue for us. The end part of the pipelines is the clinical trials in patients. Nobody is going to invest in a product that does not work when it goes into the patient. That is the most expensive part of research, and there is no funding mechanism for it at present.

43. When we launch into one of these research projects, we are often asked about the guarantee of financial return, and that frustrates us a little. You cannot give a guarantee; it is research. We do our best to try to de-risk it as best we can, but there has to be an acceptance that some of the programmes will fail. We are always asked how many jobs it will create. Some may create jobs if we bring in a technology where we are developing a biomarker. Some will be more around revenue creation, which comes back in.

44. We find the EU funding element very complex and time consuming. We do not get much support. To give you an idea, we looked at putting in a framework programme 7, and it was going to take a full-time equivalent six months just to do the paperwork. That is fine if you have a fairly good guarantee that you will get funded, but it is actually a fairly low guarantee.

45. The other issue is that those are, typically, academia or small to medium-sized enterprise led. We get only a proportion of the funding for the work that we do. Therefore, it has to be very much in line with our research programme. That puts us in a situation where you are putting an academic group in the lead of one of your lead programme in your commercial enterprise. There is a lot of risk attached to that, and we have had experiences where the academic group will just head off in a different direction. Sometimes, it is quite difficult to control.

46. Mr Hayburn: Richard, you might mention the oncology aspect of the calling of FP7.

47. Professor R Kennedy: It is worth mentioning that the current framework programme 7 does not have a relevant oncology calling for us. We cannot apply at the moment, and none of our programmes apply to the current framework programme 7.

48. Mr Hayburn: The new one, as you mentioned this morning, Alban, can apply. If we were looking for specific topics for action, one would be support from INI locally to help us to create an infrastructure internally with Almac, including staffing and resource. We have spoken to INI and its FP7 contact in Brussels. That is all very good, but there is no support there for that. It would take a heavy investment from Almac to even avail ourselves of that, and it would be time consuming. Europe-wide, it is highly competitive to try to get the funding.

49. Professor Harrison: If you think that you have made a new discovery, time is everything. If you want to avail yourself of European funding, you have to ask, first, if there is a relevant European call that you can put into — often there is not — and then, even if there is, you wait a couple of years and you have lost the edge. There needs to be something more relevant that can be applied more quickly.

50. The Chairperson: At the moment, oncology is not part of framework 7.

51. Professor Harrison: Not for this year's call. There are very minor, specific things, but it was excluded from this year's call.

52. Professor R Kennedy: We also feel that there is an important element in education. As Colin has already alluded to, we need a particular type of training for that kind of work. It is important that that is being supported and that we are getting the right people coming through the universities. Tim, you have been involved in a committee on that, so maybe you want to comment on it.

53. Professor Harrison: It is really about developing the skills. I was involved in the original science, technology, engineering and mathematics (STEM) review and now I am involved in the STEM implementation group with Joanne Stuart. I chaired a workshop yesterday that was organised by the Department for Employment and Learning (DEL), which was great. It had all of the stakeholders from colleges, sector skills councils and the Department. It was fantastic. There is a fair amount of work in doing that, but business is committed to doing it. There are certain recommendations from the STEM review that actually require a limited amount of funding to really make a difference on things like scholarships, but now there is no funding at all. It is about working with Governments to try to make sure that, when we go through those processes, we actually do deliver something at the end of them. It took a long time for the STEM report to be published, and obviously the economy has moved on. We understand that, but, if it is important — I think everyone from Northern Ireland believes that the STEM subjects are important; they are right up there in the Programme for Government — we have to make sure that we work with the Government and that we can follow through on some of our commitments, otherwise it is going to be difficult to keep engaging with business. Business is very committed. It was a brilliant workshop. There was a real buzz around the place yesterday.

54. Professor R Kennedy: Point 2 demonstrates that those programmes are long-term things. They are not simple two-year or three-year projects, so it requires more of a long-term outlook. As the Assembly changes, those things are continuing, and I know that the views may change each time. It is about having some kind of continuity on it. Thank you for your attention.

55. The Chairperson: Thank you very much, Professor Kennedy. We will leave that slide up, because it is very helpful in focusing the discussion. I am going to start off the questions. Prior to the meeting, we structured a number of questions simply to try to focus on the issues that we are looking at in the inquiry. It might not flow directly from what you have just said, but, for the sake of our inquiry, we want to pursue that structure. Of course, you can bring anything in that you want, if you think it will be an appropriate response.

56. I was very interested in the interface between academic research, and business research and development. In your original submission you stated that there was a tension between the two: that academic research was not always directed towards business, and, indeed, that some of it was not contributing towards business development. I think that is, in essence, what you were saying. In that written submission you drew out that particular tension. Would you like to comment on that? How can we get academic research, business research and business application? How can we co-ordinate that so that we can maximise research?

57. Mr Hayburn: The QUB/Almac initiative is maybe the first step.

58. The Chairperson: That is very interesting. If you want to enlarge on that, that would be helpful.

59. Mr Hayburn: Richard has been put in the unique position of bridging industry and academia. That had to be very much an industry-led initiative. Sometimes, when you go into university settings, they are very political. There are various disciplines, and we need a crossover of various departments. We had to go into Queen's and put forward a very firm proposal that was industry led, with clear deliverables. That did cross over some departments, but it had to be industry led. We approached Queen's and talked for about 12 months to facilitate the structure that we wanted; not necessarily the structure that Queen's wanted. That was led by Tim and Richard, who are both experienced in working with academics, but who also know that there have to be deliverables from an industry perspective. From a strategic perspective, it took a bit of work to do that.

60. Richard, you may want to talk specifically about how that operates.

61. Professor R Kennedy: That is an important point. I can talk about the academic side. Most of my career has actually been in academia, so I can comment on that.

62. The first thing to say is that, in our current academic set-up, investigators are rated on what is called research excellence framework (REF) return. They are rated on their publication record. That is not unique to Queen's University; that is within the UK. Universities do not rate the commercialisation of research. It is a nice thing to have, but it is not one of the things that researchers are rated on. So, you get what you pay for, effectively, or you get what you expect. Interestingly, even within the programme, the pressure from the university was still to have so many high impact publications within a certain time. That is its interest.

63. The Chairperson: And that gives the university international standing and status.

64. Professor R Kennedy: Absolutely. It is an academic institution, so it needs academic standing. The commercialisation of that research takes somewhat of a secondary position to that. We have tried to show that you can do both. My argument is that, if you do proper research with a proper commercial end point, it will get into the clinic and will, therefore, benefit patients, but also, it should be the research that gets into the good publications. Therefore, you can marry the two, but it takes a little bit more creativity. In my experience, the university understands that now. A good example is maybe the paper I showed on the stage II colon cancer project. That has a clear deliverable for patients, a clear benefit and a clear product, and is probably one of the highest impact papers that has come out of the Department at Queen's in the past four or five years.

65. Mr Hayburn: There is a link there. That paper could be used as a marketing tool to commercialise the test. If a paper in an internationally renowned journal is picked up by the pharmaceutical companies, they would then contact us to speak to them about the test. That is an important linkage. However, not everybody can deal with those academic groups. We have had to invest in people like Richard and Tim, who can go in and — it is fair to say — speak the right language with the academic groups to achieve acceptance. We find that if too hard-nosed a commercial approach is taken with academic groups, they retreat into almost an ivory tower of academia.

66. Professor Harrison: It does not automatically mean more work for the academics. As Richard said, if experiments are done in a certain way, they do not have to be repeated, so it could actually mean less work. It is about working together with them to show them that that is the way forward and can accelerate commercialisation. You still get all the benefits for the academic group, but are now in position whereby, at point x, you can commercialise straight away.

67. One way in which we have done that, which is probably different to most programmes, is through Richard, who is seconded down there as team leader with a couple of his people. I am taking one of my key team leaders out of my drug discovery group for two years and seconding them to Queen's University. We are in the process of hiring three postdoctoral fellows to work under him. He will be in the academic lab bringing all his industrial experience. We have bought equipment that is industry standard and fit for purpose. Those postdocs are going to get fantastic training; everybody in that lab is going to get fantastic training. We think that we can start to expand that. People see, for example, that we probably produce purified compounds more efficiently because we have good automation. Once people in academia see that, they will say that they want to be part of that.

68. You have to be in there; you have to work together with the academics.

69. The Chairperson: Would that have happened if you did not have the McClay Foundation? This is an innovation in the way that universities do things.

70. Mr Hayburn: It is. However, it is the way that industry does things, and it represents an investment on our part. The people who the chaps talked about will not bring in any money for us for two or three years, but they occupy costly oppositions. It is a long-term investment on our part, and there is risk involved in that investment. As the guys have said, this is biological research. There are no gimmes with it and it could go wrong quickly.

71. We need funding support. The McClay Foundation has been set up to do things like that, and that is good. However, government should also be involved. Incidentally, INI has supported that venture and the Almac Group has also invested heavily, with almost £1 million. That is sunk money and a long-term investment. Those are early phase projects. We hope to get certain candidates for prostate cancer into Almac Discovery, and we will then enter into that five to seven-year commercialisation period. However, it may be 10 years before we get anything out of that. It will be high-quality stuff, but it will take a lot of investment.

72. Professor R Kennedy: We have been working in Queen's since May of last year, and it is fair to say that our colleagues from Queen's have been very supportive. They have actively supported the programme and see the purpose behind it. There has been very good interaction, and they are beginning to understand the benefits.

73. The Chairperson: Obviously, you hope that that will work well for Almac. Do you see that as a model that other firms could use in this area and in other areas of research?

74. Professor Harrison: That model is being used. Bombardier has set up a new research area at Queen's Island. That is on the Bombardier site, but it is a university building. That is a very innovative approach and they have set up labs there, so that people from Bombardier can effectively be seconded into academic labs. I absolutely think that that model can be applied in other areas, and it is.

75. It is expensive and only the big companies can even start to think about doing it. Almac has all sorts of demands on capital investment, and it is about balancing the investment against the research and development, and the risk. You have seen the kind of rewards that you can get, but you have to be conscious that there is a very big group. There are lots of other requirements, and trying to get that balance right is important. To my mind, because this has such potential for Northern Ireland, that risk should be shared, as it is being shared — at least initially — by government. However, these are long-term projects. If we want to develop the sector, there needs to be a partnership.

76. The Chairperson: What proportion of that funding comes for Invest Northern Ireland for that?

77. Mr Hayburn: About £1·5 million. A lot of work went into getting that, Alban. This ticks all the right boxes from a theoretical perspective, but not a lot of jobs are created by it. As I said, the revenue expectation is perhaps five to 10 years down the line, and there may be no revenue expectation. It does not fit INI's classic model, but it is the future.

78. The US companies are way ahead of us on this. They are engaged with academia and they have academic guys who are commercially minded and who want to create something with an eye to the market. We find that European academia is less market focused. They are more classic academics, and changing that will take some time. However, we have made a start.

79. Professor Harrison: One other potential advantage is that, with Richard working in academia, he can apply for external research grants and bring in funding from outside of Northern Ireland. That was another big plus and we are in the process of applying for that funding now. We can utilise his position as a academic to bring in revenue in the form of research grants.

80. Mr Dunne: Thank you very much to everyone at Almac. We have been very impressed by what we have seen so far and by your commitment and dedication to your work. It is obvious that you feel some frustration at the delays in processing funding applications. Can you give us some more information and evidence in relation to how those delays restrict your development work? What can we and others do to try to help you through that?

81. Mr Hayburn: There are two aspects to that. There is local Invest NI funding and FP7 funding. FP7 is a highly complex matter, as we shared earlier. We have not really fully engaged in that, but we would appreciate support, even financial support, to be able to do so. That is a secondary issue, and we will address it internally in Almac in the next 12 months.

82. On the issue of INI funding, we have worked very hard with INI. Almac is a very big group, and INI gives us a lot of capital support and a little bit of R&D support. However, sometimes it treats that as one basket of overall funds to Almac. In respect of capital return, the business plans for our more services-based businesses are more straightforward as there is a basic return on revenue. So if, for argument's sake, you build a bigger facility, your output and revenue ought to grow in relative size to that facility. This is different, however. We have found from engaging and even trying to understand the longer-term commercial models for validation and commercialisation that they do not fit the classic three-year model. There has to be persuasion. We are trying to get three-year funding even though we know that the revenue might not come in. There is a box with a revenue slot, and it is not realistic to expect a revenue return in three years. There needs to be a five to six-year programme. We have raised that point with INI. You are completing your own Budget exercise at the moment, and you know INI well enough to know that is very difficult for it to give you budgets for five years. However, we need that surety.

83. R&D programmes are heavily people-based, so we have to give the guys job security for five years. INI does not have a structure to work with something like that, so when we engage in an application process, there are issues about return, job numbers and average salary. The average salary in Almac is between £26,000 and £28,000, which, as you know, is a lot higher than the national Northern Ireland average. Our average R&D salary, to get good-quality people, is between £38,000 and £40,000. We had to recruit Richard from Harvard in the US and encourage him to come back. He is very happy about that as you can see. We had to recruit Tim from industry. A lot of investment goes in to getting such staff. So the average cost of R&D staff salaries is high, and the INI models do not naturally fit that.

84. Mr Dunne: Do you think that it could do more to adjust those models to fit that? Do you think that we should be encouraging it to do that?

85. Mr Hayburn: You could certainly have a go at it. We talk to INI and work hard to engage with it. We feel that when we present something like this to INI, it goes away thinking, "That is great".

86. Mr Dunne: Do you feel that it is very much geared towards manufacturing?

87. Mr Hayburn: Certainly. Manufacturing is, historically, more traditional. We have asked it to do something different here. We suggested that it look at the example of San Diego in America, where the whole industry was transformed by taking a very active, aggressive governmental approach to funding in the pharmaceutical industry. That transformed San Diego in 30 years from a being a fishing base to a high-tech, high-class, world-class pharma-research base. We have talked to INI, and it has to come back to talk to you guys. There are budget constraints. From talking to INI over the past two or three years, we know that its chief concerns are budget constraints.

88. We have a very exciting programme. We are collaborating with a Swedish company, Immune Therapy Holdings (ITH), on column therapy. We have not shared that work. We have had a lot of interest from pharma companies. INI gave us a letter of approval for that. However, before we submitted the application, we had a meeting with INI and it told us, "Do not bother; we have no money". That is not a criticism of INI. I have always found that INI tries to work within very tight confines. Sometimes, it does not work, which is frustrating, and that adds to the laborious process. I think that that is fair to say.

89. We would like to get a new model for R&D programmes, even a five-year programme, which took into account a different format for the application form, with stretched-out revenues and support. INI will say that clinical trials are not supported from a European perspective, and that is true to an extent. We could push that a lot harder than we are pushing it. Those European rules are guidelines, so we could push a lot harder. There is no support for the commercialisation of R&D, and you would realise that if you asked a business development (BD) guy to out and sell R&D technology. It takes us around two years to try to sell a new technology to a pharmaceutical company. You will have an initial meeting and then you will have to go through various approval boards.

90. Pharmaceutical companies are worse than government; they really are. There are layers upon layers upon layers of approval required. It may take two years to get a meeting with the right people and then another year to try to work out a deal. They are very laborious and dinosaurian in how they approach things.

91. Mr Dunne: Why Is that? Is it because of regulation?

92. Mr Hayburn: It is just the nature of the pharma industry, Gordon.

93. Mr Dunne: Heavily regulated.

94. Mr Hayburn: They will approach anything new like this sceptically. They are licensing more now. However, if, for example, we wanted to recruit two really world-class, clever scientific BD people to go round the world selling it, we would have no support for that.

95. Mr Dunne: Do you get inquiries from pharmaceutical manufacturers for R&D work?

96. Mr Hayburn: Gordon, most of our work is R&D work for the pharma industry. However, this is different. This is stuff that we are doing ourselves. You make a good point. The R&D work that we do in sciences and pharma, which is highly complex, is not treated as R&D by INI. It is treated as a service business, and it is all about revenues.

97. I would like to focus on our sciences business. Our sciences business involves highly complex science. It is not always easy to get it right. It is highly complex science to make API and develop new ways of making API. If we do not get that right, a pharma company will sometimes say, "We are not paying you for that." You have to take that risk. Our revenues and profits from sciences may be relatively low. When we put in a business plan to INI, we are told that revenue and profit have to be growing. However, that approach does not suit that type of work in our group. Other companies in our group are more profitable. Sciences will never be very profitable, but it is a vital part of the group. It is the clever stuff, but it is treated under very harsh economic conditions.

98. Pharmaceutical companies might say, "We are not paying you for that. Your quality yield was supposed to be 95, and it is 90. We are not paying you." We have to absorb that. And to take it as a cost, or maybe our earnings before interest, taxes, depreciation and amortisation (EBITDA) projection for that quarter will not be as big as it should be. If you try to sell it to INI, it will be sympathetic and nod at you, and then someone will come down and say, "You need to fill that in. Your revenue and EBITDA have to grow. We have to show that to tick a box." It does not always work.

99. Professor Harrison: That leads on to a general point about risk. It is not just about funding bodies' approach to risk; it is a wider issue in Northern Ireland. We make funding applications, but people do not understand fully what we are trying to do. As Colin said, you put in a business plan, but it does not take account of the risk. Therefore, the funding bodies find it very difficult when they do their commercial assessment. The economists get involved and it cannot be done. It can be modelled, but not many people are familiar with doing it. It is a real struggle.

100. It would be interesting to develop something on risk attitude in Northern Ireland. If we are to become innovative, we will have to understand more about risk. It is a world problem. I do not think that anybody really understands risk apart from those who are involved in it. It is very interesting. More and more people are talking about risk. Your Committee may want to look at the approach to risk at INI and government level. We have to accept risk. It is about understanding risk and then placing bets so that risk is minimised. You cannot get rid of it. It is almost as though people want an R&D project that must succeed. However, it is then not an R&D project.

101. The Chairperson: We are coming into the whole area of risk now.

102. Mr Moutray: Absolutely. As a local representative, I am delighted to be here. I am delighted that my colleagues have had the opportunity to come and see this gem in Craigavon.

103. The Chairperson: He got us special permission. [Laughter.]

104. Mr Moutray: Do you find that higher-risk, higher-return projects generally have a more positive impact on the economy than lower-risk projects?

105. Mr Hayburn: It is hard to know what that means, Stephen. If they work, of course they will. However, we have to consider the failure rate? For example, in the world pharmaceutical industry, 95% of all pharmaceutical oncology products fail at phase 3 clinical trials because they are not efficacious. As Tim alluded to, at a phase 3 clinical trial, it costs about $1 billion to take a drug to market. We are hopefully taking a smarter, biomarker, biological-based approach about what drugs the body will respond to.

106. You may be asking whether we, as a country, should invest in higher-risk, high-quality, world-class, skilled jobs as opposed to low-level service jobs that come in and give people jobs. There is no security in that for me, but there is security in this. If we get this to work, if the intellectual property (IP) and API are protected and patents are protected and you build a reputational brand, you have got a world-class business. There is no protection for the lower-level services such as the call centres, as we have seen on the TV this week. We need to build that IP creation and that higher value, higher risk element in our services business, or we are exposed. India or China could come in and put a bid in for some of that API manufacture for four times less than we can offer. We have to build up a reputation so that people know if they go to us, they will get quality, assurance, deliverability and long-term sustainability. All that costs money. It might not always work from a profitability perspective in the short term, but for the longer-term strategy, it is the right thing to do; there is no doubt about it.

107. Mr Moutray: We have talked quite a lot about financial assistance this morning; does a company such as Almac need any other form of assistance, or is it entirely financial?

108. Mr Hayburn: What do you mean?

109. Mr Moutray: Is there any other type of assistance that you would need from government, or is it simply finance that is required by a company such as Almac?

110. Mr Hayburn: Finance is a big part of it, to be honest. A lot of things come down to finance eventually. We can look at resourcing other things but ultimately, who pays for it? We have had recent issues about planning, as you will know because they have been well publicised. In the past 18 months, a planning application was a major distraction for senior management and a major risk to our business. We lobbied hard to try and get the planning laws changed and get support from government in that, and it was a bit sensitive. I hope it is going in the right direction, but issues to create a proper, more corporate-friendly environment in legislation take a wee bit of courage. It takes a bit of forward thinking and listening to and working with businesses. Legislative assistance in things like that are very helpful. Alan and John are other board members at the back; can you think of any other assistance?

111. Mr John Irvine (Almac Group): Anything that helps on the planning side of things would be welcome. We have had huge problems there. Purely from a business perspective, those were problems that we should not have had to face, to be honest. Some of the other problems we have are energy costs here in the Province compared with our unit costs in Pennsylvania, for example. Our energy costs here are something in the order of two to three times more than what it is costing us in Pennsylvania. It is very difficult to compete globally when you have that burden to carry. I am sure you have heard people say that some of the employment legislation is extremely bureaucratic and is not always particularly employer friendly in our experience. Generally, a much greater focus on trying to identify what businesses need and the provision of support in the areas that you are directed to would certainly help.

112. The Chairperson: Just for the record, could you give your name and position, please?

113. Mr Irvine: Sorry; I am John Irvine, the executive director of Almac.

114. Mr Hayburn: That boy in the corner is Alan Armstrong, CEO. He might say something in a minute.

115. The Chairperson: You are very welcome, Mr Armstrong.

116. Mr Flanagan: I am delighted to be here to hear about the work that Almac is carrying out. It is very exciting and interesting to receive such an update on the work that you are doing. There is massive potential in it, so good luck for everything in the future.

117. I have a number of questions, the first of which is very short. What is your annual budget expenditure on R&D?

118. Mr Hayburn: It varies, Phil, given the demands. We try to keep that expenditure down to a percentage of our profit. We have to do that or else it gets out of hand. We try and keep that down to around 20% to 25% of our EBITDA. We are a small company. These things that we are trying to do, they are very ambitious targets. The other companies that are involved in this research are multi-billion-dollar companies. We are trying to work on a shoestring compared with those guys. We have to control our funding; we cannot throw money at this. We have to try to throw intelligence at it, as you can see from these two intelligent chaps here. That is what we have to do; we cannot throw money at it. We try and keep it at a ratio, Phil, so we can keep it under control.

119. Mr Flanagan: Have you a ballpark figure?

120. Mr Hayburn: It generally varies from year to year, Phil, because it is chiefly people. I have figures here, but I think that we are spending somewhere in the region of maybe £8 million to £10 million a year.

121. Mr Flanagan: The reason I ask is that the latest figures show that the 10 biggest spenders on R&D here account for 60% of the total budget. If we really are going to achieve the targets that have been set, we need to see greater involvement from small and medium-sized enterprises (SMEs), as well as from larger businesses like your own. We have discussed the risks that a company such as yours takes, which is, obviously, a calculated risk to some extent. For an SME that is going to get involved in R&D, would the risks be much greater for that smaller business than for a company, other than your own, apart from the obvious differences between limited and unlimited liability?

122. Professor Harrison: It depends on the project. It has to. It depends on the company. It depends on the business plan. It is difficult to generalise. What stage is the project at? What needs to be done? That is what determines risk; it is the business plan of the company.

123. Mr Hayburn: That is not an easy one to answer. In our industry, as I hope that we have laid out, it is a very long time from discovering something to patenting it. In the past two or three years, our patent costs alone have been well over £1 million. You have to patent or you have nothing to sell. Smaller companies have fewer overheads, but it all depends on how smart the idea is and what type of industry they are in. However, there is no easy way round our industry. I know that you guys have a strategy to get SMEs involved in R&D. We have mentioned that to INI and think that that is a good thing. There is no doubt that that is a good thing. However, the danger is that you dissipate the budget and there is no real achievement. We, then, ask for money for ambitious targets and far-reaching projects, and the money is not there. I know that it is a difficult job for you to try to balance that.

124. Professor R Kennedy: If I can comment on the SMEs. Part of it depends on the business model, which is why I have seen people setting up spin-out companies. There are two models: one is setting up a business to become a sustainable business that grows; the other is to sell the business as quickly as possible to a big company. The second model is very high risk, because it is all or nothing.

125. Professor Harrison: That is an important point. What we are trying to create in drug discovery is not the usual model. The usual model is what Richard has just said: you take a product like this, develop a company and sell it. We are not trying to do that. We are trying to do something sustainable for Northern Ireland. That has challenges, because that timeline really comes into play. Usually, you make a product, within three years you sell it and are done, and you start another company. We are not trying to do that. It is an interesting model, what we are trying to do here.

126. Mr Hayburn: Another good point is that, because of the way Almac is structured, we invest all our profits back into the business. Almac is owned now by the McClay Foundation. Nobody is in here to get rich quick. In a classic entrepreneurial R&D company, the focus is to get up to a certain stage, get rich and get out. In the LM21 project, the inventors at Queen's were approached by AstraZeneca and by us to take the compound. They chose us, because we decided that we would keep working with them over a period of time and for five years would let them be involved in the product. AstraZeneca offered them more money, but said that they should give the compound to them and just walk away. The inventors decided to stay with us. I think that Almac is unique in that way, Phil. In our first INI letter of offer for drug discovery, we guaranteed that we would put all the profits back into the business and not have any other use for those profits, which was unique for INI. Part of the reason for offering that was to try to do something different.

127. Mr Flanagan: Going back to the participation of SMEs in R&D, do you think that there is anything that the academic side of things or the industry itself can do to encourage or improve that participation?

128. Mr Hayburn: We have done a bit of outreach.

129. Professor R Kennedy: We are working with another company, PathXL, which is an SME spin-out from Queen's. We have grant applications with them, combining our approaches. We do work with other SMEs on various projects, where they fit, but they need to have something complementary to what we do.

130. Mr Flanagan: You have also referenced the cost and length of time it takes to apply for grants under the European funding frameworks, and you referred to the potential for a grant to cover the costs of having a full-time equivalent for six months. Is such a scheme being run anywhere else in Europe, and do you have a rough figure for the percentage of applications that are successful?

131. Mr Hayburn: I am not sure about that; I do not know. However, there is nothing to stop us from doing it. We could lead the way on that one.

132. Mr Flanagan: Would you be happy to do that?

133. Mr Hayburn: Yes.

134. Professor Harrison: A really interesting review of framework programme 7 came out at the end of last year and is on your website. It is probably in there, I suspect.

135. Mr Flanagan: Aidan has given us another couple of books that look like that. Aidan and Fergal have not been too shy about giving us books about research and development.

136. Professor Harrison: Last night, I was reading about Singapore's five-year investment strategy, 2011-15. It might be worth having a look at that. It is quite an interesting approach. If anyone would like it, I have a summary here. It is very R&D driven; how you get SMEs and how you link it all up.

137. The Chairperson: It would be very helpful if we could have that.

138. Professor Harrison: I will pass it to you at the end. If you need details of the website, I will provide you with them.

139. Mr Hayburn: A Chinese company is currently interested in one of these compounds. We have been engaged in a few interactions with Chinese companies in the past few years, particularly last year. Chinese companies come with a 25% stake by the Chinese Government. State aid rules limiting the amount of state aid given to private and public companies do not apply to them. The Chinese companies are funded by the state, with no rules or regulations, and they are competing against us, backed by the Chinese Government and their 25% stake. Europe has to wake up a bit. China will not always play by the rules. It will be smart. That is who we are competing against.

140. Professor Harrison: I will give you a headline figure. From 2011 to 2015, their budget is $16•1 billion for R&D, which is up by 20%. I think that the population of Singapore is approximately 5 million. Then, there is a whole host of things that go with it. It is really serious stuff. I think that you need a seeding incentive to get the SMEs going. They have a budget for seeding. They call it investing ahead of industry, and elements go towards that. I suspect that rather than reinventing the wheel, there are things that we can learn from economies such as that. Then, of course, there are Finland and Sweden, which are interesting models to look at. There is another case study on your website on EU innovation policy best practice, which looks at Finland, Sweden and Germany. It is very useful for us to look at. There are some good reports there.

141. Mr Flanagan: Finally, Chairman, I would like to tease out the co-operation that exists between the company's operations here and in America. Are they working on similar projects, or are they operating in isolation from each other? What barriers or opportunities does that present, apart from having a foothold in the North American market? Perhaps you would give us an overview of the differences that a company involved in this sector faces in America compared with a company here as regards bureaucracy, financial support from government, and things like that?

142. Mr Hayburn: Our business is global, so there is high integration between the companies. We may have a contract to offer global services to a pharmaceutical company, so that would be managed between both sites as one project. That has to be the way it is. For us to compete, we have to be seen as a global company.

143. One thing that we did not mention today but will be a costly focus for us in the next two or three years will be to try to establish something in Asia. We have something in the west, something here, and we will need something in Asia. There will be a heavy degree of internal investment and internal management time involved in making sure that we are seen as a global company

144. We have the same management structure in the US and at our Craigavon site. We are over there on a steady basis. Continental is staying alive because of Almac at the minute, because we are back and forth every week. It is a global industry.

145. What was your second question, Phil?

146. Mr Flanagan: It was on the differences in government support and bureaucracy between here and America.

147. Mr Hayburn: We get a high degree of support for our Souderton headquarters. There is a high degree of interaction. It is slightly different. It is bureaucratic, but perhaps a wee bit more business focused in the States. We have no R&D function in the US at the moment, so we have not availed ourselves of any R&D activity there. We may look at that in the future, but at the moment our R&D hub is here. It is harder to spread your R&D hub between two centres.

148. From a commercial perspective, support for Souderton was reasonably good. Some very good local government and federal schemes were offered.

149. Mr Irvine: If I can just pitch in on that as well, the Souderton project was the largest capital project that we have undertaken within Almac. It represents an investment of $120 million. A lot of interest was shown by the Commonwealth of Pennsylvania, right up to the Governor, who was Ed Rendell at the time. He went out of his way to meet with us, first in London. We had a number of meetings at the Governor's office in Philadelphia. There were roads issues and utilities issues that had to be dealt with in addition to the financial support we got. We were very impressed with the whole business approach to things and the fact that the Governor of Pennsylvania himself got involved personally to make sure that what needed to be done was done and sorted out. It is just different from here, in our experience.

150. Mr Flanagan: So, he did not just turn up just to cut the ribbon. [Laughter.]

151. Mr Hayburn: The Governor has an action team there, and the woman who ran that team, Gail Kronig, gave me, John and others her personal mobile number. She said that we were to call her if we had any hassles. It was all above board. You could call Gail to say that you were having a bit of issue with this local township or funding, and she would be straight there. The government is more directly accountable and less layered. The guys will get involved straight away.

152. Mr McKay: Thank you very much for your presentation. It has been an interesting debate. Risk, and research and development are the two issues that stand out for me. We are very risk-averse as a local economy. We are risk-averse as people, and we should be trying to break through that tradition. Investing in pharmaceuticals is viewed as a high-level risk, and you need to ensure that politicians and stakeholders have an idea of what the returns are going to be. I think we still need to work on that.

153. The point about Singapore was interesting; Committee members met representatives from Singapore towards the end of last year. They are very focused on pharmaceuticals and have a very business-oriented approach to the economy in general there. We have a lot to learn from them and there are certainly comparables in the size of the country. You mentioned India and China, and going beyond the regulatory barriers that we face here in R&D, what can we do as politicians to address those? Corporation tax is perhaps the obvious one. Are the BRIC countries being viewed as our greatest threat?

154. Mr Hayburn: It comes and goes, Daithí. Yes, from the standpoint of being able to produce services at a lower cost, it does. They have some way to go in being able to be trusted from a quality perspective. India and China have not yet developed their own pharmaceutical companies, but that will come. China will produce a pharmaceutical company within the next few years that will be a major, global company. I am more interested in your comment there about there being no regulation. Particularly in China, governmental support for those companies would be very strong. It would be unregulated. You would not be having a meeting like this; one guy would come in and help fund the company and take a stake in it.

155. You mentioned work we needed to do in risk analysis and maybe the education process. How could we take that forward? You mentioned that there was some work we had to do, perhaps on understanding what the risk elements are.

156. Mr McKay: The history of the economy here is different from other parts of these islands, for obvious reasons. Traditionally, we have a higher percentage of people involved in the public sector, so to introduce the degree of risk taking, like I always say, nothing ventured, nothing gained. Even at the level of small and medium-sized enterprises, we cannot get them to break out of that shell into the global companies as we see in other countries. It is about creating that culture. Invest NI and smaller groups in local council areas have a big responsibility in trying to develop that entrepreneurial spirit and to provide that support. If support is given at that level, it places an onus on those who receive it to reinvest, as they will owe something to where they come from. It is about doing that at a government and a community level.

157. Mr Hayburn: That is a good point, as is your point about education. INI's very fixed revenue and job growth three-year plans do not fit our R&D business model. It has a very controlled risk model and you have to show that you will grow your job numbers and revenue in order to tick a box. Ours is a longer term goal, and it requires others to enter in to an education process and a risk-taking and strategic process. That is good, but it will take some time for government to do that and that is not good for us. We have a highly competitive two-year window for some of these projects and need to act quickly. We are more than happy to engage and share more and to see whether there are other models that we can look at.

158. Mr McKay: You said that that sustainability needs to be built into the education system right up to the colleges and universities. I always remember an example that came from Wrightbus, which is based in my constituency. Willy Wright always said that he had all these guys coming to the company from the universities, who did not have a clue in practical terms when they hit the factory floor.

159. Mr Hayburn: That is right; I can hear Willy saying that.

160. Mr McKay: Do certain parts of the curriculum need to be changed or steered in a different direction?

161. Professor Harrison: Tuition fees are going up in Britain. They are not necessarily going up here, but who knows what will happen in the future. As that happens, it will make people think more about whether they need to go to university. Everyone is saying that fees going up is a bad thing, but there is a flip side to that in that not everyone should go to university.

162. At the meeting yesterday, DEL placed a huge emphasis on apprenticeships. Catherine Bell is very keen on apprenticeships and the Department is doing a great job in that area. One of the things that we, as an industry, have to do is to stress the importance of vocational training, and some of those mechanisms are happening through government. Those who want go to university should go. However, others may say that they do not want to spend £30,000 going to university and may want to do an apprenticeship instead. I think that will naturally happen and it is starting to happen.

163. Professor R Kennedy: Traditionally, universities courses have been very academically driven. It is almost as if the courses are set up for students to have academic careers, yet, obviously, most people will not do that. The US universities that I worked in offered modules in entrepreneurship, setting up companies, project management and all of the things that really matter if you go into industry. That has not been the tradition here. Perhaps government can look at that again and understand what we are teaching people in universities and whether we are educating them in the right way. We need academics and we have that, but we should also set up tracks for those who want to go into industry. When I interview for jobs in Almac, I notice that those who come from outside of Northern Ireland seem to have been better trained for industry than local people. Local people are equally clever if not cleverer, but they have a much more academic view.

164. Professor Harrison: That is a big focus of the STEM business subgroup, and we spend a lot of our time dealing with that. One of the big issues that we have in Northern Ireland, because 95% of businesses are very small, is in engagement. If we could find a way to engage more effectively with the whole of the business community in Northern Ireland, it would be great. We tend to engage with the bigger companies because we know where they are and we know where to go, whereas we do not engage with the thousands of small businesses that may only have 10 or 15 people and may be family run. It would be fantastic if government could help us to engage with other businesses. As I said, that is a major challenge and we are trying to address that with DEL and through that subgroup.

165. As to how we change people's perception of risk, my own view is that you show them success stories and role models. That is why funding some of the big companies to make that work will, ultimately, pay dividends. There is no better way to do it than by showing them what others have done, and they will want to do it themselves.

166. Mr McKay: You referred to the fact that Invest NI funds projects for the first few years, and that that funding then, effectively, disappears off the edge of a cliff. You also said that 95% of the projects fail at phase 3. What should Invest NI do? Should it cover the funding for the middle part, or would it make more sense for it to fund the latter stages? As you approach the latter stages of those projects, do the failure rates decline? Would that be more of an incentive?

167. Mr Hayburn: We know that there is a big failure rate and a high cost for those trials, Daithí. However, we suggest that there should some support, maybe with a policy of capping. We will do a phase 1 trial and a phase 2 trial, and the costs are a lot lower. There is phase 1 support, but there is not phase 2 support. With phase 2 support, you are starting to look a wee bit at efficacy and dosing. They should be able to look at giving us phase 2 support; they really should.

168. Phase 3 has massive costs — hundreds of millions. Those are global trials. It would be reasonable to fund phase 2 trials with a capped level and a control to ensure that you are not giving a company numerous trials. There is something there that should be looked at that is more focused. The 95% failure rate in those global pharmaceutical companies is why they are changing to a more biological-type focus, and that is what we are doing here.

169. Professor R Kennedy: The failure rate is quite a bit less with those biological-focused projects.

170. Mr Hayburn: It is 95% for the global industry, but it is a lot less for the biologically focused ones. That is what we are trying to do at the moment.

171. Professor Harrison: Colin has just made the point that I was going to make. Those are historical rates. Stephen asked about how you can de-risk things and how much risk you should take. What we are saying is that the business models are not quite right here. Our business model reflects an inherent de-risking by going down the route of personalised medicine. If Richard can select patients who will respond to the drug, you do not need thousands of patients; you might need 100 patients or even fewer.

172. The inherent business model that we are working towards is about how you make this better. It is not how we do more of the same. There is no point in doing that, and no one should ever fund that. It is not about that. This whole company is built around personalised medicine. If we get that right, all those ratios and success rates will change. Northern Ireland, as a country, will have to buy drugs, which are very expensive. It has to change. If we can get this right, there will be knock-on effects all over the show.

173. Every week, there is a debate from the National Institute for Health and Clinical Excellence (NICE) about whether we should approve this drug or that drug. Actually, if you really look into the way that drugs have been developed in the past, it is not surprising that they are expensive. Just give them to the patients who will benefit and they will become cost effective. That is what this whole business is about.

174. Mrs Overend: Thank you very much for having us here today. I have really enjoyed it. I am always very proud of our home industries. The late Allen McClay lived near my home, so we in mid Ulster can claim a little part of that. Your reference to San Diego was very interesting. I was on the Committee for Employment and Learning right up until last week. We were looking at how the mindset has changed there to reinvigorate San Diego. That needs to be done here in Northern Ireland; at least that is the way I see it.

175. It seems that Invest Northern Ireland needs flexibility to invest in companies such as yours. They are quite structured and need to be able to look at companies and see the potential, whether it is large companies such as yours or small industries. Is that your take on it? How do you think Invest Northern Ireland should look at that? Your briefing paper mentioned the establishment of an official group tasked with supporting all organisations to help improve R&D. Will you tell us more about where you see that coming from?

176. Mr Hayburn: I do not know who wrote that last part. [Laughter.]

177. You are absolutely right about the first part, Sandra. It is about flexibility in R&D. The way that we specifically focused on our two projects to date shows you the length of time that it takes for an R&D project here. That is totally different if you go to Bombardier or somewhere else. The R&D structure in INI for companies in Northern Ireland does not work for us. The big businesses are availing themselves of it, but they have a totally different model. Flexibility would be highly advantageous for us.

178. The groups are good, but we will not have groups that have the same issues as us. They could certainly be groups that set up in generally the same way as we approach things, such as the educative process and FP7, and that would be very useful. However, you have to come out of those groups and look again at your specific business. Our approach would be very different to that of those other industries. So I am not a great fan of groups, because, sometimes, you just spend a lot of time talking. Very specific flexibility within INI would be really useful.

179. Mrs Overend: In the submission, there is a reference to Northern Ireland needing its own national contact point. Are you aware of any such provision in Invest Northern Ireland?

180. Mr Hayburn: Invest NI has a woman who is very good and very helpful for FP7. However, you could learn the same stuff from the internet. It comes back again to the idea that you have to get stuck into it yourself; you have to go out there and submit an application. The help is there, but it is not specific enough. Bombardier shared with us what it did, which is something that we need to do. In Bombardier's first foray into FP7, it submitted four applications and failed them all. It resubmitted, having engaged with and invested in people internally to go out and find out about it. Of its next five submissions, four were successful. We will have to do the same. We held off slightly, until the oncology call was relevant, and I hope that it is relevant in the 2020 Horizon initiative. However, getting support even to do that would be useful for us.

181. I am not quite sure what the role of a central NI contact would be. If you spoke to INI today, it would say that it has that.

182. Professor R Kennedy: One big advantage we potentially have is that, within the EU grants, typically it will be for two member states. So, we can use collaborations with the South of Ireland. That could be encouraged as well. There are companies in the South of Ireland of comparable size. The problem is that, at the moment, setting those things up is quite laborious.

183. Professor Harrison: For example, the Marie Curie grant would fit into that, but that is under the FP7 people category. There are issues there. You could get the grant, but would have to send your people off for two years. That is all about knowledge transfer, which is brilliant, if you have the resources to do it. However, you can then hire new people only on the basis of how much transfer you do. You end up losing your own skilled researchers for two years and bringing in someone to train up for two years. That is great, but you still have to run a business. You cannot easily avail yourself of that grant, unless you have people you can spare to do it. It could work, but, in practice, it is quite difficult.

184. Mrs Overend: I am sure that, in the current economic climate, it is more difficult. I hear about Invest Northern Ireland giving money back to the Government. What if that additional flexibility had been there?

185. Mr Hayburn: That is true. When we hear that, we find it strange.

186. Professor Harrison: Is it true? [Laughter.]

187. Mr Hayburn: We do find it strange.

188. Mr Flanagan: Just a quick question, Chairman, before you move on. I am interested in what role you envisage venture capitalists playing in the future development of R&D here? Is there a role for them?

189. Mr Hayburn: There might be, but not with us.

190. Mr Flanagan: Not with you, but in the sector as a whole?

191. Mr Hayburn: Those guys come in for a very fixed term for a very fixed return. It sometimes works. The venture capitalist model is the classic model in the US. They go in for a very fixed term, put their own boards in, make money and get out again. However, if you want to grow a proper economy in Northern Ireland, for me, that is not the right way to go. Even in some UK companies, it has not worked. Venture capitalist houses have been into this space. They go in, and, if the return is not there in three years, they go. The venture capitalist model is not good for growing indigenous talent, because board members would probably be brought in from other countries to manage it, and manage it in a way that is focused not on the growth of a good indigenous business, but on getting money and getting out again. I do not see it, but I do not know what anybody else thinks.

192. Professor Harrison: If you look at the way that small biotechs are being funded in the current climate, you will see that that is not necessarily through venture capitalists. It is through corporate venture funds. If you want to find a way to do this, I suggest that you talk, as a Government, to some of those corporate venture funds. For example, Novartis and GSK, the big pharma companies, are now putting up $0·5 billion — big, big venture funds. Those are the guys who are investing. You are still getting venture capitalists, but I think that the ratio has changed. For pharmaceutical R&D, it is the corporate venture funds that you should definitely consider talking to.

193. The Chairperson: I had a couple of points that I wanted you to reflect on. Your written submission referred to the benefits of having:

"Enhanced all-Ireland support for European funding".

194. Will you elaborate on that?

195. Professor R Kennedy: At the moment, the SMEs, the companies in the South of Ireland and Almac work independently. I know that InterTradeIreland is trying to do something about this, but it is very difficult to set up those connections. We do not move in the same circles a lot of the time and we will not be in the same conferences, so the question is how we get those introductions. We are not even certain what research a lot of these companies are doing because it is not in the public domain. There needs to be some sort of mechanism or an independent broker who can look at what they are doing and say that it is very compatible with what Almac is doing and introduce us. It is as simple as that.

196. Professor Harrison: There is a potential mechanism there. There is a trade body called BioBusiness based in Belfast. It has recently become an all-Ireland body and has lots of networks into Northern Ireland. It recently co-opted two board members from the Republic of Ireland, and one of the ambitions is to develop that. For example, you could take that kind of network and it could be a mechanism for doing this.

197. The Chairperson: Professor Kennedy, you have made the point that we have a ready-made situation here with two jurisdictions, we can have these partnerships and we should take advantage of that. Do you think that the situation is not being maximised?

198. Professor R Kennedy: At the moment, I do not think that it is.

199. The Chairperson: So we need something to bring companies together and get this co-operation going, thereby usefully exploiting the funding that is available in Europe.

200. Professor R Kennedy: It needs to be done in an intelligent way. To go back to Colin's point, we have had these meetings where lots of companies will come together, but you do not necessarily have the right people in the room or people who are able to divulge information, because some of this research is quite sensitive.

201. The Chairperson: You do not want to reveal what you are doing.

202. Professor R Kennedy: You need to have the right people talking at the right level.

203. The Chairperson: If framework programme 7 did not exist, would it make any difference to you?

204. Mr Hayburn: At the minute, no.

205. The Chairperson: Is that simply because framework 7 does not cover oncology?

206. Mr Hayburn: We are collaborative members in a number of FP7 applications through customers and partners, but, I would say that the oncology calling is not relevant at the moment. We have not yet invested time to focus on it because of the distraction and the time involved. We have to do that and we are planning to do that in preparation for the next calling round. There is money there and we have to try to get it, and we may need assistance to do that. It has no bearing on us at the moment but we want to get involved in the future.

207. The Chairperson: Will there be a significant drive from your company to get involved in Horizon 2020 to get funding?

208. Mr Hayburn: Yes.

209. The Chairperson: What assistance would you require from the Northern Ireland Administration to do that?

210. Mr Hayburn: Off the top of my head, because of the investment in time and money to get involved in that, grant support for somebody to be involved in that full time would be good.

211. Professor R Kennedy: Because of the nature of these frameworks, that person would not just be supporting Almac; they would be supporting that framework. The point is not just to seek Almac funding; it could be across more than one company and possibly include an academic institute as well.

212. Mr Hayburn: Start with Almac. [Laughter.]

213. Professor R Kennedy: I am saying that there is more than one benefit.

214. Mr Hayburn: Even that alone is a starting point. We can work on something more around that, but that would be useful for us.

215. Professor Harrison: As of April 2011, 110 projects in Northern Ireland had received EU funding totalling €30 million. The amount of funding per company is not that high. Some companies get more but others do not get very much. You must also have the right projects. If you are going to invest that much effort in trying to get one of those programmes, the salaries that you have to put in could be close to what you actually get and there is no guarantee —

216. The Chairperson: It is hardly worth it.

217. Professor Harrison: Yes, so you have to come up with the right proposals. Those projects are very big and necessarily require more investment. I thought that was quite a startling figure.

218. The Chairperson: It is a very low drawdown.

219. Professor Harrison: It is.

220. Mr Hayburn: We are probably not availing ourselves of that funding as we should in Northern Ireland. We attended a few FP7 meetings in the past year with local companies and only a few companies have become involved strategically in that programme. As a country, we have been a bit lax in getting involved in that. We have to look at it.

221. The Chairperson: Do you think that we have to up our game generally?

222. Mr Hayburn: I think so. Almac certainly does, and it is representative of the market.

223. The Chairperson: Does industry and business generally in Northern Ireland have to do the same?

224. Mr Hayburn: Yes, I think so.

225. The Chairperson: Does government have to be a bit more proactive in encouraging firms?

226. Mr Hayburn: Yes, I think so.

227. The Chairperson: I think that is everything that we wanted to bring to your attention. Thank you very much; that was very interesting and very useful. No other colleagues have questions. Once again, thank you very much for the invitation to come here; it has been of great benefit to us. We wish you good luck.

23 February 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Dr Paul Beaney

 

Cherry Pipes Ltd

Ms Kirsty McManus

 

Confederation of British Industry

Mr Stephen Sloan

 

Momentum

228. The Chairperson: Briefing the Committee are Ms Kirsty McManus, Mr Stephen Sloan and Dr Paul Beaney. You are all very welcome. Dr Beaney is technical director of Cherry Pipes Ltd. Mr Stephen Sloan is project manager of Momentum. Ms Kirsty McManus is the assistant regional director of the Confederation of British Industry (CBI). We look forward to hearing what you have to say. I thank you for the paper that you provided to the Committee. It was very worthwhile. Thank you very much indeed for that.

229. Ms Kirsty McManus (Confederation of British Industry): Thank you for the opportunity to present today. Stephen and Paul will give first-hand experiences of the challenges for businesses engaged not only in the framework programme but more widely in the Innova and Fusion programmes and R&D tax credit.

230. If I may, I will start by providing the Committee with some context to our written submission. In response to the political and economic pressures regarding participation in the framework programme, a steering group was drawn together. It is chaired by the Department of Enterprise, Trade and Investment (DETI). The group includes representation from the Department of the Environment (DOE), the Department of Agriculture and Rural Development (DARD), the Department for Employment and Learning (DEL), Queen's University, the University of Ulster, Invest NI, InterTradeIreland, the Science Park and the CBI. The steering group's focus was to look at Northern Ireland's framework programme participation to explore how the region can adapt and position itself to improve its current drawdown from framework programme 7 and, more importantly, how to best position itself for Horizon 2020.

231. The steering group needed to have an appreciation of the current perception of framework funding among the business community and to assess support mechanisms that are currently in place. A sample that offered a variety of large businesses and small and medium-sized enterprises (SMEs) — some with and some without previous experience of framework funding — were invited to attend an open and interactive workshop to glean first-hand evidence from industry on framework funding. The workshops were held over two days and hosted by an independent facilitator in order to offer an unbiased account of the voice of industry. The workshops enabled us to gather information on the key issues and barriers for SMEs in Northern Ireland to engage in the framework programme and, more importantly, potential components to resolve those issues and ways to increase the funding that Northern Ireland obtains from Europe.

232. Our written submission formulated the feedback from those industry consultations. More importantly, both Stephen and Paul participated in those workshops. They are here today to provide first-hand industry experience. I will hand over to Stephen, who will discuss his experiences of framework funding.

233. Mr Stephen Sloan (Momentum): I will give you a bit of context. My role is to look at collaborations, partnerships and expertise sharing between companies in both the North and the South and in GB. We became aware of framework programme 7 in 2009, and we started to look at it. People told us how difficult it was. The way that we decided to address it was to get involved in one of the projects. To summarise framework programme 7: you need partners from three European states, and you need to have research technology developers (RTD), which are normally third-level institutions but can be large corporates if more than 10% or 15% of their business is focused on R&D.

234. The first project that we got involved with was an SME associations call. We looked at its duration. You had three months to get an application in when the call opened. The process then was that you waited for a further three months for it to be assessed and to be told whether it was successful. You would then go into another two or three months of negotiation, and the project would start approximately nine to 12 months after you had initially engaged. When we went to talk to some of the member companies — the SME information and communication technology (ICT) member companies — we learned that the time frame, even for application, was far too long for them. The projects normally ran for two years, so if they had an issue that was very relevant to them at the beginning, it would be three years down the line before they could get an answer to it. As ICT is quite a fast-moving industry, you would find that it was almost obsolete at that point. Those were the main issues that we came across.

235. We addressed some of the members and asked them how they would engage. It became clear that we are more of a micro-SME region when compared with other regions in Europe. The definition of an SME in Europe is a business that has fewer than 250 employees and a turnover of under €50 million a year. So, the real issue was that, with the size of companies we have, we do not have the capacity to do a lot of R&D.

236. The process that we are investigating with members is whether we can take their requirements, do the heavy lifting for them, help with the application, help to work it through, find and identify partners, sign the partners up and keep them dipping into the process. That would mean that they can make sure that the outcome will still meet their requirements and ensure that, at the end, although the funding varies quite a bit, they will get something out of the project that they will then be subsided through the programme to implement or test. Those are the kinds of things that we are currently looking at.

237. We are currently involved in a project that has been running for over a year and is expected to run for another year. One of the issues is signing up partners; you have to go down the route of engagement. The project was a recent one that we submitted in conjunction with Invest NI and with Queen's University in our region. It also involves the South West Regional Assembly in Cork and an IT association down there, as well as the same grouping of organisations in France and Cyprus. Therefore, it involves a lot of networking and discussion. If you are looking for SMEs to be involved, you find that they do not have the time for that. Their agenda is to generate their revenues. That is all they are interested in. If you can bring them something that is going to be of benefit, they will bite your arm off for it. However, they cannot waste their time; they do not have the capacity.

238. That is a synopsis of my experience. I will hand over to Paul, who has operated an SME inside one such project.

239. The Chairperson: That was a very useful insight into the practical aspects of the process. Thank you.

240. Dr Paul Beaney (Cherry Pipes Ltd): I am the technical manager at Cherry Plastics Group. We are plastics recyclers and processors, so our company goes right from the collection of waste, through all the various separation processes, and then processes the recycled plastic into pipes. We are a recycling company and a manufacturing company, so we cover both sides. We carry out a lot of research internally, and most of that research is focused on overcoming the different technical hurdles that we come across in recycling.

241. We have carried out a range of projects from framework programme 7, knowledge transfer partnership (KTP) projects, grant for R&D schemes and the innovation vouchers programme, so we have been through all the different processes. There are quite a lot of challenges for SMEs engaging in framework programme 7, and I suspect that that is why we have such a low uptake. I suppose that the first challenge is the awareness factor. I would say that only a very small percentage of SMEs are aware of what the framework programme 7 is and how they can get involved in it. The second barrier they will come across is probably the timescales involved in the programmes. If we were to come up with an idea for a framework programme 7 project today, you would be doing well to turn that into revenue in four years' time. In our business, we are thinking about how we are going to ensure profitability next month. As market forces become more challenging, companies are becoming more tactical and less strategic, unfortunately. The end outcome of that is that the economy as a whole is going to be less competitive on a global scale.

242. Once you have sorted out your timescales and things like that, the next big challenge is writing the proposal itself. It is typically a 120-page document that is very technically complex. I cannot think of any SMEs in Northern Ireland that would have the resources to write that unassisted. They tend to partner up with academic institutes or other research and technology providers in Europe or consultants who specialise in that to actually write the proposal. That is a big undertaking in itself. We paid around £35,000 to get the proposal written for us, and it tends to be no win, no fee, so there is a big risk there. Are you going to outlay that money in the hope of something in four years?

243. Once you have done that, you submit the proposal, and then you have to get funding. The average success rate is about 20%, so you have put in a phenomenal effort at the front end for a 20% chance of a reward in four years' time. If the funding is granted, there are some other challenges that you come up against, one being the very large in-kind contribution required from the SME. Typically, the grant will be something between £1 million and £3 million over a two-year period. That is 70% funded, and the SME usually gets 10% of that funding. My budget was about £100,000 over two years, so I had to make that up with an in-kind contribution. That was my time. It is a full-time job for somebody fairly senior in any SME. That in-kind aspect should not be underestimated. I do not think that a lot of SMEs realise exactly what is involved once they kick off on the process.

244. Once you have got over that, the co-ordination can be quite a challenge. You tend to have maybe seven organisations across Europe that have been pulled together by someone. It can be difficult enough to co-ordinate seven people inside your own organisation, never mind that very large pan-European grouping. There tends to be a drift towards the technical and academic side of things rather than the commercial side, because at least three quarters of that resource will be going to academic institutions. Sitting around the table, there may be three or four people from the commercial business side and perhaps 10 or 12 people from the academic side, so it is very easy to end up with a project that is technically good but commercially useless if you are not very careful.

245. As for recommendations, it is very important to measure the bottom line impact and economic impact of anything that we are going to do. Do not think about how much money we have brought into the economy through funding. It is about the end product, not about getting the funding. Getting the funding is only a very small part of it. We need to take a holistic approach, not just focusing on how many millions of European funding we pull in. Also, we need to be careful that any project we get involved in has very clear commercial goals, not just technical goals. You can hit all the technical goals — though it is not easy to do so — and then end up with something that is not commercial.

246. There is a big challenge around reviewing intellectual property (IP) agreements. Most SMEs know almost nothing about intellectual property agreements and so on. The agreement that we have come up with is very complex. Even our patent attorneys do not fully understand the implications of the agreement that we have signed up to. So, some help around IP agreements would be very valuable.

247. Thank you, that is all that I wanted to say.

248. The Chairperson: Thank you very much, Dr Beaney. We will move on to questions.

249. Reflecting on what you have said today and on what is contained in your written answers to our questions, I have a general question to put to you. Clearly, the process is complex and expensive in terms of time, money and effort. There does not seem to be much by way of an impact by local industry into framework programme 7. The question is, I suppose, how to improve the process so that it becomes attractive to Dr Beaney's firm or the firms that Mr Sloan is dealing with. I know that there are attempts to improve the system with Horizon 2020. How would you reshape and improve the system?

250. Ms McManus: In recommendation 11 in our response paper, we point out that, in framework programme 5, funding was received by a full partner and the services were contracted out. That model would make it easier to engage more SMEs. Unfortunately, the framework process will be engaged at a European level, which means that all member states will engage in the process, and it is difficult for us to have influence. However, I would not underestimate the influence that the Barroso task force would have on that.

251. We have to recognise that not all companies can or will engage in the framework funding. It is a matter of engaging more companies and getting them on an R&D escalator. Stephen can talk about some of the research programmes that are available on an all-island basis, such as Fusion and Innova. We would encourage companies to get on that ladder though such programmes.

252. The Chairperson: They are not part of framework programme 7, are they?

253. Ms McManus: No, they are not.

254. The Chairperson: They come under the aegis of InterTradeIreland.

255. Ms McManus: Yes.

256. Mr Sloan: I want to come back on a couple of points. As Kirsty said, there are a number of issues about trying to simplify the arrangements. That will probably take a long time, so the easiest thing that we can do is to take the pain out of the process. Our role in that has worked. We have taken the pain away from companies and have encouraged them to become involved. The paperwork and all the running around has still to be done, but the companies do not have to suffer that pain. All they are seeing is the benefit. They can look at the situation cleanly, from a commercial point of view, and ask what will come out of the project and whether that will be useful to them. They can make the decision to be involved in that.

257. The point about the duration of the projects and the involvement of SMEs has been recognised. They did try, in framework programme 7, to pilot a number of options. Having received a project application, they would split it. They would get validation of the project from the SMEs, but they would not necessarily ask them to engage. Once the research had been completed, they would advertise the results to see whether any other SMEs — not necessarily the original ones — wanted to commercialise it. That process has not been all that successful either.

258. The Chairperson: If you were one of a number of firms engaged in the process, I am not sure that you would like the final product to be commercialised by other people, would you?

259. Mr Sloan: That would happen if the SMEs that were originally interested were no longer interested. If they have moved on or changed direction, there is an opportunity to bring in new SME partners. If a company is no longer interested or has changed direction, the research can be advertised and made available.

260. Mrs Overend: Thank you for talking to the Committee today; we appreciate it. You explained the time-to-grant process, which was very informative. As I understand it, Horizon 2020 has cut that time frame by 100 days. How will that affect your ability to respond to market development and feed into your business again?

261. Mr Sloan: It will come down to how easy it is to sell the process to the SMEs and whether it reduces the pain and the duration of the engagement.

262. Another point to be aware of is that different calls come out and the funding arrangements are different for each call. That is something else that the SMEs do not really want to know about. We are currently involved in two projects. In one of those, the breakdown of finances is agreed upfront. If that project is approved, the finance will come through, and you know what your grant will be. There is a different call, however. What happens with it is that, if the project is approved, everybody sits around a table, and then, to use a colloquialism, the bunfight starts. It is about carving things up to see who gets what. So, there are different issues, different calls and different programmes.

263. Even inside Europe, there are two-stage projects — major projects can be €10 million or €15 million — that are called integrated projects (IPs); there is a single-stage one, which is a specific targeted research project (STReP); and there are coordination and support actions (CSAs). Companies do not want to know about those or do not need to. We are hoping that Horizon 2020 will simplify that and will simplify the funding process. They are talking about doing that. They are saying that the SMEs will be funded at 100% plus 20% overheads. At the moment, in a lot of the projects, it costs an SME money to get involved. It varies depending on the different call that comes out, but, normally, it is around 75% funding with 20% overheads. OK, it is 95% funding effectively, or nearly that. However, it is difficult to say to somebody, "We would like you to be involved in this project, and, by the way, it will cost you money straight away and you do not know whether you will get anything out at the back end of it". So, we are hoping that those things will encourage SMEs to look at coming into Horizon 2020. The reduced time frame makes it more attractive, as does the fact that it does not cost them money.

264. Mr Frew: Thank you for your answers so far. Recommendation 8 is on the mentoring services and schemes and the cradle-to-grave approach throughout the life cycle of a project. Stephen, what you said about small businesses resonates with me; they just do not have the time or capacity to deal with this major funding tool. What type of mentoring support is required? I know that Invest NI has started with the research institutions. Is that the best model? How can that be adapted for the SMEs?

265. Ms McManus: I will comment on the mentoring programme. We had spoken with Enterprise Ireland and taken its model. The mentoring is from cradle to grave for the SMEs. It addresses some of the issues that have been raised previously about legal advice, so that you know what you are signing before it is signed. It also addresses issues with patents and with application writing, so that there is training in the company and that skill set is maintained within the company. It also helps with the negotiation process, because a lot of the budgets are not set until after the approval process when the budget is negotiated. So, there is a piece on negotiation skills.

266. The initial pilot, which cost £250,000, returned projects to the value of £3 million. That is from only the initial stage. Long term, there will be a number of successful applications further down the line from those applicants. It is a tailored programme for the SMEs, which not only gives legal advice but helps with the application process, how to engage with Europe and how to negotiate. So, it would be a bespoke programme for SMEs that, as we said before, takes the pain out of the process and helps to guide them through it.

267. Mr Frew: Who should provide that support?

268. Ms McManus: I think that it should be facilitated through Invest NI. The institutions have a lot of skill sets around application writing that could be utilised for SMEs. I see a natural fit through Invest NI.

269. Mr Sloan: We also find that there are great opportunities for mentoring through the projects that you become involved with. People with an awful lot of experience have co-ordinated and developed different projects. They can give you the information and are very good at helping you to network. The biggest problem that we had initially was that we had no visibility, but now, through the projects we have been involved in, we are getting visibility. I am now getting contacts from different regions in Europe asking if we are interested and if we have the companies. I am used to all the background information that comes with the request, but it then allows you to say, "Yes, there is a company that fits that or a couple that I can approach", or to say, "The answer is no".

270. That has been very beneficial. We have recently been approached by a consortium where one partner has dropped out and it is looking for a replacement. That project has already been approved and is worth €355,000 to the association. I am talking to a number of associations both North and South to see which one is the best fit. Those are the kinds of opportunities you get because of networking and the partnerships you develop.

271. Dr Beaney: Mentoring is important, because the typical SME, if it is doing well, may have two framework programme 7 (FP7) projects in its lifetime, but that does not give it much opportunity to learn. If they have a mentor who is embedded in the project from start to finish, they will quickly learn a lot more than anybody else, and there are not many projects in Northern Ireland. The experience that a mentor could provide in a short time would be really beneficial. They will have seen all the pitfalls at first hand and be able to give good advice. However, it has to be very hands on — not at just one particular stage or another but seeing it right through from idea to commercial project.

272. Mr Dunne: You are very welcome. We found your presentations interesting and informative. With regard to collaboration in R&D, your submission states that a lot of time is lost trying to find enough partners to satisfy the requirements. Do you think that collaboration with other states, the Republic and elsewhere, may help to meet those R&D requirements? Is that worth exploring?

273. Mr Sloan: Yes. That was one of the big selling points when we initially went to engage with European partners. Momentum is engaged with the Irish Software Association through the project that I run. It is a good selling point to be able to agree between ourselves beforehand and then walk in and say, "We have a project idea. We need you as a partner, and, by the way, here are the other two partners that you need for the consortium". That is a big help. It helps people to focus on you. They ask, "Who is the other partner? Have you worked with them before?" You can answer, "Yes. We know them well. We are both agreed. We are bought in. Who is interested?" You can then normally find your third European state quite quickly.

274. Mr Dunne: I suppose that the problem would be identifying partners. How do you go about doing that?

275. Mr Sloan: That depends on the project and where it is initiated. If it is initiated by an SME, it would be a case of looking at other SME associations, for example, and using their knowledge and core skills to find a logical company to approach. We have that access route due to the relationship we have. We have the same access route with regions in Paris in the digital media and ICT sectors. We are developing ones in Germany, and we have some in Cyprus. The key thing is to have a key contact who you can go to and say, "This is the kind of company we are looking for. Can you find it?"

276. If it was a project developed by an RTD performer, you would normally find that they would have their own contacts. They would use their own network to identify contacts, and you would find that contacts would flow down from them.

277. Mr Dunne: What about gap funding? The point was made about non-Invest NI clients. Is there an issue there?

278. Mr Sloan: I am not sure whether that is being looked at. You can get support funding for academic institutions to write the application. I believe that the funding is up to £12,000. That is available only to academic institutions. That is probably something else that would be a bit off-putting for SMEs that come up with an idea. Did you get any support, Paul?

279. Dr Beaney: No, not really. I gather that support was available, but we did not avail ourselves of it at that time. Financially, it cost the company an awful lot more than it would have gained with any funding. In my opinion, the SME really only benefits from the final product. The funding would be largely irrelevant relative to the costs.

280. Mr Sloan: Although academic institutions can apply for a grant, I do not believe that they are available to private companies.

281. Mr Dunne: On a general point, we were talking last week to a large company that is involved in a lot of R&D work. It came out in the evidence that it never got round to applying through framework programme 7. Do you agree that there is a reluctance and almost a fear? I suppose that, like a lot of things in Northern Ireland, people never get round to doing it. However, there are obviously barriers that people have to work their way through. A lot needs to be done to break those down.

282. Dr Beaney: I think that you are right. There are barriers at all stages. The question is whether you focus on the more strategic goal or the day-to-day running of the operation. You nearly need to have someone in the organisation who is responsible for that or someone like a mentor who is supported to do an awful lot of the heavy lifting at the proposal-writing stage and all that, where there is a massive barrier. You can partner up with a technology developer or a university to write the proposal for you, but the only thing is that they will write it with their best interests at heart, rather than yours, and it can be difficult for an SME to determine or know how to write those things. There are definitely barriers in that area, but they are there to be overcome. At the end of the day, if more companies in Northern Ireland were to do that in the long term, the economy would be more competitive on the global scale.

283. The Chairperson: Thank you very much, Mr Dunne. From what you said, Mr Sloan, throughout the years there seems to have been a build-up in knowledge of other companies that are available to partner, and that is done through networking, through associations or generally at large. We seem to have at least some advantage here, in so far as we have an opportunity to partner with a company in the Republic. It is almost like having a ready-made partner on the shelf, as it were, where you can just go along and get a partner and develop a project. However, do you not also need a third partner, at least?

284. Mr Sloan: You do. You need three European states for most of the European projects. As I said earlier, that is where networking becomes key. You have to get your backside on a plane and go out and meet those people, which is how we got the partners. Reputation has a lot to do with it. For example, in the Regions of Knowledge, which is one of the calls that we submitted recently, we went to Paris and met a partner whom we had dealt with before to talk through the idea and, basically, get them to say yes or no as to whether they wanted to partner. We had to do the same with an association in Cork. We had to travel down there. Therefore, there are opportunities. Also, as your reputation builds, more people will want to work with you. We approached a very experienced partner, but because we did not have the track record, they simply said that it was very interesting but the answer was no, and that was because we did not have a big enough profile. I am sure that you are all aware of how it works. When the projects go in, they all get ranked, and whether you get funded or not can be down to half a mark in the assessment. If they approve six projects and there is £4 million available, if the first project asks for £2 million and the second project asks for £2 million, that is it; the money is gone. That is one of the other issues.

285. Dr Beaney: One of the criteria is often the ability of the consortium to deliver the projects. Therefore, if you are partnered up with people who are not capable of doing it, that will count against you. Therefore, you have to be very careful who you choose.

286. Mr Flanagan: Thank you for your presentation. I thank the CBI for its response and its 11 very useful recommendations. The first recommends that a Horizon 2020 contact point or champion should be appointed to co-ordinate the funding across the public and private sector. I would like to go into that in a bit more detail. How do you see that working? What kind of a person do you see filling that role, and what sort of an organisation would they sit inside? Would it be a government organisation or a private organisation? What would the roles and responsibilities of that entity be?

287. Ms McManus: That really combines recommendations 1 and 2. As a region, we need to focus on our core areas, such as agrifood, ICT and renewables. In my opinion, Stephen would be a great Horizon 2020 champion for the ICT sector, because he has the experience of networking; securing partners and making those links north and south so that you have two member states there naturally; helping with the application process; and perhaps taking on the mentoring role that we talked about earlier. He has the experience of framework funding and he has those contacts across Europe to make those partners, but also create clusters in Northern Ireland, so the ICT sector would have a Horizon 2020 champion bringing those SMEs together, finding partners in the South, encouraging more participation in calls and helping with the application process. So, on the technical and strategic sides, the champion would build on those connections for our various sectors across Northern Ireland.

288. A key piece is helping companies deal with the European Commission. The feedback that we have received from a lot of companies is that once they were successful they were left to deal with any issues that came up themselves. There were specific companies who had issues locally where their partners were not delivering what they were supposed to . We were thinking that the Horizon 2020 champion could help negotiate through the Commission and also leverage in the Barroso task force. That is my interpretation.

289. Mr Flanagan: The target for spend on R&D is 3% of GDP. What is your assessment of that target? Is it achievable, is it overambitious, or should we be aiming for something higher?

290. Ms McManus: At the moment, it is very difficult to say without having the specific champions. The universities are very engaged in the framework, and their involvement could easily secure that. There needs to be a more co-ordinated approach when we are setting goals so that the industry is involved in the process much more than it is today. That is my only comment on that. The target should not just be set from a Government perspective; it should work with the ICT sector or the agrifood sector and set a goal that is ambitious for both parties.

291. Dr Beaney: If the only goal is spend on R&D, it would have to relate to some sort of economic benefit. Otherwise, you could end up with an R&D salesman who goes around selling R&D whether or not it relates to any economic benefit. That is more difficult, but it is crucial.

292. Mr Flanagan: Is that measurable?

293. Dr Beaney: It is. You could look at how much of a company's profit was as a result of R&D carried out over the past few years. There is a lot of stuff available for that. The gathering of that data might be much more complex, but I do not know the infrastructure around that. Having a metric such as that is good to start with, but I urge everybody to be careful about whether that relates to any economic benefit.

294. Mr Flanagan: I completely agree with you.

295. Ms J McCann: Thank you for your presentation. It strikes me that we constantly hear about the need to develop the SME sector here, because it is crucial to growing the economy. I know that foreign direct investment (FDI) is important as well. [Inaudible due to mobile phone interference.] If we are really serious about creating jobs for people, we need to develop the SME sector so that it is able to export. That is where we need to put a particular focus. You have given some good recommendations on how we can do that. We heard in the last presentation about skilling people and how the FE colleges are working with business to take that initiative forward in R&D.

296. You mentioned the evaluators. In your paper, you say that there are relatively low numbers of evaluators from here who would probably understand the problem better than someone from Europe. How do we ensure that people who are sitting on these panels are looking at where funding is going? There is a lot of funding out there, but sometimes it is not going in the right direction. How do we ensure that there are people here who know the issues, are directing the themes of funding and are looking at the projects that are key to delivering what we need?

297. Ms McManus: That is where the Horizon 2020 champions come into play. We select the sectors that we want to play in across Europe; the agrifood sector, the ICT sector and so on. That role can help facilitate the selection of the programmes and projects which we will go ahead with. The evaluators are a key piece, and I can leave a copy of this document. We did a comparison of evaluators across the various calls in the UK, Ireland and Northern Ireland. The evaluators really make the decision as to which projects will be successful. We are missing a piece there; evaluators, when they come back to the region, are giving feedback to the projects that were not successful. [Inaudible due to mobile phone interference.] They are learning a lesson so that they are successful next time. We need to encourage more academics and people from industry who have been successful in frameworks and have that expertise to become evaluators so that, when a local project is being evaluated, there is someone from a local perspective to help increase our success rates. We can leave this analysis with the Committee. It shows clearly that in Northern Ireland there is a very low uptake of evaluators across all the calls in Europe.

298. The Chairperson: That will be very helpful. Thank you very much indeed.

299. Ms J McCann: There seems to be a need for some sort of consortia for the small and medium-sized sector. That happened with some of the community organisations in drawing down European funds. It strikes me, from what you are saying, that you do not have the time to devote to what some of the larger companies might have or whatever.

300. You talk about a champion for this. As I have said, we hear, time and again, even in accessing public procurement contracts, that the SME sector, though central to our economy, does not seem to get the same type of focus from organisations such as Invest NI. Would a champion for that sector create jobs? I remember that, at a Finance Committee meeting, it was said — I cannot remember who said it — that if we could increase the capacity in exports and development of each small and medium-sized business here, and create one or two extra jobs, we would have full employment. It seems to me that the necessary energy or drive is not given to that. Maybe we could have a champion to try to develop all that? We need to look into the future to create employment opportunities for our young people.

301. Ms McManus: Nationally, we have just completed a report called 'Future Champions' which looks at medium-sized businesses, that is, anyone with revenue above £10 million. We have identified those businesses as a core area. Just as you said, they could contribute £20 billion to the growth of the economy by 2020. They will create the jobs, if they are promoted and fostered. I am happy to distribute that report to the Committee. Some of its key findings are about addressing key burdens, including access to finance. In Northern Ireland, there is a dependency on bank finance. We do not look at alternative sources of finance, such as venture capital (VC).

302. There is also a management and leadership issue. We need to encourage more of our indigenous companies to look at and export to foreign markets. How do we support that growth? The CBI is creating a programme for that this year, and it will be one of our key focuses for the year. How do we challenge and raise the level of ambition in those companies to look at all other markets, consider alternative finance models and look beyond Northern Ireland as a market?

303. Ms J McCann: Also, to encourage young people to come forward and create their own businesses.

304. Ms McManus: Absolutely. That is key.

305. Mr McKay: What about funding streams? You mentioned InterTradeIreland — [Inaudible due to mobile phone interference.] Do you find that some sectors, maybe the better established ones and those that are less fluid, are better at availing themselves of funds? Are they better prepared? They know the European market and who to go to. Certain sectors will be better than others.

306. Mr Sloan: Yes. The companies that are experienced in accessing funding use the likes of the Innova programme, because they have contacts. Innova encourages cross-border R&D projects between two companies. I work closely with some of the companies that are on the Innova programme, and we need to make people aware of what is involved and whether it is the right thing for them. It comes back to awareness and a little bit of hand-holding. I have approached a couple of companies that have talked to me about applications that they wanted to develop, and I worked it through with them. They had looked at Innova, but were a little bit scared of it. However, when they understood it, they moved forward and have been approved for a couple of project development grants. Therefore, the answer to your question is yes. The companies that are more solid and experienced understand exactly what they have to do.

307. Mr McKay: Is it not the case that the ICT sector is much better developed at doing that than the agrifood sector? Do certain sectors need to up their game?

308. Mr Sloan: From my knowledge of some of the applications, I would say that participation is quite widespread. There is quite a lot of participation from agriculture and a number of other sectors, including pharma.

309. Mr McKay: What about renewables?

310. Mr Sloan: I have not seen enough of that and cannot comment . However, from the ones that I have seen in passing, there seems to be a reasonable cross section.

311. Ms McManus: I have a report here from Enterprise Ireland. This is an all-island framework initiative, and the largest areas of success are seen in agrifoods, health, ICT, Marie Curie, energy security and transport.

312. Dr Beaney: On the SME side of things, we find that it very much depends on local universities and how interested the individual departments in those universities are in collaborating with industry. Some departments are not interested and just want to write academic papers, while others are very hands on. Often, SMEs are not necessarily thinking about this and the universities can show them that there is a whole world of funding that they did not know about. In our sector, the level of engagement that the companies have with their local universities is probably the biggest correlation with how much funding they will draw down. Some do almost nothing with the universities and get no funding. In my experience, that tends to be where that comes from.

313. Mr McKay: Is that changing? Do you find that colleges and universities are opening up more?

314. Dr Beaney: Not really. I know that that is what they are saying, but on the ground I am not so sure.

315. Mr Sloan: The innovation vouchers are helping. They almost force an initial engagement, and that can lead on to the likes of a KTP programme or a Fusion programme, through which a dedicated PhD student will work on a particular issue. In turn, that can lead to a R&D grant for a bigger research and development project through the Invest NI funding programme or Innova . There is a pathway, and the innovation vouchers are forcing that engagement, which was always an issue, to happen. Once people start to network those barriers are gradually broken down.

316. Mr McKay: You referred to different streams and programmes. Is there a danger in tinkering with those? Obviously you want as many funding streams — [Inaudible.]

317. Is what is there at the minute through the Innova programme adequate, or should we tweak — [Inaudible.]

318. Mr Sloan: I have not sat down and analysed the whole pathway, but good steps seem to be taking place. As I said, the innovation vouchers allow companies to see whether their ideas make any sense, KTP programmes allow companies to get further research done and, if a company is the right size, Invest NI can offer further support through a R&D grant to get the product to market. There seem to be good opportunities there. As regards generating ideas, there is Invest NI's collaborative networks programme. It helps to bring local companies together with this central idea. They identify gaps and niches. To answer an earlier question, they can identify gaps where there is an opportunity for a new business to be created and help fill that for the network. Does that answer it?

319. Mr McKay: Yes.

320. The Chairperson: Before I conclude, there are a couple of small points. As far as I am aware, the final thematic elements in Horizon 2020 have not been completely or exhaustively defined or determined. Are there any thematic elements that you think might be usefully added to the list? If you do not have an answer to that now, maybe you could have a think about it and forward an answer to us. That would be worthwhile — unless you have some ideas at this moment.

321. Ms McManus: Yes, OK.

322. The Chairperson: You talked about evaluators. That is a concept that I find hard to understand, and I am not sure where it has come from. However, you do need an evaluator to evaluate these projects. I am sure that evaluators do not grow on trees and that you have to get people who are competent in this area. How do you get to the point where you are considered to be an evaluator? Do you have to have some recognition from the European Union? What is the process?

323. Mr Frew: You have to evaluate them. [Laughter.]

324. Mr Sloan: Anybody can apply to be an evaluator. You sign up and, when certain themes come up, they will look at your past history, the skills that you have identified, your qualifications and your past track record. They will pick you from that. If you do not have the skills, you will just not get called.

325. The Chairperson: Right; it is as simple as that.

326. Mr Sloan: Also, through the networking, they build up an idea of who certain people are and who can do what. They will look for certain things. If there was one on cloud computing, they would put in a search for people who had experience of working with cloud computing. They would search for those words and pull those people out. They would then look at what level those people were at, whether they were in the private sector, third-level institutions, large companies or whatever, and select from those people. There is no harm in anybody. No one gets marked down or told, "No, you are not qualified to do this." People may have a specific skill.

327. The Chairperson: Yes, but what you are saying, Ms McManus, is that for the process to really work, we need more evaluators. I think that you are all in agreement with that.

328. Ms McManus: Yes, absolutely.

329. The Chairperson: One other point. How well do you think research and development tax credits work? Do you think that they would be useful here?

330. Dr Beaney: From my point of view, they do help. They help to take some of the risk out of the potential innovation. If I have a new material that I want to try — something like that, small basic research projects — they are quite useful. If it works, that is fine. If it does not work, at least it has not left you out of pocket. The whole process of how you claim the money seems to work fairly well as far as I am concerned. I am pretty happy with it.

331. The Chairperson: Are there specific tax credits already available?

332. Dr Beaney: Yes. The way that you claim it is that you submit annually, if you want to, all the R&D activities that you think are eligible. You then get a rebate for the corporation tax that you paid on it, or something like that. I am not from that side, but, generally speaking, it is a matter of keeping a log of what R&D you do so that you can recover some of the money. It rewards companies that —

333. The Chairperson: Is it specifically identified in your company's tax return that this is research and development, or is it just seen as another business expense that is used to reduce your tax bill?

334. Dr Beaney: I see what you mean. It depends on the company. It is open to both, really. The definition of R&D is quite broad, so it could be used for either.

335. The Chairperson: Therefore, a smart company — I do not mean that in a mischievous sense — would say, "If we put so much into R&D, we could claim that in tax relief."

336. Dr Beaney: Yes, sure. We get approached by people who say that they are specialists in that area and can maximise your claim.

337. The Chairperson: OK. I think that that is everything.

338. Thank you very much, everybody. That was a very interesting session. Once again, thanks for the written submission. If we have any further questions, perhaps we can send them to you in writing and you can respond to them along with any further information that you think might be useful. Thank you very much.

23 February 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Mr Thompson Keating
Mr Ken Webb

 

South Eastern Regional College

339. The Chairperson: I welcome Mr Ken Webb, chief executive, and Mr Thompson Keating, director of corporate and economic development. Thank you for permitting us to meet here in the college. Part of our policy is to get round as many institutions and to meet as many people as possible in the community. We were delighted to take up your invitation, and we look forward to hearing what you have to tell us.

340. Mr Ken Webb (South Eastern Regional College): Thank you very much. On behalf of the college, I formally welcome you. We are absolutely delighted to see the Committee here today. We have a short presentation, and then we will take questions.

341. The Chairperson: Thank you very much, Mr Webb.

342. Mr Webb: I welcome you to our fourth largest campus. After the meeting, we will give you a tour of the environmental skills centre, where you will be able to see how closely engaged we are with businesses. In the presentation, I will give you a brief outline of Colleges NI and the South Eastern Regional College (SERC), and we will give examples of how further education (FE) can support the economy.

343. You have some details of Colleges NI in your pack, and I do not intend to go down through any of those. The sector is a significant size, with a turnover of £250 million. Under the stewardship of the Department for Employment and Learning (DEL), the colleges have taken a tremendous leap forward in the past four years, since the merger process that took us from 16 colleges to six. I am a Johnny-come-lately to the FE sector: I have been here for less than four years. However, even in that short time, I can see how far and how fast the colleges have moved in their role in supporting the Programme for Government and, in particular, supporting the economy. Speaking on behalf not just of myself but of other principals across the sector, we are keen to do more to assist and promote the development of the economy.

344. The six Northern Ireland colleges are of a scale that, quite frankly, would be deemed to be large on a UK basis. With that comes the resources and the capabilities to be able to deliver real assistance to the economy. Northern Ireland is competing on a world market. Its businesses need to be world class, and they need to be supported by a world-class further education system to enable them to succeed. That is our aim.

345. I move to the 'FE Means Business' slide. As I said, we had the merger to form the six colleges, moving away from a supply-led to a demand-led model. Thompson will speak to some examples of that. It is very much focused on delivering the Programme for Government, taking cognisance of what industry itself — not just the sector skills councils — wants, and being very close to businesses. We have a desire to get as close to businesses as we possibly can because it is only by knowing and understanding what businesses need that we can make sure we are delivering what businesses want. As a sector, our belief is that we are highly flexible and highly responsive. That is an important factor.

346. I will set the funding into context. The FE total budget, in terms of what is distributed for courses to the colleges, is about £145 million. In contrast to that, the school transport budget is £75 million, and the higher education (HE) in FE budget is about £25 million. We provide some 20% of all higher education provision in Northern Ireland. When you consider that, as shown on the 'Colleges NI' slide, there are 180,000 enrolments, you get some sense of the scale of how many people we are dealing with and the amount of money involved.

347. SERC has about 1,100 employees and 32,000 enrolments. I will come to that briefly. We deal with over 1,100 businesses across the island of Ireland, and we have a £45 million turnover. Critically, again under DEL's stewardship, there has been nearly £80 million of capital investment in the short time that I have been at the college. We have new campuses in Newcastle, Downpatrick, Ballynahinch and Lisburn. Here in Ards, you can see that half of this campus has been rebuilt. We have world-class facilities. The same has been the case in many other areas of FE. Sadly, a few colleges are still operating with resources and facilities that are not as good as ours. There is no doubt that the significant investment in facilities is allowing us to give students opportunities to access the very best equipment and enabling us to promote a culture of excellence.

348. The next slide gives you some idea of the mix of enrolments. We have some 4,200 Training for Success and ApprenticeshipsNI enrolments; over 8,000 enrolments on essential skills, that is, numeracy, literacy and ICT; and some 18,000 enrolments in further education and 1,500 in higher education. You can see the spread of those enrolments across the college area.

349. At any given time, we have about 1,000 students on placements with companies. Those range from students who are doing higher education courses — we run courses right up to full degree level — right down to Training for Success students. We are very focused on getting industry projects and real-life projects on which the students can work. We have done that very successfully across most of our programmes.

350. We are, obviously, experiencing difficulties in getting students placed, because industry is finding things tight. In recent weeks, things in the construction industry, in particular, seem to have been getting more difficult. We are faced with a situation where students may not have an opportunity to get a placement with a company to develop their skills. Therefore, we have been creating projects with not-for-profit and private sector organisations in which we can get the students working on real-life projects and getting actual experience. Examples of those have ranged from creating prayer walks at the Belfast Bible College, to refurbishing boiler rooms and replastering and rebuilding parts of the college with other voluntary groups. The experience that those young folk are getting means that, whenever they apply for or get a job, they will have the necessary practical experience to enable them to do the job.

351. STEM (science, technology, engineering and mathematics) is a vital part of our work going forward. Just under one third of our enrolments are related to science, technology, engineering or mathematics. As a college, we have very much taken the view that we want to promote STEM. In fact, practically every new course includes a STEM element. We also have students coming not only from across Northern Ireland but further afield. In fact, we have students from 44 different countries studying at the college.

352. The next slide is about success rates. We say that retention times achievement equals success. If 100% of people are retained on a course and 90% pass, you have a 90% success rate. Our higher education success rate is 91%. Many universities would die for such results. Across the sector, the standards in higher education, which are checked by the same quality assurance organisation that examines universities, stand testament to what the colleges can do.

353. We have a success rate of 57% in essential skills. That is for individuals who have not been able to achieve a grade C or better at GCSE in maths, English or ICT. Some 81% of those who sit the exam are passing it. Again, that is a testament to the work of the staff in getting people forward.

354. Thompson will now focus on how we can work with businesses.

355. The Chairperson: Thank you very much, Mr Webb.

356. Mr Thompson Keating (South Eastern Regional College): I will narrow the presentation down a little bit to how we engage with businesses. Before I do, I will speak to a slide on how we promote public value through our return on investment from the public purse. You heard Ken talk about how effective we are as a college. The slide highlights the fact that it takes 3·4 years to get a return, through taxes, on the public investment that it costs to get a level 2 qualification. If you go from level 2 to level 3, or from level 3 to level 5, it takes only 1·9 years for the public to reclaim the money on that investment through taxation. Given a 1·9-year return on an investment, most people in business would make such an investment.

357. I move now to business engagement. Ken mentioned that we engage with over 1,100 companies throughout the whole of Ireland, from Coleraine to Cork. We do that in various ways and through various means. One initiative we used was FGas. Some legislation around gassing and recharging came out for the air conditioning industry, and that entailed a lot of training. We set up a mobile training centre that could travel around industry to service that level of qualification. We trained 300 people in the North of Ireland and 600 in the Republic of Ireland. We are continuing and diversifying further. That demonstrates how flexible and responsive to sectors we can be.

358. Although we engage with a high number of businesses, we are forming partnerships and partnership agreements with some of the bigger companies in Northern Ireland. We have had a long-term partnership with Denman, for example. We have invested in [Inaudible.] measurement machinery that has helped the productivity of that business. There has been a more recent partnership with Coca Cola over the last year and a half. It not only sponsors our enterprise system but engages in our industry projects. A recent project actually saved it a substantial amount of money. At the moment, we are developing online training for it to reduce its downturn and to improve its corporate governance and productivity. I could go on through all the major companies listed, but I am just trying to highlight how we are engaging at many levels.

359. One of the strategic aims of FE Means Business is about being responsive to industry needs. We are doing that in various guises and through various work streams. One example is upskilling through the software testers course. Through working with Momentum and e-skills, it rapidly came to our attention that there was a huge demand and lack of skills in software testing. Software testing involves a different skills set to that needed for software writing. In conjunction with DEL and with its support, it took five weeks for the college to put on a level 5 qualification in order to provide a conversion course for those who had attained a certain level and convert them into the required skills sets for business. Once we created the course, we advertised, and we got 700 applications for 20 posts. Those were guaranteed interviews. We ran the course in Lisburn, and 19 of the 20 completed the course and achieved the interviews. That is an example of how engagement with the sector and with business can identify skills that are relevant and required and moves us away from the supply-led model to the demand-led model.

360. In relation to workforce supply, we are forming a partnership with Grafton at present. We went to Allen and Overy because, as you are probably well aware, Invest NI brought in Allen and Overy. It is a very London-centric organisation and is used to different cultures. It went through a recruitment process, and it has concerns about culture in many ways. The company told me that it had recruited for behaviour and attitude, and it now has skill issues. The skills that it requires are modern-day office skills. It is about document creation and proofreading. It is a level above normal office administration. The company trades in documentation around the world. I am currently working with Allen and Overy on courses and skill requirements to provide the level of expertise it wants. If that company has that level of skill deficit, it leads me to believe that so do PwC, Carson McDowell and the other companies that have to work in a global society.

361. Another area that we are focused on is productivity. There is a flagship scheme called business improvement techniques, which has proved very successful. The example I will cite is Huddleston Engineering. We have done not only level 2 business improvement techniques but level 3. We are currently the only college delivering level 3 business improvement techniques. That company has been very impressed with improved productivity. It is very difficult to quantify, but the company says that it has made in the region of over £200,000 of improvements through its investment in that training.

362. We are also working on applied research. We set up the environmental skills centre just over a year ago, and we have had two companies coming through. One was a company called Bluebuild Energy, which wanted to focus on the renewables markets and saw the opportunity coming up. With the renewable heat incentive coming in, its timing was pretty good. We brought his workforce here, upskilled it, and helped him to source new product material. He is up and running now, and it is proving very successful for him. The second company is called Astar, which is in the process of redeveloping a heat pump that has the unique selling point of not having a fan. We are doing the final research and development work for that company, which is in late negotiations with Four Seasons Health Care to put the heat pumps into its nursing home. The company's focus at the moment is on social housing. We are also working with the Northern Ireland Housing Executive in respect of upskilling the workforce for retrofit and passive housing.

363. One example of reskilling is where Bombardier advertised for mechatronics engineers but could not get them. So, it came to us, and we put on a course that took its basic maintenance engineers and upskilled them to mechatronics engineers. We were very pleased with that, and we are now going on to get progression routes up to the next level — level 3 — in mechatronics.

364. That is a range of examples that shows how we are responding to industry needs. We are working hard to understand what the skill sets are and to meet the demands of making the curriculum more relevant. We also try to underpin strategic decisions for Northern Ireland. For instance, there is a food strategy for Northern Ireland that highlights jobs and skills deficits, and one particular area, in keeping with today's theme, is that Invest NI wants to ensure that Northern Ireland is leading in low-carbon research, design and manufacturing. That strategic aim, combined with the fact that 17 of the 24 sector skills councils highlighted that there were skills deficits in the environmental and low-carbon areas, prompted us to take a hard look at what we needed to do, and we came up with the vision of the environmental skills centre.

365. FE is responding collaboratively. One of the big wins out of the merger is that there are now six colleges and signs that communication and collaboration are more focused. One particular emerging market is the low-carbon economy, and we have a collaborative approach to that. Three years ago, we started our carbon-zero project, which has been hailed as a success. Its aim was to look and raise awareness and to create a fit-for-purpose curriculum. Belfast Metropolitan College (BMC) has taken on apprenticeships in wind turbine maintenance; we are focusing on offshore accreditation among other things; and the wind industry foundation degree has been created at South West College. That college is part of the global wind and maritime alliances, as are we. We are just about to set up a cross-working group to see how we can respond to the offshore wind skill sets that will be landing on our doorstep next October.

366. The environmental skills centre is a little bit more focused and wide-ranging. As I said, it was set up to address the skills deficits highlighted by the sector skills councils. It has to do two very simple things: to help to exploit the opportunities, and there are many of them coming down the line; and to help to meet the challenges. People do not know enough yet. The renewable heat incentive is coming in in April, and a lot of people still do not even understand what a biomass boiler is. The centre is about having access to somewhere that is independent. That is a big plus — we are independent, and we are not trying to sell you anything. Everybody else is trying to sell you something. We can carry out research and development and teach you whatever you want. It is a big triangulation between industry, education and, hopefully, government, where people can come and access information.

367. The environmental skills centre currently works on three key work streams. The renewable energies lab is there to show you and to identify all the different types of renewable energies, so you can feel it, touch it, train on it or do whatever it is that you want to do. The other area is low-carbon design, because that is the future in respect of passive housing and how you can reduce expenditure through energy.

368. We set up the environmental skills centre less than a year and a half ago. In one year, we had received five awards and accolades. However, what has impressed me most is how industry wants to engage with us. Every time we hold a seminar here, we get 100-plus people coming to it, and industry has actively approached us to form active partnerships. For example, JP Corry wants to be part of the scheme, and it is highlighted in an initiative called the render centre. Rendering is going to be an important part of skill development in respect of retrofit and reducing fuel poverty. Kingspan wants us to be its solar centre and to take on its training instead of that being done within the organisation. Baxi came to us and said that it wanted to set up a Baxi academy here.

369. It is hugely important that we engage with business and that business engages with us, because technology is moving at a tremendous pace. If we have to teach children the latest technologies, we need to be tied into industry. We need to have access to their innovation hubs and networks and to be able to solve issues for them going forward. So, by having that connection, our lecturers, technicians and students are being upskilled to a world-class level.

370. I think that we have spoken for 10 minutes, so we are now open to questions.

371. The Chairperson: Thank you very much, Mr Keating, and, once again, thanks to Mr Webb. The presentation was most interesting. It certainly dovetails with the Committee's approach to renewable energy, in particular, and to trying to push that agenda with government. So, we are very pleased to acknowledge your work in that area. I suppose that, in a sense, it is not about pure research but about skilling or upskilling people for the renewable energy sector. It is more about the application of research than the pure research itself. I think that that is very important. I was very impressed by the facility you have here to respond quickly to the needs of business, and you should be commended for that. Setting up the centre is, of course, part and parcel of that, and it seems to be fulfilling a need and filling a gap that exists.

372. In respect of your contact with business, does business come to you or do you go to business? Mr Webb, you have some association with, I think, the Confederation of British Industry (CBI). Is that right?

373. Mr Webb: Yes, Chair.

374. The Chairperson: It is very easy to say that colleges and education generally should try to satisfy the needs of business and industry. You can make that statement, but doing it is an entirely different thing. So, does business come to you or do you go to business? What is the position?

375. Mr Webb: I will start off, and Thompson can jump in. It is a bit of both. As Thompson outlined, businesses certainly come to us. However, we are also very active in reaching out to businesses. As outlined, we are actively looking for student placements with businesses, and that helps us to engage with them. We are also looking to assist businesses with their development, so that is another area where we engage with them. We engage with businesses and the business community on multiple levels through, for example, the councils and their work on economic development activity; Invest NI; the Department; the CBI — I sit on the CBI council; the Institute of Directors (IoD); chambers of commerce; and city centre management groups. The college is a national skills academy for retail. Last week, all the city and town centre managers were with us in Lisburn to look at how we could provide upskilling for staff working in the retail industry during these very difficult trading times. So, we engage with businesses on multiple levels. However, we are always keen to do more and to engage more.

376. Mr Keating: I will add a couple of points to that, but before I do so, I would like to pick up on the point about research that you made. I am mindful of the Committee's inquiry and our response to it, and one thing that I did not bring out very clearly in the presentation was our working relationship with the University of Ulster and Queen's University. This facility is equally important for signposting research and development, and we have done that on many occasions. We have excellent working relationships. One of the points that I made in our response was that the colleges could augment the research and development process by developing research centres for applied research and development. The majority of companies in Northern Ireland are small and medium-sized enterprises (SMEs) that do not necessarily align themselves to universities but are more comfortable to walk through the door of a college [Inaudible.]. Once they get the helping hand, we can signpost them into the universities.

377. The Chairperson: Is that approach in association with other colleges or simply within your institution?

378. Mr Keating: It has always been here, inherently, but the environmental skills centre has put a lens on it and has enforced that, because we need to work collaboratively with both universities. There are synergies. Increasingly, the universities need to have a bit more understanding about the applied side of the house. They can come here and touch and feel and get a bit of experience for their students. Equally, we need a path into the universities for businesses that are developing and need that extra step forward.

379. Mr Webb: That is the approach that other colleges wish to follow and are following. For example, South West College is moving in exactly the same direction. All the colleges are keen to do that.

380. The Chairperson: Sorry, I interrupted you, Mr Keating. Have you finished?

381. Mr Keating: I was going to make one more point about business engagement. There are various ways of engaging with businesses, and I am noticing now that one of the more successful ways is to use existing channels through such organisations as IoD or CBI. Organisations of that nature have already made network channels, and we can be part of that and can align our strategic aims with theirs. That gives you good access in and raises the profile of what you can do.

382. The Chairperson: Thank you very much indeed.

383. Mr McKay: That was a very good presentation, and an important point was made about ensuring that students and lecturers are up to speed with industry. In this area of work, you need to be ahead of the curve as technology moves forward at rapid speed. We are always talking about the need for communication, and, from the presentation, it comes across to me that everything is well interlinked and gelled together. Have there been many difficulties in getting to that stage?

384. Mr Keating: It is well linked because our network is extensive, so we look at it from every perspective. We look at it from the perspective of where Northern Ireland's strategy on the economy wants to go, and we make sure that we are aligned with that. We are also connected to sector skills councils, to the sector and to businesses, so we have a rounded perspective of where we can go. We have evidenced here that we have provided a facility that meets the needs of business through having that rounded perspective, and, because we have done that, it is proving very successful. Those businesses would not be coming to us or wanting to be part of this if they did not think that it was going to be a success.

385. Mr McKay: Do you find that students who come from education are geared towards the environmental and renewables sector? To be honest, we do not hear that much about the work that you are doing. Is more public discussion needed around how that can steer the economy?

386. Mr Keating: At the moment, we are satisfying the demand of the existing workforce. There is a bit of work to be done on the framework and the environment to start creating the jobs. I have no doubt that the renewable heat incentive that is coming in very soon will start to change people's thinking and that there will be a demand for new ways of doing things, which will have to be reflected in upskilling and reskilling. New career pathways will be created on the back of that.

387. Creating new careers has to go back a few years to our supply chain in schools. It is about motivating schoolchildren around the future types of employment to do with the STEM subject areas. We are beginning to do that under the entitlement framework and by working with careers and having careers days here that are focused on STEM. Last year, over 2,000 children came to our Bangor campus, and the theme was STEM and renewables. It will take a while for that to filter through, but it is about how we are focusing on our supply chain for the future.

388. Mr McKay: There is a bit of debate now about the future of DEL and whether it splits up into Education or Enterprise, Trade and Investment. You are looking in both directions: you are looking towards business and the economy and also towards the earlier stages of education. What is your view on that?

389. Mr Keating: I am firmly looking at the principal at the minute. [Laughter.]

390. The Chairperson: I suppose that, in essence, it is a political question. However, do you have any comments on what might take place?

391. Mr Webb: Under DEL's stewardship, the colleges have come a long way in supporting industry, but one also needs to keep sight of the work that we have done on the entitlement framework and how important that is. So, presently, we are in one Department [Inaudible due to mobile phone interference.]. As Thompson outlined, it is vital that we help to shape the curriculum and career paths in schools so that children move through education in a route that will ultimately take them to jobs and will satisfy the needs of industry. Our workload and funding tend to indicate a move towards a Department of the economy rather than a Department of education, but we need to recognise that we have a role in education as well.

392. The Chairperson: In essence, it will be a political decision. You can advise, but you cannot determine it.

393. Mr Webb: Absolutely, Chair. Once that political decision is made, whichever Department we, as a sector, are in, it is vital that we have the resources and mechanisms to allow us to deliver for the Executive, the Programme for Government and society as a whole. I, personally, am comfortable that, as long as we have the resources and mechanisms, the decision is an organisational and political matter rather than a matter that is directly for us.

394. Mr Agnew: Thanks again for your presentation; it is good to speak with you again. The Deputy Chair, as he often does, has stolen much of my thunder.

395. Do you feel that enough is being done to push us in the direction of the ambition for Northern Ireland to lead in low-carbon research, design and marketing? I compare us with Scotland. My assessment is that Scotland sees a low-carbon economy as an opportunity and wants to do as much as it can. I sometimes think that we see it as something that is coming down from Europe that we have to do, certainly at government level. What is your assessment of that and what more should we be doing? If we are to compete with Scotland, we are starting behind them at this point.

396. Mr Keating: I have two comments on that, because there are two ends of opportunity in the low-carbon economy. Invest NI has clearly set the stall out on research and design and on being at the forefront of the knowledge economy around the low-carbon economy, and Queen's University and the University of Ulster are gearing themselves up and working very closely with Invest NI to promote that.

397. However, I fear that we are, potentially, missing another opportunity at the other end of the market, which is about working in the offshore market and maintaining and accessing jobs. The recent initiative of placing offshore wind turbines in the Irish Sea could create a lot of job opportunity, and I am not wholly convinced that we are taking full advantage of that. As you may or may not know, DONG Energy has won two contracts to install and maintain two offshore wind turbine farms in the Irish Sea. They will manufacture those in Germany and bring them across to Hull, where they will assemble, test and commission them to a degree where about 12,500 jobs will be created. They will then come across to Belfast, where the logistics and assembly plant is being created by Farrans. That £50 million of investment will, potentially, create 4,500 jobs, of which only three are currently guaranteed in Northern Ireland.

398. The offshore market holds many opportunities, particularly for a construction sector that is suffering. In order to work offshore, you have to lay cable and put foundations in the seabed and to erect the huge structures. A lot of the skill sets already exist in the construction industry here. However, you need a ream of health and safety legislation to work offshore. You cannot put one foot offshore if you do not have minimum safety requirement training, such as minimum industry safety training (MIST), OPITO and Client Contractor National Safety Group (CCNSG) training and a helicopter dunk test. In Hull, all that infrastructure is in place, so the indigenous population can access those qualifications and local people can avail themselves of the job opportunities. In this college, we are working to create some of those qualifications, but there is an opportunity to open up some of the potential jobs to people by skilling them in offshore accreditation.

399. Mr Dunne: I apologise for being late this morning. It is good to see you, Ken and Thompson, and we congratulate you on the excellent work that you have done at SERC. It is to be commended, and you have shown a lot of leadership. The new buildings that you have throughout the area are a great credit to you and show the commitment that there has been.

400. Ken, you mentioned apprenticeships. That is a big issue. During a recent visit to the college, I was struck by the young lads who were doing work within your own buildings and were keen to learn basic skills. That brought it home to me and others that there is a tremendous shortage of opportunity for young people like that. What more can be done to address those issues?

401. Mr Webb: As I outlined in the presentation, a lot of companies have been unable to offer apprenticeships and the numbers of apprenticeships have fallen by the wayside. The Department for Employment and Learning introduced the programme-led apprenticeship scheme over two years ago, which allows young people on that course to get placements with companies. They spend two days in college to get the underpinning skills and, hopefully, spend two days with a company in the same way as an apprentice would.

402. Unfortunately, getting placements has been difficult and is becoming more difficult, particularly in the construction industry. To ensure that students get opportunities to practise and embed the underpinning skills, we have created projects with not-for-profit organisations and the voluntary sector, through which the students can undertake work to practise those skills. As I said in the presentation, we have worked with the Belfast Bible College, where students have created prayer walks, refurbished boiler rooms, built walls, replastered rooms, and painted and decorated. Indeed, those young people have also been involved in the full construction of buildings. At any given time, about 400 of those young folk are out on projects across the whole of the south-eastern area. There are projects with Autism NI in Newcastle, the Atlas Women's Centre in Lisburn, organisations in Bangor, and so forth.

403. The benefits of that are many. Those young folk get the opportunity not only to practise their skills but to work in an environment that is like a real work environment. They have to turn up on time and to behave properly as they would do in the workplace. They also interface with people who they may not otherwise have had the opportunity to interface with, so it helps with their personal development. The charities also benefit. They get work done that they could not have afforded to pay to have done. They provide the materials, and the materials or supply industry benefits because the project would not have happened at all. So, it is one of those situations where everyone is a winner. However, in particular, it is the personal and skills development for the young folk that is so important.

404. We frequently hear from businesses that graduates or students coming out are not work-ready and that they do not have the attitude or the necessary skills to come straight into work. That is why we have pushed to have industry projects and placements. We have also introduced a City & Guilds qualification aimed at students' personal development and promoting enterprise and entrepreneurship. From September, universally across the college, students will not just do a single vocational course. They will do a range of courses, from their vocational course through to the essential skills courses on ICT, literacy and numeracy, and the City & Guilds personal development course, which will embed the skills to enable them to be work-ready when they come out. That is why, as a college, we promote student companies as part of our programme, so that students can gain an understanding of what it is like to be in a company and to be in a work environment.

405. Mr Dunne: OK. Thank you very much. I have a couple of other questions. Do you see universities as a threat or a challenge?

406. Mr Webb: I see them as neither. We are complementary to one another — very much so. As Thompson outlined, we work very closely with both universities in Northern Ireland and those elsewhere. We each have our role to play. Universities are very focused on the big "R" of R&D — the blue skies research. Colleges are more focused on the development side. Our skills are complementary. The mixture of the two and the promotion of the two working together will only add to the strength that we, as part of the education sector, can deliver for industry.

407. Mr Dunne: Do you feel, Ken, that we need to get away from the idea that everyone needs a degree to be successful?

408. Mr Webb: I think that there should be more higher education in further education, particularly in apprenticeships at levels 4 and 5. There are insufficient numbers of those. The way in which schools have approached education has been that you go through GCSEs, get A levels, and go to university to get a degree. That is it; that is the route. However, since 2008, we have been seeing situations where lawyers are becoming unemployed, and the traditional route through education of getting a degree is not necessarily delivering the best outcomes for students. We can certainly improve on current careers advice. Higher education in further education is an area that is underdeveloped and needs further development. The applied area of higher education is one that needs a greater focus because it is ultimately what industry needs.

409. Randox, for example, will tell you that, when it advertises jobs, it gets people with PhDs who have aspirations for pay. However, what it wants them to do is not PhD research work but is more akin to level 4 or 5, and it finds that such people do not have the skills necessary to start to work. In simple terms, those are pipetting skills, titration skills and so forth. Those people have not gone through an educational process that is practical in its nature; it has been academic in its nature.

410. I think that is the area that needs further development.

411. Mr Flanagan: Thank you very much for your warm welcome and your presentation. Thompson said that many people would not know what a biomass boiler looked like. That is largely accurate and is the case for most forms of renewable energy, apart from a wind turbine. That is also the case for the payback period and the costs associated with installing such devices. How do we go about addressing that? A conference on renewable energy was held yesterday in the agriculture college in Enniskillen, where a wide range of businesses displayed their products. It attracted a big crowd. There is huge demand for those things, both with the security of supply it brings and, eventually, the lower prices for electricity and heating homes. It also has economic benefits and the potential for job creation. How do we improve people's knowledge of renewable energy and the different forms of renewable energy generators out there?

412. Mr Keating: It is around communication, and communication as a two-way process. At the minute, we are communicating one way — the environment framework is not enough for people who want the information. As I said before, when the renewable heat incentive comes in, neighbours, friends, businesses and companies will start putting in those renewable sources because of the grants associated with it. That will be the proof of the pudding, and people will be asking the questions.

413. Along with a lot of other stakeholders, such as Action Renewables, we put on seminars and tried to raise awareness. The information on biomass came from an Action Renewables survey. However, until such times as it becomes a reality, like the renewable heat incentive, it is very difficult to get the message out there. There needs to be the framework around the environment before we can communicate properly and start to create the demand for the skills. Again, it is like the Housing Executive around fuel poverty and the Programme for Government. That will probably secure some action now. We are also working with the Northern Ireland Housing Executive on areas of development.

414. Mr Flanagan: What do the majority of students do when they leave here? Do they go and work for some of the businesses that you collaborate with, or is there a high level of entrepreneurial spirit among your students to start up their own businesses? Is it the case that there is not enough support for young people who want to leave college and start their own business? I am interested in what your college is gearing young people up for.

415. Mr Webb: We are gearing them up to either to start their own business, go into employment or go on to further and higher education. We do not want them to end up unemployed. This year, significant numbers are progressing into further education. Almost 1,000 students from this college made applications to the Universities and Colleges Admission Service (UCAS) for university places, so we are very much part of the progression route. Significant numbers of our students are starting their own businesses, and significant numbers are going into employment. Indeed, the young man at the back of room, who is controlling the sound system, was a former pupil of this college and now has a successful career. There is a range of outcomes.

416. To go back to personal development: because the economic climate is changing so quickly and because areas of business and industry can find themselves facing an economic downturn very quickly, with new areas arriving, we try to make sure that our students have a mental attitude that enables them to have confidence in themselves so that if the job opportunities in one area diminish, they can reinvent and reskill for jobs in new areas.

417. When one company was closing down in west Belfast, I listened to an individual on the television say that he was a lathe operator for 18 years but that there were no opportunities for him going forward. It is absolutely criminal that he thinks that he is finished and washed up. He said, "You can only have so many taxi drivers in west Belfast." As a lathe operator, he was operating complex machinery. He was having to operate to very fine dimensions. He had huge skills that he did not properly appreciate. He had a mindset that said that he was finished. We have to instil our young folk and our older workforce with confidence. We are endeavouring to do that. They need to understand the skill sets that they have and that they can reinvent themselves and seek out and take new opportunities.

418. Mr Flanagan: Do you think that the Executive, or society as a whole, reacts quickly enough to large scale redundancies like that? Is enough support provided to people who have find themselves out of a job and who, with a bit of money, could maybe start up their own business? Is there anything that you would like to see changed to give people more of an avenue to get back into employment quicker?

419. Mr Webb: There are a range of facilities on offer. As with everything, there are areas that can always be tweaked and improved. However, in some ways, this is not about money. It is about instilling an entrepreneurial attitude and an attitude of confidence in people and society as a whole. That is about communication as much as it is about money. It is about ensuring that people have the attitude and the skills to be able to deliver on it.

420. Mr Frew: Thank you very much for the presentation and your answers. I will name-drop a few businesses in my constituency. Willie Wright of Wrightbus is very vocal on where further and higher education should have gone 20 years ago. What he said then is taking place. There are other industries and large companies around Ballymena, such as Japan Tobacco International (JTI), Michelin and Moy Park. They all say the same thing, which is that, for years, the further and higher education facilities looked down towards their student base rather than up to their business base. What is happening now is the realisation of Willie Wright's dream. He has always talked, and probably more so in the past seven years, about the skill sets that people leave school with, especially numeracy and literacy skills. You talked about the additional skill sets that companies need above that, with regard to office work and so on. How big a problem is it? Do you recognise it as a problem? Is there a vacuum or void in the numeracy and literacy levels of our young people?

421. Mr Webb: It is well known that significant numbers of young people are coming out of school without having attained a grade C in GCSE maths. Although that number has been declining, it still is a hugely significant number. As a college, we have 8,000-odd enrolments. Across the whole sector, 25,000 students are enrolled in essential skills courses to get them to a level that we really should have had them at when they came out of school. It is a significant problem, and we are playing our part in addressing it. There is no doubt that, if we had students coming to us with a grade C in GCSE maths, it would be easier to push up attainment levels in the college. DEL has been focused on it, and it has had a very high priority in that Department. It has had a very high priority in this college, and the Department of Education is very focused on it. It is absolutely a top priority. Also, in addressing this, we find students coming in with not just educational problems but a wide range of social and financial problems that, quite frankly, have more impact on them not attaining [Inaudible due to mobile phone interference.].

422. Mr Frew: I see that you have a wide range of engagement with businesses across the island of Ireland, and that you have enrolments from all over the Province. What makes people come from other areas of the Province to this college? If it is because you prioritise one subject or a series of issues, what are the other colleges doing throughout the Province? Do they have niche projects or markets? How does that network together in a Province-wide scheme?

423. Mr Webb: If you look at enrolments for other colleges, you will, to an extent, see the same sort of pattern. However, we run courses that some other colleges do not run, as do they. Students will travel to go to those courses because there would not be enough demand to warrant a course in each college. That is easier to do for level 3, level 4 and level 5 courses, but at lower levels, people will not travel or cannot afford to travel distances. You will see from the breadth that people are travelling that it is probably at the higher levels of provision rather than the lower levels. We need to have campuses that are accessible to the local population without them having to travel too far.

424. Mr Frew: My final point is about the construction industry. Do you feel that the construction industry is adapting to renewables with the bad time that it is going through, and, although it pains me to say it, there being no real sign of recovery? Do you see that drive there? Also, what interaction do you have with the agricultural and agrifood base with regards to adapting in this very worrying climate? We have been talking about renewable energies, and we have targets of 40% in the strategic framework, but I am one of these people who believe that you cannot convince a household to go down this route unless it costs them money not to have it or it saves them money by having it. Until you convince them of the pound in their pockets, renewable energy and the environment does not really come into it. Do you see enough change happening in the construction industry and the farming community?

425. Mr Keating: Some change is happening, although I am not sure whether there is enough. There are opportunities around two or three areas. I mentioned the renewable heat incentive that is coming in, and I think that will create demand. With demand, I think there will be the potential for jobs and reskilling people in those areas.

426. There is a potential around the green new deal, but by the same token, housing associations are forwarding the agenda on fuel poverty. That is going to require skill sets and upgrading and regrading. It is also going to capitalise on new skills in the construction industry. There is the potential also of offshore working in the Irish Sea and beyond, which is a massive market in maintenance. As I said, the skill sets in the construction industry around budget management and laying cables are transferable as foundations would be needed in the seabed, and I think we should be doing more to open up those opportunities to the construction industry. There are opportunities, and I think there will be an opportunity for the construction industry to diversify by going into renewables and various workstreams.

427. Mrs Overend: Thank you very much for your presentation. It was very interesting. I feel as if I am back on the Employment and Learning Committee.

428. On work placements, it was very interesting that you are working more with charitable organisations. It often seems to be the case that you work with large organisations because it is easier to find placements. How are you finding working with smaller businesses? Is it possible to change their mindset to the same as that of the charitable organisations? Maybe they could get more done if they took people on. How are you finding that?

429. Mr Webb: A significant number of our placements are with small businesses. In our Training for Success and ApprenticeshipsNI areas, we have training support officers who engage directly with small businesses to endeavour to get placements. The officers engage with businesses during the placements to ensure that the students are getting the benefit of the placements and that the employers are happy. That presents opportunities for us to develop wider engagement with the businesses. That is something that we have been doing, but we recognise that we need to do more in that area, because, at the minute, those training support officers are focused on the placements. Obviously, we need to expand that to make placements more fulfilling for small businesses. That is an area that, as a college, we are working on to help improve the service that we are giving to small businesses so that the staff who are engaging with them on placements are able to offer them help and advice or signpost them to where they can get additional help and advice, and give them encouragement to employ more people.

430. We find that, when a business takes a student on placement, it ultimately moves towards employing them because it has had time to see them developing in their workplace. You can see that significant numbers of students, having been through placements, do get jobs.

431. Mrs Overend: I was most impressed by your links with businesses and your ability to respond to their demands. How is your careers advice adapting to reaching into schools and the community? How are you getting your message through? Are you working on that as well?

432. Mr Webb: Increasingly, we are working closely with schools through the area learning communities. There are area learning communities across Northern Ireland, and in north Down there is a particularly active one. That is an opportunity for the local colleges and schools to get together to look at how they are going to deliver on the entitlement framework. That also gives us an opportunity to engage with the schools on careers.

433. Careers advice is also about helping to form the curriculum that students should consider and be offered. Through that process, we are working with schools to help inform them about what we see as career opportunities for students and routes of study for students. In the 45 schools that we are dealing with, not just in the south eastern area but in greater Belfast and beyond, 11 of which are grammar schools, we have seen them changing their curriculum to take account of what we are suggesting. The curriculum is becoming more focused on what industry needs.

434. Mrs Overend: Very good. That is very interesting. I want to make one final point about the Department of Enterprise, Trade and Investment (DETI). Is Invest NI helping you in any way? How is it supporting you?

435. Mr Keating: The relationship with Invest NI has become quite strong over the past three or four years, and certainly since the merger. There has been better recognition that further education colleges can contribute to Invest NI's strategic aims and objectives and to the economy. In particular, we have strong relationships in areas such as environmental matters and renewables. We are working with Invest NI at all levels, and the working relationship is a good one.

436. Ms J McCann: I apologise for missing the beginning of your presentation. You mentioned the need to work together with business and to encourage young people to take up STEM subjects, because of the apparent decline in uptake. I was interested in what you said about the impact of an individual's social and economic background on their studies. You are obviously setting out a clear pathway for the jobs that are going to become available in the future, which represents common sense and is good practical advice.

437. The diagram in your brochure shows that, for the most part, enrolments for the STEM subjects are low in socially and economically deprived or disadvantaged areas. You mentioned the location of the colleges; is that the reason for low enrolment? Is it because people cannot afford to get to them, or that no transport is available, or is it because further education is undeveloped as a whole? Do we need to look at the types of subjects that some of the other colleges are delivering? It seems to me that you are delivering a focused subject range. I know that you deliver other things, but I am interested in building the STEM subjects. Is there a disconnect from some of the other colleges in other areas?

438. Mr Webb: All the colleges are focused on the priority skills and on improving the STEM subjects. You will have seen that there has been an increase in priority skills and STEM subjects across all the colleges. The grammar school sectors have been stronger in STEM subjects than the secondary school sectors. That is why we, as a college, have been keen to look at the mix that we are providing under the entitlement framework, and, perhaps, look at giving further opportunities for pupils in secondary schools, which tend to serve more disadvantaged areas, to engage in the STEM subjects at an earlier stage. That is very much part of the process that we are developing to improve opportunities for students to study STEM subjects. All the colleges are focused on that.

439. Ms J McCann: Why is there such a low uptake in Belfast?

440. Mr Webb: I am sorry; I should say —

441. Ms J McCann: Is that just the uptake in your colleges?

442. Mr Webb: Those are the enrolment figures for our colleges. They show that, although an individual may live in Belfast, they may choose to attend one of our campuses. Belfast Met has a similar map that shows students coming from the south eastern area being in Belfast.

443. Ms J McCann: Are they enrolled on similar programmes?

444. Mr Webb: There are similarities, but the answer to the earlier question is that each of the colleges has areas of specialism. Up to and including level 2, you will find that all colleges will, in the main, offer the same provision. Above level 3, there are differences between colleges that reflect those areas of specialism. We provide a huge amount of information, communication and technology (ICT), for example, in comparison with other colleges that offer different subjects.

445. The Chairperson: During the week, I met Mr Jim Nicholson MEP, and he is very keen on the further education colleges working together on research and development. He feels that Northern Ireland as a region is too small to indulge in a fragmented approach to research and development and that that applies not only to what I have termed pure research but to applied research. It is a strong point that he made to me, and he is looking at it from outside as it were and saying that this is what should be done. It was a strong message that he delivered, and I have sympathy with it. I leave you with that message.

446. Mr Webb: Collectively, all the colleges are keen to progress on further collaboration, particularly in the areas of research and development. More recently, we have been doing that in international work. Colleges Northern Ireland, including a representative from our college, was in Saudi Arabia recently, and Thompson has been in India. We have a sister college in Japan, Toyama National College of Technology, and students from Japan come to our college. There are a wide number of examples of the colleges collaborating and working together, and I see that further developing as we go forward. By the same token, individual colleges will further develop their areas of specialism individually and collectively. We will be much more collective operating as a sector.

447. The Chairperson: Thank you very much, and, once again —

448. Mr Agnew: Chair, can I ask a quick final question?

449. The Chairperson: Yes, of course.

450. Mr Agnew: Phil made a point about people's awareness of renewables, and, in one sense, it is a great strength of renewables that there are so many diverse technologies. At the same time, getting people to understand what is out there and what they should go for is a problem, so they may not start to try because it involves too much research. Do you have any ideas about how we can help that process?

451. You mentioned the importance of word of mouth; your neighbour gets in it and says that it is great. Obviously, poor-quality installation or the wrong technology in the wrong home damages the whole industry. Is there merit in seeking an industry standard, something like CORGI? Would that help to give people confidence in the industry?

452. Mr Keating: That was three or four questions. It is critical that there be industry standards going forward, both for installation and for where people are selling renewable energies. We see a lot of situations where people are selling renewable energies that do not meet the claims that they made. The strength of this college is its independence, and suppliers see that and are keen to have their products here. We can work with products and explain them. The Northern Ireland Housing Executive is piloting schemes around passive house and retrofit, and we are looking at ways to create an accredited workforce that it can have confidence in and at having auditing systems that can maintain that confidence level.

453. Mr Agnew: Thank you, Chair, for you indulgence.

454. The Chairperson: Thank you very much, Mr Agnew. Thank you, Mr Webb and Mr Keating, for your presentation and your answers to our questions. On behalf of the Committee, keep up the good work. It is very impressive, and this has been a very positive engagement.

1 March 2012

Members present for all or part of the proceedings:

Mr Paul Frew (Acting Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Givan
Mr Stephen Moutray
Mrs Sandra Overend

Witnesses:

Mr Ronnie Harrison
Dr Leslie Orr
Mr David Raymond

 

Aerospace Defence Security

455. The Acting Chairperson: I advise members that briefing the Committee today are David Raymond, who is deputy chairman of Aerospace Defence Security (ADS) Northern Ireland, Ronnie Harrison who is Thales's technical director, and Dr Leslie Orr, who is manager of ADS Northern Ireland. I apologise on behalf of the Chairperson, Alban Maginness, who has probably just passed you in the corridor, but he has had to go to another engagement. Members have put me in his place for the rest of the meeting. You are very welcome to the Committee, gentlemen. Without further ado, if you have a presentation to give, please be our guests.

456. Dr Leslie Orr (Aerospace Defence Security): On behalf of ADS, I thank you for the opportunity to share our thoughts with the Committee. I will say a few words and then I will pass over to my colleagues Ronnie Harrison, who is from Thales, and David Raymond, and both of them are members of ADS.

457. I will talk through my paper and pick out some items. ADS is the trade body for aerospace defence and security. We represent 900 companies across the UK. We established here in Northern Ireland in 2010, and we have 45 member companies here. Those companies represent 7,500 employees, so it is a key sector in Northern Ireland.

458. The aerospace, defence and security sector in the UK contributes £23 billion to the economy in the UK. The sector invests £1·7 billion in research and development (R&D). Therefore, it is a big part of the economy. The UK has 17% of the world's market share in this sector alone. The defence sector employs 314,000 people, and R&D in the sector accounts for about 8% of sales.

459. The space sector is growing by 10% a year. In the UK, it contributes £7·5 billion to the economy. The security sector contributes about £2 billion to the economy. Therefore, all those sectors together across the UK are a very big part of the economy.

460. In Northern Ireland, we did a survey last year, and I will pass round a copy of it. The four parts of the sector contribute about £1 billion to the Northern Ireland economy, so it is a key sector. As I said, it employs 7,500 people. In Northern Ireland, R&D in the sector is about £34 million, which represents 3·5% of turnover. Therefore, the figures back up the findings of the Committee that R&D in Northern Ireland is 3·5% of sales, whereas, in the UK, it is 7% of sales. Our goal is to increase the business for ADS Northern Ireland members and to increase investment in R&D.

461. Many of the projects in this sector tend to have a long lead time. It can take up to 15 years before investment in an aircraft is recouped. So government investment is required to make such programmes work.

462. That is a little background. I will pick up on some of the questions that were raised in the consultation paper. What opportunities were we aware of? We went out to our members in Northern Ireland and asked what investment opportunities they wanted and were aware of. Replies to question 1 included the response that they are getting and are aware of Invest Northern Ireland grants, as they are of grants from InterTradeIreland, the UK Technology Strategy Board (TSB) and European Union framework project 7 (FP7). All of the member companies were aware of those sources of help.

463. The second question that we asked our members was how appropriate those opportunities were. A number of companies said that a lot of resource tends to be required to respond specifically to EU funding. Only very large companies tend to benefit from EU framework 7 funding. The challenge is that Northern Ireland is, in essence, a country of small companies. We have a few large ones, but 90% of our companies are small, so they do not find that they can benefit from EU funding. That is one of the key responses from our members. Members came back to say that, going forward, we need to focus on funding for small to medium-sized enterprises (SMEs). My colleague David Raymond will highlight an opportunity we have found to do that.

464. Aerospace has been identified nationally as a key growth area for the UK. Business Minister, Mark Prisk, is leading the Aerospace Growth Partnership in the UK that ADS manages and in which all the aerospace companies are involved. Nationally, the Government are asking what areas and themes of aerospace research and development we should invest in, going forward. So, the Aerospace Growth Partnership is key, and many Northern Ireland companies, such as Bombardier, are already involved in that. As a local Assembly, you should be very much into that growth partnership. I wanted to highlight that aerospace is a growth area and an opportunity for us.

465. Of the UK's £23 billion revenue from aerospace industries, Northern Ireland gets £1 billion. Applying the Barnett formula, that £1 billion is twice what we should get, so we are bigger than we should be. We are twice the scale that we should be, but that is great, and there is opportunity for further growth.

466. I want to highlight some answers to question 5, which asks what the main barriers are to R&D. We found that lack of confidence in local companies in investing in R&D is one of the main barriers, specifically for small companies that are unaware of the global market opportunities. It is difficult for an SME to be aware of such opportunities and to invest in that R&D. We are trying hard to get companies to come with us on trade missions to find out about the worldwide market opportunities.

467. Other barriers that we highlighted in section 5.2 of our submission show that we found that many of the calls for R&D are not market driven. A lot of them are very much blue-sky R&D, and small companies feel that they need market-driven business opportunities that will return investments fairly quickly. So, market-driven R&D is very important.

468. The other factor in EU projects is that the time involved is excessive. It just does not work for a small company to have to wait a year before knowing whether it was successful in an R&D funding programme.

469. In section 6 we talk about what government can do. Our members said that it should simplify the R&D application process. It would be great if you could streamline that. They also said that R&D funding projects should be market-driven and that there should be investment in growth areas for Northern Ireland. The aerospace, defence and security sector is very much a growth sector for Northern Ireland.

470. I want to highlight the additional policies. A number of the companies that responded said to make sure that the Executive maintain R&D tax credits. Those are key for large and small companies investing in R&D. Tax credits have really been a tremendous boost for such companies, so they want to make sure that they are maintained.

471. How can business and academia work together? We feel that the new Northern Ireland Advanced Composites and Engineering Centre on the Airport Road, where business and university academia are coming together, is a key opportunity for companies to research and work together. I would like to take this opportunity to extend an invitation to the Committee to come down and see the centre as part of another meeting.

472. Before I hand over to my colleagues, I want to highlight an interesting opportunity that probably is not mentioned in the paper. It is about how the Northern Ireland Government can help with R&D, which is key. I think that there needs to be wise procurement. The Northern Ireland Executive buy a lot of things. Very wise procurement can help R&D in Northern Ireland. For example, last year, the PSNI needed to renew several hundred armoured cars for several million pounds. The contract went through, and a company outside Northern Ireland won that business. We then got the same type of armoured car that we have had for the past 20 years, which is heavy and not novel or fuel efficient. Through wise procurement by our Executive, however, there is an opportunity to place a research project with existing companies in Northern Ireland to design a new armoured car for the PSNI and to build it using the composite materials that our new composite centre can handle. Such a design could also create an export product for Northern Ireland. That is wise procurement, and we want to encourage it very much. Before the Executive buy something, they should think to themselves, "Can we get this designed locally through a commissioned project?" That is still in the works. We want to encourage that opportunity. Forgive me if we raised something that was not in the paper. I will now hand over to Ronnie Harrison from Thales, which is a large company, and then to David from a smaller company.

473. Mr Ronnie Harrison (Aerospace Defence Security): Good morning, Chairman and Committee members. We are very grateful for the opportunity to give you some thoughts from our perspective. Thales is a large company, with about 70,000 people around the world. We have a variety of divisions. Thales Belfast is part of the land defence division, which looks after advanced weapons systems, protected vehicles and optronics. So you get all those sorts of technologies in Belfast as part of our activity.

474. I really want to talk about R&D from the perspective of how the UK is handling it, the effect that that has on us and how we address it in regard to export and the export market, because those are two slightly different issues. I do not need to say to you that budgets are very tight and that the defence budget, in particular, has been attacked quite severely over the past couple of years, which has affected us as a company. Traditionally, we expected to get funding from the early stages of technology development right through to qualification, but that does not happen anymore. Over the past few years, it has been our experience that we have had to invest from the very beginning of a project to get it to demonstrator stage before, for instance, the UK Government is interested in offering a contract. That is quite a different model for investment from the one used in the past, where, as I say, we would have been given a clear requirement and a clear path to develop the technology and to bring it into service. That would then have been used as an export product to sell to other countries.

475. That model is changing because of budgets and because of the competition in the rest of the world. For example, over the past few years, we have invested many millions as a company in developing a new missile product and a new launcher platform product. That has got to the point at which, once it had a demonstrator capability, the UK Government were interested in offering a contract for taking it further forward. That is a challenge for us. The UK recognises that and has put in place the Weapons Technology Centre, which brings together all of the main players and prime contractors in order to get the best out of the money that the UK is spending.

476. The danger is that the UK provides the money to all of the various players and they all develop the same technology and get paid six times for it. That would never have happened in the past, of course, but the Weapons Technology Centre is trying to be sure that we have got the best value for money. By joining with industry in doing that, the idea is to give us confidence to invest against that funding. The Government are saying that the UK is really interested in that particular area of technology and will be prepared to fund that activity, but they want you to invest against it. We have targets in the UK to invest against funding that is provided for research and technology (R&T) activity. Thales is committed, and has been committed over the last few years, to spending in line with those targets. We have been investing and committing. It is still early days for that model of procurement, through which we are expected to put a lot of money in up front, as opposed to the traditional method.

477. The UK has been a challenge. There are things afoot to try to help us there, but there is still work to do. The export activity is different. In the past, the model was to develop a UK product and sell that overseas, but that is not happening anymore. It would have been the case that the UK product would have been at the top end of the performance range and very sophisticated, but not every country wants that sort of product. Therefore, it is difficult to sell it. What we have to do is invest separately in some cases to develop an export product. It might be based on the local product but developed separately. The big issue there is confidence. The issue in research and technology for big companies is never money; it is confidence, because, if it is 100% certain that they will get a return, they are going to invest. It is the same in the UK as it is in the export market. The challenge for us in the export market is to be confident that there is an actual opportunity there. That is one of the areas in which we are very grateful to the Northern Ireland Assembly for help. Even over the past few weeks, we have had a lot of help from Assembly Members in dealing with export opportunities to try to increase the confidence. When we have that level of increased confidence, we feel that we can invest and work against that.

478. We are also very grateful to Invest Northern Ireland, which plays a big part in helping us with that as well. There are many areas in which the risk would be too great for us to take on our own, and, although we take a high percentage of the risk and spend some money, in many cases Invest Northern Ireland has helped us to put that extra bit to the investment, which gives us a real opportunity as opposed to having the job half done. Invest Northern Ireland has been very useful in that model of working with a hi-tech company, particularly in our business, where the investment occurs over many years. It is not as though we invest for six months and the product is sold after six months. It often takes 10 years, or maybe five years, if you are lucky, for a system to come together. There is a long period of investment to get to the point of actually providing an export solution in those areas. We are very grateful to the Assembly Members here and to Invest Northern Ireland for their help.

479. We also work quite closely with the Electronics, Communications and Information Technology (ECIT) centre and the Centre for Secure Information Technologies (CSIT) at Queen's University in the Titanic Quarter, and we have managed to bring some business to them from other parts of Thales. For instance, we have a Thales research and technology centre in the UK and one in France, in Palaiseau. That centre in the UK is working closely with CSIT on research and technology to do with secure information technologies and communications technologies, so there is quite a bit of investment from that point of view.

480. In the export market we need confidence in the market. We need to be backed up in dealing with the export customers, and we are grateful for the help we have been given on that, but the more we get that, the more we invest and feel confident to invest.

481. One of the issues is EU funding. We have tried to get framework funding to Northern Ireland. That has been difficult for us, partly because of our defence business and partly because of the cumbersome process involved in getting that funding. In the past, you were required to get several partner companies across the EU, plus several universities. You can appreciate that in our business, with the sort of issues we are dealing with, it can be quite tricky to get the right sort of companies and universities to be able to do that.

482. We have helped with activities related to the Seagate-sponsored centre on nanostructures here in Belfast. Thales has put a proposal together with it to get funding, which has been achieved. However, in general, our own business does not benefit much from EU funding, and we have talked with Invest Northern Ireland a little bit about that.

483. In summary, we have been investing. We are being asked by the UK to invest more and to do so against targets that we are lining up with. In the export markets, we are challenged because of the confidence levels; we have Russian technology, Chinese technology and other technology competing with us, which is quite tricky. We appreciate the help we get from the Assembly, Invest Northern Ireland and Queen's, but we face a challenge where our business is going to be much more export focused and we have to spend a lot of our time investing in that.

484. The Acting Chairperson: Thank you, Mr Harrison. Mr Raymond, do you want come in?

485. Mr David Raymond (Aerospace Defence Security): Thank you very much for having us here to talk to you. We do not have 70,000 employees; we are a very small company. I am the chairman of a small aerospace design company, BASE, with 40 people. We do design and stress analysis and sell that information to most of the big manufacturers worldwide, including Bombardier. If you bear with me, I will run through the SME position, particularly with reference to aerospace, the opportunities that that presents and how R&D can and does affect that.

486. In a small business, you want growth, profit, security and a whole lot of things like that. We look at our economy and see opportunities of a certain scale and think about how we can get outside that. We are working with companies around the world, but we are at a small scale. We look around and the question is this: what we can do to get R&D to be more of a driver for exports to create more jobs, more wealth and more choice here?

487. I may be wrong, but 90%, 98% or 93% of the companies in Northern Ireland are locally owned and are SMEs of 10 people or more. Our company has 40 people; some of them have 200 people. However, looking at the aerospace sector, as Leslie said, there are 45 member companies on our council — ADS — of which I am the deputy chair in Northern Ireland. SMEs tend to focus on immediate issues and things that are important to them next week, next month or next year. That is not outwith research and development. A lot of the research and development happens within a company and is to do with how things can be done better. That is not viewed necessarily as research and development. SMEs sometimes regard such research and development as being technology or information technology and something that they do not do. In fact, they do it all the time: they are thinking about improving all the time and are thinking all the time of doing something more effectively, cheaper, better and more competitively. They tend to focus on more immediate issues for that reason. That is an issue of scale, which is something I will come back to.

488. Companies like that are, by the way, all very well run and strong and have an international reputation in a small way. They are engineering, manufacturing and design companies with a great future and make a great contribution to this part of the world. They may look at the funding streams for R&D, and, if they are lifting their horizons, they might be thinking, "Maybe we could talk to some of the people we know in Queen's and look at some manufacturing technology." They look at the process involved in that and look at a one-year application to the TSB, for example. I have met with Iain Gray, the chief executive of the TSB, in London several times and talked about this. The SMEs think about the applications and the fact that they have to get two or three partners in Europe. That is beyond their scale and capability, yet they could have something really good. Consequently, the idea is set aside, and they are back to square one.

489. From the smaller companies' point of view, if it is a technology company, it can work with the university. The company could have a piece of high-level technology, which is extremely valuable. It could work at it and develop it into intellectual property. It is often thought that the intellectual property is then sold on, goes away from here and the company goes on to develop another piece of intellectual property, which is really good. However, the 500 jobs do not come out of that; they go somewhere else.

490. When an SME or small manufacturing company looks at doing something better or more economically, it looks at its customers, such as Bombardier, Airbus and Boeing, who continually say that they want the work to go to India or China. Yes; however, there are only certain pieces of that work. Often, what local companies do is of higher quality. It is easier to make, maintain and repair. There is a great deal of innovation and technology in those companies. Growing that is crucial to our economy. Without that, we tend to dumb it down to how much we pay people per hour in order to compete. We cannot do that; it is not going to happen.

491. I looked at some information on the UK research councils. The UK Government gives them £4·4 billion a year. The Technology Strategy Board, which I mentioned a while ago, is not an easy house to visit to get grant aid from because of the duration of the application. Nevertheless, to our minds, it is seen as being practical and on the ground, helping engineering and manufacturing projects for R&D. They have something like 7% of that. It is the wrong way round. Nevertheless, that is where it is.

492. You could suggest that there are two solutions from the point of view of SMEs in Northern Ireland. I suppose that the first thing is to say is that focus should be on SMEs' needs. Well, perhaps not; perhaps focus should be on the market's needs. Nevertheless, SMEs need to have an easier way to access support for research and development in areas that will actually make their businesses different. That is a clear, sound and practical need.

493. However, the problem that comes out of that is that they, then, have to think of the scale effect. You still have a SME with 50 employees. It has invented something or has developed a new process. If it has something and needs to know how to get beyond it, grow it, get investment, buy new equipment, build that area, that is not R&D. That is a different aspect of business altogether. However, that is something that can stop it dead in the water.

494. Then, you look at collaboration. Can you get companies to work together? Yes, you can. There are many good examples of that. However, the problem still arises as to how to move beyond that. I have seen companies that collaborated with a university and, in one particular instance, with a competitor. They came up with something. They developed it. They are the same companies, with 40 50 or 100 employees, that are out trying to get business five days a week. They are out trying to manage their accounts. They are out trying to look after deteriorating markets. They are doing all of that while, at the same time, trying to do this. They exhaust themselves doing that. They came up with a good solution. At the end of it, their first thought is whether they can sell it to anybody, because the next peak, going beyond that, is to get investment, create new product lines and get the sales team that they do not already have to go out and sell it to people who said tentatively that they wanted it. That is a hell of a hill to climb.

495. Given all of that, about a year ago, we started to look at how we could improve that, not purely for R&D, but to address the overall opportunity of which R&D is a significant part. With the help of ADS and others, we did a number of things. We started to look at what some of the major customers wanted and at collaborating. We got six interested companies together in Northern Ireland. They are six Northern Ireland-owned companies. They already sell in the aerospace circuit and in other sectors as well. Between them, they have turnover of around £50 million and around 600 employees. BASE is one of them. We started off with those companies and asked what interest we could generate in the major world aerospace brands in order to create a new business here that could move up the R&D scale, bring in investment to help us to do that and could also partner some of those companies.

496. We have had considerable success with that. We are already talking directly to Spirit AeroSystems. Two weeks ago, its vice president, directors and head of research and development visited here for the first time. They spent a day here, and they visited Invest NI. They had never been to Northern Ireland previously. That company has a $5·3 billion turnover. It has 1,000 employees in Prestwick, which is just across the way. It has factories in Wichita, Saint-Nazaire and Malaysia. You might say that it will do all of its work in those places. No. Its strategy is to look for high value in the UK and in western Europe. Northern Ireland is strongly on its radar for manufacturing, and we are also talking to it about research and development. It can see that there is a scale here that it can become engaged and interested in doing business with.

497. We talk to Bombardier regularly. It has expressed a keen interest in working in partnership with us in R&D. Again, it has got to be on a scale. It cannot do that easily with a company of 10, 20 or 30 people, because of all the problems that we mentioned earlier. Bombardier has a turnover of $8·5 billion.

498. Goodrich has a partnership with Pratt & Whitney engine makers, and it has a turnover of $6·3 billion. I mention those numbers because it is evidence of big business and of access to opportunities that we do not have at this time. Those companies are talking to us about manufacturing and specifically about research and development opportunities. We have got to get to a sufficient scale to be able to access the funding and the partners who will work with us to help us to bring our businesses up to a higher level of competitiveness in the export market. That is our view of R&D in Northern Ireland in the aerospace industry.

499. The Acting Chairperson: Thank you very much, gentlemen. Before I open it up to other Committee members, I have a couple of questions. It is clear that there is a lack of confidence in SMEs, and all three of you mentioned that. That is not necessarily the case with your company, but it is overall. You said that a lack of market awareness is a symptom of that. How do we get round that and build confidence in the SMEs? You said that those companies are doing sterling work in the day-to-day running of their businesses. They are looking at tactics for the weeks, the months and the year ahead but are not maybe taking a strategic view, either because they do not have the capacity or are too busy with that day-to-day stuff.

500. Dr Orr: I will start off on that question. There are a couple of angles, and we need to get the companies to look outside Northern Ireland. A lot of that could be done through their attendance at trade shows and missions, and we need to get them to go on those. Invest Northern Ireland has trade shows and missions, but we need to focus more on aerospace defence and security. The Farnborough International Airshow is the biggest air show, and I believe the Prime Minister will open it this year. That is a key sales ground that we need to get the local companies to attend. A number of companies participate, but we need more to do the same. David talked about companies coming together. It would be key if those companies were able to come together and look outside Northern Ireland.

501. Mr Raymond: Leslie is absolutely right. Many of the companies go on trade missions and that is a key and important thing for them. However, often they do not follow that up. They put all their efforts into preparing for those trade missions, they go and come back and say to themselves, "That it is good, I met all those people, but what about that machine? Is it still working?" It comes back to the point about having a lack of resources to allow them to drive their companies forward. Some companies pull out all the stops and slowly grow and accelerate. However, I am talking about the overall picture.

502. I think that Leslie would agree. One of our companies — I cannot name it — has a turnover of around £7·5 million a year, and it is a very successful Northern Ireland company. Representatives of that company have told me that they have visited trade shows and have met other companies who tell them, "That is very interesting; we will see you next year," but nothing further happens. It needs the strength and the power of the sales team to follow that up.

503. Your question was about how we encourage companies. Most successful SMEs are either stressed because of a lack of orders and that is their only interest, or they have so much work that they can just about handle it and are equally stressed. It is cyclical. Those companies swing from one of those places to the other, and they are trying to manage it. To get them interested, we need to lift it to another place. I talked about collaboration, and that is one way of doing it. However, for government, it is about opening the eyes of those companies to what they can achieve and getting them to step up, join with others and try different things. You could talk to them all day and tell them that they should be doing R&D and they should be interested. They will tell you that you are absolutely right. However, given the scenario we have, we need another business model to help us to do that.

504. We are being helped by Invest NI to build that collaborative arrangement, so I give it credit for that. It has taken time to get it to the table but it is doing it, and that is fine. At the end of the day, more issues like that, where companies are able to come together to collaborate and bring their strengths, will get them interested like nothing else will get them interested, short of going and giving them a whole lot of money to do it.

505. The Acting Chairperson: You talked about the plans Invest NI put in place to assist. Is that enough to integrate EU funding into a Northern Ireland plan? Do you see that being of real product or does something else need to happen that is not happening? Do you see the work with Invest NI achieving something of greatness here?

506. Mr Raymond: The nature of our business spectrum is SMEs. Thales has been talked about, and, with respect, Bombardier, Wrightbus and organisations like that have the scale and can deal with that. They manage Invest NI and the Technology Strategy Board very well because they have the strength to do that. A lot of companies do not have that. You can give them advice but they know their own business. Listening to them carefully and making investment in R&D easier for them to access is absolutely critical. Unfortunately, maybe because Invest NI does not have control of TSB in all those things, a lot of that help is in how to work through this ridiculous process, which lasts a year but that they have to get through.

507. The Acting Chairperson: A number of you spoke about simplifying the process through streamlining. Will Horizon 2020 help that?

508. Mr Raymond: I do not know enough about that to be able to say.

509. Mr Harrison: From our perspective, most of our customers are government customers in other countries. So, the likes of Invest Northern Ireland is very helpful because it acts as a local government organisation. The exposure we spoke about operates on two levels. One is through trade shows and things like that and the other through trade missions. We all go to normal shows such as the Farnborough and Paris air shows. The level below that, however, when you are engaging with the R&T communities as opposed to just the companies, is where Invest Northern Ireland can help at times. We certainly had engagement with R&T communities in other countries across Europe with its help, which then gets us access to companies involved in that community that, perhaps, we would not otherwise have seen.

510. There is a process to be gone through with Invest Northern Ireland but it is not half as complicated as the EU process. I appreciate that there are forms to be filled in and committees to be gone through but if it is worth it, it is worth doing that. For a bigger company, I suppose that it is usually worth doing that, although I appreciate the issue of SMEs, etc.

511. Dr Orr: We do not know enough about Horizon 2020 yet but, because we are a nation of small companies, it would be good for Northern Ireland if the Executive highlighted how a region with small companies could benefit more from EU funding. That is key because we are not getting our fair share.

512. Mr Raymond: Iain Gray, chief executive of TSB, was brought over by ADS last year. I followed up and met him a few times in London. He said that they have £300 million a year to disperse and we are not getting our fair share of that. So, knocking on the door and talking to him, the picture was, "Well, this is our process and this is what you need to go through." That is fine but we need to have a way to make that amenable to SMEs but not as a policy, as in, "You must make this amenable to SMEs." It is about making it amenable to good business ideas, good collaborative ventures or to three or four companies coming together to try something. The key to it is making that easier to do, because if you keep driving it to the individual company, you are not moving away from that but coming back to the same problem all the time. The guy with 20 to 30 employees is limited in what he can do. We need to lift him up the scale a wee bit and give him a chance to be able to do that. Instead of coming together with someone in Germany, someone in France and two universities, let him come together with some of his colleagues around the countryside, or maybe someone in Scotland. He should aim at something that is workable and achievable, and then go for it; no question about it.

513. Mr Agnew: Thank you, gentlemen, for the presentation. Dr Orr, you mentioned various streams of financial support, including FP7, Invest NI, InterTradeIreland and a UK funding stream that I did not get the details of. Do you have figures as to how much each support pays into the industry, and how dependent the industry is on that support?

514. Dr Orr: I did not get a breakdown of what companies are getting from each region but, with regard to EU funding, I was surprised to find that a firm even on the scale of Thales in Northern Ireland is not benefiting from EU funding. There are only one or two firms, small numbers, benefiting from it.

515. A lot of companies responded that, yes, they are working with Invest Northern Ireland and some with InterTradeIreland. We are trying to get them more engaged with the Technology Strategy Board, and we had a number of events where we brought the Technology Strategy Board over here. The companies are absolutely dependent on the source of help to move forward.

516. Mr Agnew: I appreciate that you do not have the figures. Can you give us rough proportions?

517. Dr Orr: I do not have a breakdown.

518. Mr Agnew: That is fine.

519. You mentioned support for Queen's University a number of times. Where does that support come in? How does it fit in with the picture?

520. Mr Harrison: From our point of view, one of the centres of excellence at Queen's is aerodynamics, so we have a lot of connection with the aerodynamics chair and we provide lectures to Queen's as a part of that. The linkages include making sure that Queen's use the same tools as we do, so that we can outsource work to it to allow it to do academic and even postdoctoral activities. We sponsor those activities to help that community develop an expertise that has exploitation routes. That also helps us. We have provided quite a bit of sponsorship to do postdoctoral-type work in areas where we either would not have the time or would not be prepared to devote the level of expertise to over time. That is part of the engagement that we have with Queen's.

521. There are other areas too, such as the communications and information technologies people. They do research into things like systems on a chip. Those are very high-tech small electronic processing units that are very useful to us. We look at that. They also have a lot of activity on image processing and that sort of thing. So, there is interaction. It is not just Thales here in Belfast that has direct contact with Queen's University but Thales in the rest of the UK.

522. Mr Agnew: Let me just ask one final question. Export was mentioned. Obviously, exports are key in this industry, and indeed, in the economic strategy, growth through exporting has been highlighted as key target. Are there particular countries that you target when you are looking at trade missions? Are particular countries the best areas to export to, or which you would seek to target for exporting?

523. Mr Raymond: As far as Aerospace is concerned, anywhere, basically. Obviously, it is not just anywhere, but America, Asia, India, China, Europe — everywhere. Leslie has the figures. The expansion of the commercial aerospace industry is so great and widespread across the world. It is the one place that we have to be. Without question, if we could build our business there, on its own, it could transform the Northern Ireland economy. China will have a bigger middle class in the next 20 years than the enlarged European Union. Those people will want to visit their grandmothers. They will only do it one way, and that is on a plane. That is very simple. Some 35,000 new aircraft will be needed over the next 20 years. That is new aircraft, apart from the ones that are being maintained, fixed, refitted and all that sort of stuff. It is not going away; it is growing and it has huge possibilities for us. With regard to which country to go to, they have a lot of people in their industry.

524. Dr Orr: Page 14 of our booklet highlights exports of £86 million in this sector from Northern Ireland, which is for sales right across the world. As David said, a number of sectors are suffering as a result of the financial downturn. In this sector, however, passenger numbers are growing at 5% a year. The business is expected to grow from a current worldwide market of £200 billion, where we have £1 billion of that £200 billion, to £300 billion in 10 years' time. If we are to maintain our current Northern Ireland market share, it will require 3,500 new jobs. Our goal is to increase that. Our goal is to do more than maintain our market share. There is real opportunity in the sector.

525. Mr Harrison: With regard to emerging countries, clearly China is an issue, as is India. There are the BRIC countries — Brazil, Russia, India and China. In our industry at least, we found that there is a challenge to R&T, because most of those countries expect us to transfer technology of some sort as part of the deal. So, we have to protect that by ensuring that we do the R&T efficiently here in Northern Ireland. Increasingly, therefore, we are faced with the situation of being given a contract, but we are expected to give a level of technology in return. We like to stay ahead. Investment in R&T in Northern Ireland would allow us to do that. It is important to us as a company, but it is also important for Northern Ireland to stay ahead of those other countries that are hungry, not just for the product, but for the technology and the know-how behind it. It is a big challenge for us.

526. Mr Agnew: I asked Dr Orr about financial support. How much does your company receive from the various support streams, and how vital are they?

527. Mr Harrison: The help that we get from Invest Northern Ireland is certainly very important. It is a percentage of what we do. We invest a lot more than we get. However, it is important to us, and it is in those risky areas at the front end of the technology streams. It is not down to the production end; it is not quite blue skies, but it is the grey skies before you get to the hard-nosed production area. That is where we get the help. We have a thing called the valley of death, which is where you have a good idea, it gets a little bit of work done in the laboratory, but it has to get to market. The valley of death is where that idea dies and you do not have the funding, or you have a little bit of the funding but you do not have it all. That is where Invest Northern Ireland can really help.

528. Mr Flanagan: To follow on from Steven's point, initially, we were told that companies are absolutely dependent on that funding to move forward. Do you agree with that statement, Mr Harrison? You said that it was very important, but someone who spoke previously said that companies were absolutely dependent. Would you say that your company is absolutely dependent on the funding it gets from Invest and other funding streams?

529. Mr Harrison: It was important that Invest Northern Ireland gave us assistance and help at the front end of the business. Without it, we would not benefit from being able to develop products that are competition-beating. We could probably keep up with the market, but we could not move ahead. It is the additionality that Invest Northern Ireland brings that allows us to make that step ahead of the rest of the market and keep the business moving forward.

530. Mr Flanagan: The graph on page 14 shows that 44% of the exports that leave Europe do not go into America. Where is the majority of that 44% going? It is an amazing statistic, and it is probably an anomaly for any industry here that nearly half its exports are not going to Europe or America.

531. Dr Orr: What I highlighted there was very much the US or the EU, and we have bucketed everything else from Asia to Latin America to Canada, which, as far as Bombardier is concerned, is quite a big shipment. It is really the rest of the world.

532. Mr Raymond: I will give you an example. Our company base has a co-operation agreement with an Indian design company that sells to Bombardier. That company employs us to do highly specialised work that it cannot do.

533. Mr Flanagan: That is fine. It is a strange statistic when you look at other sectors where at least 70% is normally in the EU or America.

534. Mr Raymond: You are right, but that reflects the truly global nature of the business. In all continents, it is strong and growing.

535. The Acting Chairperson: It could be true to say that we are trying to encourage those companies to spread globally. That is where they will see their growth.

536. Mr Raymond: It is the right business to do it in because there is national need for the company that is buying it. If someone wants to build aeroplanes, we partner with them and help them to do that and design them. They want to operate profitable airlines and want their population to be satisfied that it can travel and has freedom of movement. So, all those things work for them.

537. Mr Flanagan: I have another couple of questions, but I will be brief. Other organisations that have appeared before the Committee, such as further education colleges and the CBI, were very straightforward in the type of work that they do. Can you give us some practical examples of the sort of research and development your organisation carries out? What is the benefit of that research and development?

538. Mr Raymond: In design work, we are looking at ways of manufacturing composite components for aircraft that are more resistant to damage and more easily repairable because it is a new material, relatively speaking. That is very important to companies that want to make lighter aircraft that are cheaper to run, etc. That is in the early design phase.

539. On the other side, very often, small engineering companies in Northern Ireland are in a build-to-print situation. In other words, they are given information and told that they have to make 10,000 of those products. We are looking at that and asking how they could be redesigned slightly to be more effective, easier and more economic to make. That directly competes with low-cost economies in doing that. Those are two things that are at different ends of the spectrum. It is not as sophisticated as Thales, but it is looking for the same result at the end of the day.

540. Mr Flanagan: Is that largely in the aerospace industry?

541. Mr Raymond: In my case, yes.

542. Mr Flanagan: Do you have anything to add in respect of security and defence, Mr Harrison?

543. Mr Harrison: There is a crossover between the aerospace industry and our industry. We have done work with the likes of Queen's University on novel ways of controlling an aircraft. Conventionally, that is done using flaps, rudders and elevators, but there are novels ways of doing that by getting rid of those actuators and using airstreams or other more efficient devices that cut down the cost, reduce the weight on the aircraft and reduce the weight on any other flying object that we manufacture. So, there is a range of front-end technologies like that.

544. We are also involved in a variety of products that have commercial and defence application, such as laser technologies, which you can find everywhere when you walk around the supermarket. Those sorts of technologies have dual use, so we tend to be involved in those as well. So, it is a very wide application.

545. Mr Raymond: The other aspect is that an aircraft has a 20-year lifespan, and an awful lot of things happen to it during that time. A lot of retrofitting and change takes place, and a lot of R&D that is done is put into them later to make them more efficient. For example, aircrafts get new engines to make them more effective. So, the R&D work is quite broad in its scope.

546. Mr Flanagan: Is much research put in to finding out the impacts of the more controversial products that the industry designs and uses, particularly the Starstreak missile, which is listed on page 10? What sort of research and development is done to find out the impact that it could have on people who might turn out to be innocent casualties of war in far-flung corners of the globe? Is that something that your company looks into, or is that left to national governments to deal with?

547. Mr Harrison: First, I have responsibility for safety and environmental effects in respect of the products. The first thing is that they have to be safe for the general population. In other words, in peacetime, they have to be safe and not harm anybody. Secondly, environmentally, they have to be manufactured using a clean process, and, even after they are used, the effect on the environment in other ways than were originally intended to has to be in line with all the green technologies etc that are around. Yes, we design from the point of view of safety and environmental impact.

548. Mr Flanagan: So, it might wipe hundreds or thousands of people, but, if it does not cause any damage to the environment, it is ruled all right by your company.

549. Mr Harrison: We provide to a requirement. Our company is providing to a customer. As a company, we simply provide to a requirement, and any Government around the world can ask for that. On a point of correctness, the Starstreak missile is a precision system.

550. Mr Flanagan: I understand that.

551. Mr Harrison: We are not talking about the nuclear industry here or anything like that.

552. The Acting Chairperson: I will have to pull it back to R&D and the business opportunities that the companies have.

553. Mr Dunne: We welcome ADS here. It has been an informative and hands-on session, and we really appreciate it. As a Committee, we express our thanks and appreciation for the good work that you are doing, and the input that that has on the local economy needs to be recognised. We also appreciate your comments on the work of Invest NI. The MLAs in the Northern Ireland Assembly have been supportive of your work. We will also make sure that the Minister is made aware of it, and I know that you appreciate the work of Arlene Foster and the commitment that she has made to you.

554. Most of the issues have been covered. I know Thales very well, having worked alongside it in my previous employment. I recognise the good work that it has done. It works to high-quality standards and is very professional. It is renowned for the work that it has done throughout the world. Ronnie, the points have been well made. Our main objective is to ensure that the next phase of funding is simplified. Do you see Thales locally getting involved in making applications for funding in R&D in the future?

555. Mr Harrison: Yes. In fact, our general approach to R&T is that we take a strategic view. We try to do three-to-five year involvements. The company commits to saying what its strategic plan is, and we will share that with the likes of Invest Northern Ireland or some other group and invest against that. Our plan is always to think strategically. It is not just to do the short-term stuff, but to ask, over this period of time, what we can guarantee on our commitment to R&T locally and to jobs. In line with that, we leverage funding that is available to us. We intend to invest, and we already have plans in place for the next three years.

556. Mr Dunne: Good. Leslie, you talked about Bombardier. Has it used that funding in relation to its technologies? We are aware of the leading-edge work that it has done on composites.

557. Dr Orr: Bombardier has participated in and benefited from EU funding programmes. It is one of the few companies in Northern Ireland that is benefiting from that.

558. Mr Dunne: David, as you mentioned, the problem is that the existing system is too complex, cumbersome and off-putting for SMEs. Is there a risk for SMEs in collaborative working because you let your neighbours know what you are doing?

559. Mr Harrison: That is good question. The problem is not so much that, but, if people come together, they collaborate not only to do R&D work but to win bigger pieces of business. Doing R&D work is part of that, and that is seen as part of growing a bigger business for the group, rather than me looking at what he is doing and him looking at what I am doing. It is this business of taking it to the next stage so that, if you have three or four companies working together on finishing, machining and design, they are talking to manufacturers on a bigger scale. They are saying that they would like to bid for much bigger packages of work, involving tens of millions of pounds a year, rather than a few hundred thousand pounds a year. Therefore, they are also listened to quite strongly by those manufacturers, and we quoted Spirit, Bombardier and Goodrich as examples. Those companies could look at doing some collaborative R&D work with us. So, the tension between the companies is not like that in that instance. That is why that is probably the best model to take it forward with. I understand that small companies find it difficult to talk to each other at the best of times about what they are doing. So, it is advantageous to lift it out of that scene.

560. Mr Dunne: We have talked to a number of further education colleges — we had one in before you. Do you see where they perhaps would have a role in training staff and running training and development programmes on how to access European funding? Is that a possibility or something that is worth checking out?

561. Mr Raymond: I do not see any problem with that. Anything that simplifies it is good. My only caution is that, if you have a complex thing to start with, investing talented people's time in working out how to work through that complex thing is advantageous to the beneficiaries. However, finding a simpler way to do this has got to be more useful. We have examples of large companies that have failed. We have worked in parts of Bombardier and, on occasions, failed to get access to large funding, and Bombardier is no mean chicken. When that happens, what hope do you have for a small company doing it? I do not know; I think that it would be useful to look at that, and —

562. Mr Dunne: It is worth exploring.

563. Mr Raymond: — to explore it. Yes.

564. Mr Dunne: We should be thankful for the good, positive comments about the work done by Invest NI in particular. We often hear the negative stuff, the bad news, but thank you for the positive comments.

565. The Acting Chairperson: Thank you, Mr Dunne, and all members for the questions, and you, gentlemen, for your informative answers.

566. Mr Agnew: May I ask a final question?

567. The Acting Chairperson: As long as you are brief. People need to get away and we have quorum issues.

568. Mr Agnew: I need to get away, so I appreciate that.

569. Mr Harrison, to come back to Mr Flanagan's point about where products are exported to, are there any conditions on the public funding that you receive? For example, exports to oppressive regimes with which the UK on one hand may have trade barriers but on the other provide public funding.

570. The Acting Chairperson: I am going to —

571. Mr Dunne: That is not relevant.

572. The Acting Chairperson: If the gentlemen wish to answer, that is fine. However, the question is really not about R&D or the business opportunities that we are here to discuss.

573. Mr Agnew: It is about funding by this Department, Chair.

574. The Acting Chairperson: Again, I do not feel that it is appropriate for today's agenda. I want to draw back on that, if I may. You are free to ask about it after the meeting, Mr Agnew. I just do not want to lose the present focus on R&D.

575. Gentlemen, thank you for your time. I wish you all the best for the future.

1 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Mr Paul Givan
Mr Stephen Moutray
Mrs Sandra Overend

Witnesses:

Mr Damian Duffy
Mr Justin Edwards

 

Belfast Metropolitan College

576. The Chairperson: Briefing the Committee today are Mr Damian Duffy, director of business generation and learner services, and Mr Justin Edwards, assistant chief executive, of Belfast Metropolitan College. Gentlemen, you are very welcome. Please make an opening statement and then we can move on to questions.

577. Mr Justin Edwards (Belfast Metropolitan College): Thank you. We are delighted to be here today to meet the Committee and to take the opportunity to share our views on research and development and innovation. My name is Justin Edwards, and I am the assistant chief executive. I represent Marie-Thérèse McGivern, the chief executive of the college. I am joined by my colleague Damian Duffy, director of business development and learner services. Between the two of us, we will take a moment to outline the college's contribution to the agenda.

578. I know that many members of the Committee are aware that the college was founded in 1906. It currently has 35,000 learners and an annual turnover budget of £54·3 million. We have 1,003 staff engaged in education and training over a very wide range of curriculum areas, from entry-level qualifications through to postgraduate qualifications at level 7. Primary delivery is through our five main campuses, and our flagship campus in the Titanic Quarter opened recently. Our new Springvale E3 campus will be coming on line in April.

579. In terms of our provision, we have not only our five main campuses but a heavy engagement with industry, offering training and learning development through further and higher education with employers in the Belfast region and beyond. Our education provision reaches out to international work as well. With that overview, I will hand over to Damian, who will take us through the research and development and innovation side of Belfast Metropolitan College.

580. Mr Damian Duffy (Belfast Metropolitan College): For clarification, it is important to point out that we have added the element of innovation to the debate because we see that as part of an encompassing framework. Following up on the briefing paper that we submitted on our work at the minute, Belfast Metropolitan College is one of the most successful colleges in Northern Ireland and the United Kingdom in respect of knowledge transfer partnerships (KTPs). We have delivered over 20 KTP programmes to date. As Justin mentioned, we are about to open a brand new facility on the Springfield Road in April. It is a high-tech digital hub, a unique facility. The £15 million spend was supported by the International Fund for Ireland (IFI) and the Department for Employment and Learning (DEL). It provides us with new facilities for digital media, composite materials and renewables.

581. We collaborate with Queen's University and the University of Ulster on the Connected programme, which is managed by Colleges NI and focuses on bringing in expertise on innovation and product development to companies and small and medium-sized enterprises (SMEs). We have recently signed a memorandum of understanding with BioBusiness Northern Ireland to explore opportunities for sharing expertise and skills with the bioscience industry. Belfast Metropolitan College and Queen's are also collaborating on a JISC-funded programme called Engage to develop a portal that, again, will promote the joint capability and expertise between Belfast Met and Queen's University.

582. Along with the other FE colleges across Northern Ireland, we recently submitted to DEL a three-year strategic plan for the DEL-funded employer support programme. Through that programme, we have identified a number of strategic priorities: Information and communication technology (ICT); bioscience; digital media; renewables; advanced materials in manufacturing; and tourism and hospitality. The six FE colleges will collaborate across those priority sectors over the next three years to deliver a range of mentoring and business support programmes to SMEs.

583. It is important to highlight the fact that not only is Belfast Metropolitan College the biggest further education college in Northern Ireland but the sector itself presents a significant resource to the Northern Ireland economy. We have six regional colleges, employing 4,100 staff, with over £250 million in turnover. We deliver 18% of the higher education output of the region. So, we see ourselves as a very strong piece of the innovation ecosystem in Northern Ireland. We are keen to explore the opportunities to develop our role in the sector by working closely with the sector skills councils and the universities. In order to align our academic curriculum, we have just developed a five-year curriculum strategy that ensures that the delivery of the courses and programmes that we put forward in the years to come will be plugged in to the Northern Ireland economic strategy.

584. I will share with you more of the innovative ideas that we are working on. We recently submitted an application through the INTERREG programme, working with the Institute of Technology, Sligo and the University of the Highlands and Islands in Scotland. It is a £4 million programme to develop a virtual enterprise platform to put a range of toolkits around creativity and innovation and to share them through a digital and online medium.

585. We recently submitted a project, again through INTERREG, and this time Belfast Metropolitan College is leading the project in partnership with the Southern Regional College, and the South West College and three institutes of technology, Dundalk Institute of Technology, Institute of Technology, Sligo and Letterkenny Institute of Technology. It is a £3·8 million project entitled Colleges Actively Driving Digital Delivery, and it is focused on improving progression routes for higher and further education students on a cross-border basis. We are also active in a number of other European programmes, including Erasmus and Leonardo Da Vinci, and work on e-learning programmes and various sustainable design initiatives with our other European partners.

586. Uniquely, Belfast Metropolitan College is the first FE college in Northern Ireland to take on the development of a project under the European Commission's seventh framework programme (FP7), which is a significant challenge. We have a very interesting project in the connected health field, and we hope that we will be successful in the future.

587. In order to support the embedding of the curriculum of culture, creativity and innovation, we have developed an award-winning programme called FRESH, which won a national business education award last summer. That programme works with young people to help them to work and think outside the box.

588. Mr Edwards: We know that the 10 biggest spenders on research and development (R&D) in Northern Ireland account for 60% of the total contributing spend of R&D. A small number of companies engage in high-level R&D, such as Almac, Randox and First Derivatives. We have interacted with all those companies to help us to develop the skills bases and the ability to support R&D. We have significant connections with the three universities — the two local ones and the Open University — in developing our research and licensing capacity and our spin-out arrangements. When our E3 centre goes live, it will have a new composites tool called an autoclave, which, we understand, will be the only one in Northern Ireland. We have already had engagement with the universities to use that tool for research and development work.

589. For the majority of the SMEs that we engage with, we have to engage on small parts of innovation through the likes of our E3 centre and opportunities through some of our training. They are also picking up opportunities through our higher-level skills and our part-time higher education programmes to learn about streamlining business or improving business productivity.

590. As Damian has already outlined, we have reflected the Programme for Government and the Northern Ireland economic strategy in our whole-college quality improvement plan and our whole-college curriculum strategy over the next five-year period. We have identified the areas that Damian outlined, and we will be directing our curriculum to develop those areas, the first priority of those areas being digital media, interactive media and IT. For this year alone, we will increase the number of placements available in interactive IT and digital media by 4%. We will also bring on stream the first mobile learning and open source level-3 qualification in our E3 centre, working closely with local providers, such as Fujitsu IT, to help us support and deliver that to learners and bring on the next generation of IT.

591. The whole-college quality improvement plan is making sure that what we deliver is of outstanding quality, and we aim to be an outstanding college, comparable to the colleges in southern Ireland and England, and we have been working closely with those colleges.

592. If I may, I would like to outline some opportunities that we see as curriculum related, and Damian might take the opportunity to outline some of the funding opportunities.

593. Outside Northern Ireland, we notice that new opportunities are developing in higher education apprenticeships. We believe that the college is particularly placed to work with innovation and industry to develop higher education apprenticeship models. We would like to see the development of that opportunity here in Northern Ireland. We have had approaches from employers about extending beyond level 3 into level 4 and level 5. We have also been working closely with awarding bodies as they develop higher education apprenticeships in England and Wales. We see opportunities in the Scottish model, such as progression degrees of two years plus a further year between HNDs and degrees, and the opportunities that foundation degrees present with regard to our higher-education offer and accelerated learning paths, particularly for part-time and online learners. We see opportunities starting to arise in England, where awarding powers are being taken by colleges to offer such courses as foundation degrees in financial services. They are engaging with those particular industries. Again, we see opportunities in those areas should they arise in Northern Ireland.

594. We also see more collaboration in Northern Ireland between the six further-education colleges to explore areas such as renewables, digital IT and open source, where we collaborate through the sharing of source materials and our staff skills and capabilities in delivering programmes directly to industry. We think that, as a sector, we are maturing in that regard and can develop that further.

595. I will hand over to Damian, who will cover the EU aspect.

596. Mr Duffy: I will make points on areas where we see opportunities. We talked earlier about EU funding opportunities through the INTERREG and FP7 programmes. We think that there is significant scope for higher-education institutes, further-education colleges and the business community in Northern Ireland to extend their reach and engagement in those programmes, such as on a cross-border basis using the INTERREG and FUSION programmes and in strategic collaboration on the benefits of all-Ireland partnership on Europe-wide programmes in order to secure a bigger return.

597. We also believe that there is scope to build on the work of collaborative networks, which are supported by Invest NI. A lot of very good work is being done by Momentum, Digital Circle, Whisple, BioBusiness NI and other collaborative networks that have already been established. It is about trying to bring the work of those networks into a holistic system and to have a composite view of how we maximise the benefit of the work that they do and the opportunities that they identify. In order to achieve that, there may be a possibility of establishing some sort of overarching research and innovation council, as we have referred to it, to bring all of that research, development, innovation and implementation of opportunities together and to co-ordinate and facilitate the work of the various networks.

598. One difficulty that we have found with regard to the KTP programme, in which we have had recent great success, is that, often, it is not completely suited to the needs of SMEs. Therefore, we have tried to develop a route through the innovation system, starting with low-level innovation vouchers, which are low cost, moving to a KTP-lite scenario, which is a short-term KTP over six or 12 months, into mainstream KTPs, which are of longer duration. We see the possibility for some businesses to progress through that life cycle to the point where they could be ready for submission of FP7 proposals, which are quite onerous and labour-intensive with regard to finding relevant partners around the European Union.

599. In another area where we think that there are opportunities, there may be a role for Invest NI. It makes significant effort to support and bring the necessary information to the table. However, the fact is that the Horizon 2020 programme will increase spend in research, development and innovation from €55 billion to €80 billion. We need to get a bigger slice of that. The Republic of Ireland's share of the cake significantly exceeds that of Northern Ireland's. We are at the point now where we are looking at the next programme. We need to sit down and think solidly about how we improve our chances in that particular programme in the future.

600. I will finish on another issue with regard to opportunities, which is that, when we developed our curriculum strategy, we had a sense that we had to pin our colours to the mast and identify a number of sectors that we thought would be strong growth sectors. We will reshape our curriculum and course offering to meet those challenges. We often feel that Northern Ireland Plc needs to take a risk. It needs to identify some priority sectors where it feels that there are global growth opportunities, take long-term calculated risks and invest. Clearly, on the research and development side, the payback period on investment requirements on some high-level research and development, and even on innovation for SMEs, can be medium to long term. Therefore, that requires us to have a long-term vision of where we would like to go with regard to renewables, financial services, digital media or biosciences. We must choose the sectors where we think there are opportunities, take calculated risks and align our economic strategies and curriculum to respond to those needs.

601. The Chairperson: Thank you very much, Mr Duffy. I thank you both for your presentation and written submission, and I commend you on the good work that is being done.

602. If I may be so bold, your submission states that there is considerable emphasis on knowledge transfer projects, and that is a key element in the work you are doing in this area. I would distinguish that from what I have referred to as pure research at first instance, as it were. What you are really doing is going further, perhaps using research and applying it to a practical situation, seeing how it works, reporting back to companies and assisting them in skilling up their workers in a sort of bespoke fashion. Is that, effectively, the type of applied research work you are doing?

603. Mr Duffy: The reality is that, to date, the research and development arena has been the sole preserve of the universities. Our remit has been on the innovation part of the life cycle. We are looking at the implementation of —

604. The Chairperson: There is no point in having research and development unless you innovate. That is the whole point of it.

605. Mr Duffy: Our role is to support the implementation or skills development. We are the primary provider of support to Bombardier on apprenticeships programmes. We have a £2 million composites autoclave. That is a state-of-the-art facility. There is nothing like that on the island of Ireland, never mind in Northern Ireland.

606. What we are trying to do for ourselves and the FE sector is to have a conversation about how we move forward in a relationship with the universities from fairly sanitised co-operation or co-existence to real collaboration. How can we add value to the research and development work of the universities? That is what we presented in one of our slides about the innovation ecosystem. Our role is on the innovation side, and the success of the whole system can be improved if the FE colleges and the contribution that we have to make are clearly mapped out in the broader ecosystem. That requires us to have a more-structured dialogue with the universities about what our role can be and what capabilities we can bring to the table.

607. The Chairperson: But you are not trying to replicate the universities.

608. Mr Duffy: Not at all. It is a completely different thing.

609. The Chairperson: Your submission states that changes were made recently to the knowledge transfer project criteria, which made it more difficult for the partnerships with the FE colleges. When did that happen and how has it made the partnerships more difficult?

610. Mr Duffy: The knowledge transfer partnership programme was managed on a national basis. There is regional representation, and it is jointly funded by Invest NI. The changes happened around the tail end of last summer. The knowledge transfer partnership criteria were a wee bit more open-ended in the preceding three or four years. That meant that smaller companies could put marketing or export development proposals on the table.

611. The change in the criteria meant that it went back to being more pure research-driven and, let us say, more academic. Therefore, we were in a position where we had quite a number of successful big companies interested in KTP programmes. However, because the criteria changed and the focus seemed to shift backwards into research and development, their projects were not seen as being innovative enough.

612. At one stage, our KTP manager had a conversation and asked, "What would you see the success of a KTP programme being?" The answer was: "A good journal paper." For us, the success of a KTP is increased turnover, job opportunities and the opening up of export markets. We are having a good dialogue and conversation with Invest NI to try to address the situation, so the discussion is ongoing.

613. The Chairperson: This is a national, UK-wide thing that has been brought in?

614. Mr Duffy: Yes, but it works against our regional interest, because, if you think about it, a small number of companies in Northern Ireland are hi-tech, hi-spec and invest in research and development. Sixty per cent of the investment comes from 10 companies, and the majority of other companies are SMEs. They are working in the innovation field and are in that slice where small incremental steps or new products or new services can move them into a different space. Our question is this: how does Invest NI support those companies in that space? A KTP was a key tool, but the change in criteria works against the fabric of —

615. The Chairperson: The change in criteria is pushing the whole thrust of things backwards towards more pure research rather than applied research.

616. Mr Duffy: That is right, and the key thing for KTP companies is to remember that they contribute a third of the costs, and that might be for a £60,000 programme. There are small companies that are prepared to put their own money on the table to be part of a knowledge-transfer process.

617. The Chairperson: I want to move to another aspect, and then I will open up questions to colleagues. You talked a lot about the importance of networks in your paper, and it is clear that you are networking throughout the UK and throughout Ireland and, indeed, even beyond that. The important thing is networking. You referred to the benefits of the Club Met knowledge network. Can you expand a little on that?

618. Mr Duffy: In my opinion, Belfast Met and the FE sector in general are much closer to the ground and to small businesses and are much more connected, flexible and responsive. Club Met is a vehicle through which we try to connect with businesses. The outcome of that engagement with Club Met and the various networks and groups that we set up is that we have structured dialogue with businesses around their needs. A recent example was that we set up a renewable energy steering group. We invited DONG Energy to come to talk to us, and we are working with a company called B9. DEL and Invest NI were involved in the discussions, and, as a result of those discussions and that networking process, we identified the need to develop a wind turbine maintenance qualification for the simple reason that we were going out to attract investors to come into the wind turbine market but there were no accredited qualifications. Therefore, we set ourselves the challenge to go through the process to ensure that Belfast Met is the second college only in the UK to offer an accredited wind turbine maintenance programme. The programme was financed and its development went through the DEL assured skills programme, so it is matched closely to the needs of business.

619. The real benefits of the process on the networking side are that we have had the opportunity, in a structured way, to listen to the needs of a number of companies. We have reflected on that, and, in discussions with DEL, we have been able to put a solution on the table. A lot of good work is done in the sector skills councils and in the various collaborative networks that have been established, but some of the implementation of that is lost. The strategic vehicle to translate that good work into the priorities and the skills needs is lost in some way because of the lack of an overarching body to facilitate that and cherry-pick the good ideas. We come up with good ideas from partners that we meet, and we would like to feed in to the business community, but, sometimes, we set up our own networks to do that.

620. Mr Dunne: You are welcome. We are impressed with the presentation that you have given to us so far. Has the college any plans yet to become involved in Horizon 2020, and, if so, how would you go about that?

621. Mr Duffy: We would like to be involved, but, in reality, under our current strategy, we have one FP7 project that will probably come to fruition next year. Horizon 2020 is an ambitious programme that will run over six years. It involves a big amount of money, and we would like to be involved. We feel that, although we are the largest college in Northern Ireland and the fourth largest in the UK, we are small in our size and experience. That is why the relationships with the universities are important, and it is through collaboration with the universities that we will have something to bring to the table. If the universities, the FE colleges and businesses can put clusters together, we could, legitimately, create sizeable projects to secure funding under Horizon 2020. There is such a broad range of sectors. What work against us are the time and resource commitments that are required. We do not have any dedicated resources for that, and we try to do it on the fringes of our existing business development activities. With their large knowledge transfer resources, the universities are probably much better placed to do that than we are.

622. Mr Dunne: Do you feel that the system is too complex?

623. Mr Duffy: FP7 is an inherently complex process. The institutes of technology in the Republic of Ireland evolved from a vocational setting to take on a degree-awarding status. One of the things that we have learned from our contacts with the institutes is that the Republic has had much more success. It seems to have a better set up and it is more actively engaged in FP7 and the opportunities that are presented by Horizon 2020. It also realises the benefits of putting together the European clusters and the return that can be made by doing that. We do not seem to be as well tuned in to that.

624. Mr Dunne: You mentioned that Northern Ireland companies will have to try to get more out of Horizon 2020. As a college, can you do anything to develop a programme for customers on how to source EU funding? Is that a possibility?

625. Mr Edwards: If that was to fall within the remit of education and training and providing people with that as a service, the college could explore that. That could be a possibility.

626. Mr Dunne: We were impressed by how you customise your programmes to meet the requirements of industry and your various customers. I think that that would be worth looking at.

627. Mr Duffy: Our engagement with the Leonardo Da Vinci and Erasmus programmes has been beneficial. The Erasmus student exchange programme will be massively expanded under the next round of EU funds. It is now called the Erasmus for All programme, and it really opens up the possibilities of student and staff mobility across Europe. Our staff get learning opportunities from those programmes, and two of our business advisors have just returned from Germany, where they were looking at the cradle-to-cradle approach to sustainable design that was developed there. We are involved in those programmes to learn from them and to bring back tools and techniques and look at their application in Northern Ireland. From an education and skills point of view, that type of engagement in European programmes is very useful. However, we need to work on and fund the mechanisms by which we share those skills and experiences and transfer them to the businesses that we engage with.

628. Mr Dunne: Is the challenge in getting the necessary funding to run the training or mentoring that is required?

629. Mr Duffy: Yes. The previous regional innovation strategy provided funds that supported companies to engage with and secure FP7 funds. I do not have the detail on the success of that, but you probably do.

630. Mr Dunne: On a general note, you mentioned the autoclave. I have been to Bombardier and have seen its impressive set up. Were you involved with it in the earlier stages?

631. Mr Duffy: Yes, we worked hand in glove with Bombardier to develop the spec for our autoclave. We are the main providers of apprenticeship programmes in Bombardier, and Michael Ryan and others fed into our discussions on what that autoclave would look like and how it would be used. We are also trying to ensure that Belfast Metropolitan College is a member of the new Northern Ireland Advanced Composites and Engineering Centre (NIACE) in the Titanic Quarter.

632. Mr Dunne: Is that the new building that has just opened?

633. Mr Duffy: Yes. If someone is doing an MSc in aeronautical engineering at Queen's University or the University of Ulster, the chances are that he or she will train on our autoclave. That is an example of the odd connections between the FE sector and the universities that people are not always aware of. If those connections were enhanced and we had a structured discussion, those connections could be much more beneficial in trying to link together the different pieces of the jigsaw. We do collaborate, but it is a matter of broadening that collaboration.

634. Mr Dunne: Would you say that composites technology is moving further beyond aircraft production?

635. Mr Duffy: Wrightbus is using composites, and composite materials are used in body armour. There are all sorts of applications for composite materials.

636. Mr Edwards: We directly link composites capability into various areas of our curriculum including the motor vehicles side. We also have the sports motor vehicle academy running in Mallusk, so we are taking opportunities to take in learners at all levels and expose them to the technology so that, as they progress through to higher education, they are already aware of facilities and have an underpinning knowledge of how to use them.

637. Mr Flanagan: Gentlemen, thank you for your presentation. I think that Belfast Met is making fantastic progress, and the new building is tremendous. I hope that all works out for you in the future.

638. In your response to the Committee's request for information that was sent before Christmas, you mentioned that Belfast Met will hold an FP7 event in February or March. Has that happened yet? Can you give us any more details on that?

639. Mr Duffy: It has not happened yet. We are working with Belfast City Council to secure, through Enterprise Ireland, an expert, who has a hell of a lot of experience and a track record in success, to present to businesses and give his perspective. There is actually limited experience in Northern Ireland. There are a few people who have experience of FP7. So, we have not organised that yet. We are in discussion with Belfast City Council about funding for it. The event would be open to any of the businesses that we work with and to anyone who has any interest in it.

640. Mr Flanagan: It would be useful if this Committee were to be given an invite and were able to attend. Once again, I hope that goes very well for you.

641. We heard from the Confederation of British Industry (CBI) when we were in Newtownards last week. It has advocated that a champion should be put in place to drive forward research and development here or that an organisation should be established by Government that would co-ordinate all R&D work here. Would you buy into that opinion? What are your views on that?

642. Mr Edwards: As Damian has outlined, collaboration is happening, and connectivity needs to come beyond collaboration. We would welcome the idea of exploring how we could better collaborate or better engage to benefit from each other's research and application. Joined-up education services can only support Northern Ireland further.

643. Mr Duffy: If you look at the model that we have presented to the Committee, you will see that there are different pieces to the jigsaw. It all needs to work together. If it is fitted together, then the engine can run quite well. We — the CBI, the Northern Ireland Science Park and the FE colleges — are all doing very good things. There is just a bit of glue missing that needs to hold all of this together and facilitate it. It does not need to be an expensive body; it just has to be a framework to facilitate the next piece of this discussion to really work through the research and come up with action plans to say that this is what we are going to do. There are the regional innovation strategies, which we have had for the last two iterations, but we need a bit of a push to try to bring the various parties to the table. At present, we have no vehicle to bring any ideas that we have to the table unless we were to have bilateral discussions with each university. There is no overarching framework to have a discussion around research, development and innovation and to co-ordinate the strategic policy approaches to delivery against that.

644. Mr Flanagan: That is the view that we are getting from most stakeholders, so I presume it will be an important facet of our report eventually. In your collaboration with institutes of directors and businesses in the South, which are really ahead of us in innovation and R&D, can you give us an example of a practical success or a win you have had as a result of working with an organisation in the South?

645. Mr Duffy: Good question.

646. Mr Edwards: We would have to go back and look, but we could report back to the Committee on the range of companies we have engaged with and had success with.

647. Mrs Overend: Thank you very much for your presentation. It was very interesting. From reading through your submission, it seems often to be the case that research and development requires a longer-term investment and the available funding is available only in the short term and there is no return within that. Is that something that you are finding or is your innovation work more short term?

648. Mr Duffy: The funding available for research and development from Invest NI and other sources usually has a three-year time frame. The employer support programme, for which we have just developed a strategic plan with DEL, looks at strategic interventions across a number of priority sectors, and that is a three-year programme. So, funding sort of runs in three-year slices, which is probably tied in to the budgetary processes in some way.

649. Mrs Overend: That is what I am saying. The funding has that sort of time frame, but does that match your project? Do you have to re-adjust?

650. Mr Duffy: We have an action plan that will try to deliver a range of activities over a three-year lifespan, or we will engage staff to deliver on a programme in one three-year slice and then the next three-year slice. The employer support programme, to which we have just submitted a plan, was the successor to the DEL innovation fund, which was also a three-year programme. The Connected funds and so on run in cycles of three years rather than any longer-term commitment.

651. That is not necessarily a bad thing. Things can change quite quickly in three years. The priority sectors we identified in the regional innovation strategy five years ago, and those we identified in the current Northern Ireland economic strategy, have changed. Three years is a reasonable time frame, but the assurance of a role in the delivery is more important than the timescales of the programme. We would like to feel that we had a long-term role and engagement in the delivery of research, development and innovation, whatever that role may be, and were assured of where we fitted in the ecosystem. We could then get on with that.

652. Mrs Overend: Your presentation mentions that curriculum development is part of the long-term development. Surely that requires tailored careers advice to make sure you have the appropriate students coming into those roles?

653. Mr Edwards: We identified the seven areas through our curriculum strategy and mapped those back to the various strategies on economic engagement. With regard to a delivery package for that strategy, there were nine key areas, one of which was careers advice and guidance to learners prior to entry and increasing the amount of pre-entry advice and guidance that the college was giving, particularly around those curriculum areas.

654. We implemented that in September of this academic year and have had a significant increase in engagement from the public on that. We now require learners to attend a pre-entry session, regardless of where they are going to take up a place on the course, to make sure they have to hand all the information about what is involved with the industry directly.

655. With regard to developing the curriculum, Damian outlined how we are engaging with industry the other way. We are also able to use that back the way, so that we can ensure that what we are offering in assessment and curriculum areas is what the industry wants through our full-time learning. For example, Bombardier came in to tell us not just about the autoclave but the skills that are required to make best use of that autoclave and then adapting it. There was also the work with B9, where we were writing the qualification with them, because there was no qualification there, and putting it on the framework with major awarding bodies. The college uses its links with industry to shape its curriculum.

656. The institute is talking to our colleagues in Dundalk Institute of Technology (DkIT) in about the benefits they have in being able to do that at higher education as an independent body, whereas, as further education colleges in Northern Ireland, we are constantly going to various awarding bodies to try to work with them, which brings another party into the mix. Many of the awarding bodies that we work with have picked up the challenge and have become more responsive to industry. However, specialist areas can slow the process, and we just want to be as fast as we possibly can in delivering back to industry.

657. Mrs Overend: That is very interesting. On balance, do you do more work with the larger enterprises or small and medium-sized enterprises?

658. Mr Duffy: We do about £3 million a year of apprenticeship programmes with a large number of big employers. On balance, because of the scale of the programmes, a larger amount of money comes through big employers, but there are more engagements with SMEs, because the fact is that 90% of the businesses in Northern Ireland are SMEs. Uniquely, we have delivered KTPs all over Northern Ireland, for example, in Fermanagh and Warrenpoint. The KTPs that we have done have been across the piece from small businesses and niche businesses to large, hi-tech ambitious companies with big plans and big turnovers. Depending on the needs, we can respond to different requirements. We are working with Citigroup, Allstate and Liberty IT — big companies and small companies. That is not unique to us, but is particular to the Belfast metropolitan area, where there is a large number of big employers that we connect with in different ways. Other FE colleges in other parts of Northern Ireland are in the same position in that they have a mix of interactions with large and small businesses.

659. Mr Edwards: One of the interesting developments is that large employers are seeing the relationship with the college developing with their suppliers, particularly in the IT industry, where we are developing relationships with small, innovative suppliers around mobile technology. Therefore, although we are doing the training for the large companies, they are then asking us what we are doing directly back with their suppliers and whether there could be an opportunity to roll out that training or education into the supply base. At that point, that hits the SME base. They spin off in the two directions in that balance and mix between big and small.

660. Mr Duffy: Let us say that Almac, a big company that we talked about earlier, has 2,000 employees. Probably only 200 of those are high-level, PhD-qualified with a costly input. The vast majority of the other 1,800 jobs will be technician-level, logistics and management jobs. We are in the volume skills-development-capacity game. Our bioscience laboratories at Belfast Met are industry standard and are as good as you can get in the whole of the European Union. Some of the historical perspectives around the role of the tech have completely changed, and we will be delighted to invite you to our new E3 facility when we get the keys. You will get a feel for the future of further and higher education, because we deliver further education and degree-level qualifications, so we are an FE/HE institute. We are keen to expand on our ambition to have a responsive and ambitious curriculum, and we are flexible enough and able enough to do that.

661. The Chairperson: We will look forward to that invitation. Are you happy enough, Mrs Overend?

662. Mrs Overend: Yes, I could probably go on, Chair, but thank you.

663. The Chairperson: There are no other questions from members. I have one final question on innovation vouchers. I am not sure how they work. Can you explain briefly how they work?

664. Mr Duffy: It is a very quick and easily accessible scheme. It uses innovation vouchers, probably of around £4,000. The company identifies a project and connects with Invest NI. If Invest NI agrees that they have a particular piece of work that they need done, it will give the company a voucher, through which that company can buy in a particular input.

665. The Chairperson: It is a very simple system.

666. Mr Duffy: It is a very simple process, and Invest NI has tried to make it as easily accessible as possible. You can have three or four innovation vouchers to look at different aspects. In the presentation, we were trying to say that that initial engagement around the pretext of an innovation voucher can lead to a discussion with the company about a bigger opportunity around KTP and so on. It applies to all sorts of businesses, including retail and agricultural businesses. It is a very open-ended brief.

667. The Chairperson: Thank you very much for your reply. That is very helpful.

668. Mr Agnew: Sorry, Chair, for not indicating earlier. Thank you for the presentation. As was mentioned, we were at the Ards campus of the South Eastern Regional College (SERC) last week, where Thompson Keating spoke about DONG Energy having a contract for offshore wind projects. If I remember correctly, it will manufacture in Germany and do the assembly and installation in Kent. Basically, it was felt that Northern Ireland was not in a position to take on those contracts. I hope that colleagues will correct me if I get this wrong, but one of the reasons for that, which he highlighted, was that we do not have sufficient training in health and safety in working offshore. I see that offshore energy is mentioned with regard to your Titanic Quarter campus.

669. You also mentioned work with DONG Energy and B9, which are key players in the industry; B9 is a local industry. What work is being done with the likes of B9, DONG Energy and Harland and Wolff to ensure that we have the capabilities to go right through the process, namely the manufacture, assembly, installation and retail of renewable energy projects? There are so many aspects of the business. Green energy is now one of the few growing sectors. It is a big question, but where are we now? Where do we need to get to, and how do we make that journey?

670. Mr Edwards: You talked about supporting the offshore industry from design to production to maintenance. As has been highlighted, Belfast Met, as a college, has the full qualification at the maintenance end. That includes the health and safety component and all the training requirements to allow for offshore maintenance support works. We are in a position to support the industry right now. We are already working on the delivery of that training. We had to completely innovate the way that we deliver and assess the courses, inventing new equipment to record the activity taking place at a windmill and deliver it through FlickKey. We had to integrate technologies. Therefore, not only did we have to redevelop the curriculum, we had to redevelop approaches to the delivery of the curriculum. We are in place. We are one of only two colleges in the UK that is capable of delivering that training. We are at the leading edge of that technology.

671. As has been outlined, in respect of manufacturing capability, we have foundation degrees on composites at both level 5 and level 3. With the new autoclave facility coming online in April, we will have the technology to deliver composite design and manufacturing as well as to support those skills areas. We are moving on with that agenda, and it will go live for delivery with our mainstream curriculum in September.

672. We already have the design skills capability in the college. It is not necessarily specific to wind farm or green technology, but it is design in construction manufacturing and, therefore, goes across that field. As you identified, Belfast Met has worked with the companies. It is that collaboration with companies that will deliver the skills as they roll this out. It is a growing area of the economy, and B9 itself is a growing company. As opportunities arise, we are stepping in.

673. You talked about the development of qualifications from start to finish. We are reducing the development time of qualifications significantly so that, as soon as the demand arises, we put in place the qualification for the skills. B9 is an example of exactly how we want to operate in future. Although some points of that are not on stream right now, they are very near to coming on stream and have the capability to do so.

674. Mr Duffy: In the centre for business excellence, we have now appointed a dedicated renewable energy sectoral adviser, whose full-time job is to look at and understand opportunities and participate in European programmes to bring back expertise. Our E3 facility is a BREEAM category-1 building. We have made any sustainable input that we could make. It has a wind turbine, a woodchip pellet burner and so on. It will probably be one of the most sustainable buildings in Belfast.

675. In the sector, a working group has been established to work with SERC to explore and understand the DONG opportunity, what it constitutes and how we, as a sector, respond to the renewable energy agenda. It is the same for the other priority sectors that we have identified. There is a lead college in each of those six or seven sectors. SERC has an expertise, and we have a capability. We will bring those capabilities together and offer a collaborative solution to the likes of DONG and other investors and say, "Listen. The FE sector in Northern Ireland has a capability to respond to your skills requirements, whatever they may be." DONG has been in Belfast Met, and we have presented to it. We have also talked to Invest NI and DEL. The discussions are ongoing. When we looked at the workings of wind turbine maintenance and operation, we found that the electronic bits and pieces inside the wind turbines are being developed by Siemens. That led us off to Dublin to talk to Siemens about the contribution we may or may not be able to make to the electronic boards that control the wind turbines. We are trying to get up to speed quickly and to be able to offer a solution.

676. To go back to the point that I made about making decisions and taking risks, renewables would be one of those areas. The Northern Ireland economic strategy says that work is still ongoing to identify the opportunities. Let us tune in quite quickly to those opportunities, because there is tremendous scope. We, as a college and as a sector, are trying to respond to those opportunities.

677. Mr Agnew: I appreciate that. You will not be surprised to hear that I absolutely support you in taking a risk in renewables. As risks go, it is one of the safer ones. It is inevitable that the industry will grow further. Are you aware of any other barriers to Northern Ireland getting those contracts? If so, is there more support that you could be getting from the Department of Enterprise, Trade and Investment or any Department?

678. Mr Duffy: Scotland has a £70 million or £80 million renewable energy fund in place to support the development of the industry, attract foreign investment and so on. I am not sure that we plan to set aside that sort of money. However, if we think that it is a priority sector, and if we want to compete in a global market place and gain a foothold quite quickly, we need to think about how we can use the likes of Horizon 2020 and other programmes to attract funds to do that.

679. The Chairperson: I think that that brings our session to an end. Mr Duffy and Mr Edwards, thank you for attending and for your important input into the inquiry. If we need to write to you about any other matters, I am sure that you will be able to respond.

680. Mr Duffy: Thank you.

8 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Mr Stephen Moutray
Mrs Sandra Overend

Witnesses:

Professor Tony Gallagher
Mr Scott Rutherford

 

Queen's University Belfast

681. The Chairperson: Briefing the Committee today are Mr Scott Rutherford, who is the director of research and enterprise, and Professor Tony Gallagher, the pro-vice chancellor of Queen's University. Gentlemen, you are very welcome to the Committee meeting. Thank you for your very considered, detailed and interesting written submission to the Committee. It is very helpful to our work on this important inquiry into research and development.

682. We see research and development as crucial to developing our economy and generating innovation within industry and business throughout the economy. Thank you for your attendance and, once again, for that submission. Would you like to make an opening statement? Then we can ask questions.

683. Mr Scott Rutherford (Queen's University Belfast): Thank you very much, Chair. As you have indicated, it is quite a comprehensive and detailed response, and I will keep this briefing as short and succinct as possible. I will go over just a couple of the key points.

684. With regard to the list of questions that we were asked in the inquiry, the opening part is about funding opportunities and sources of funding. The drawdown of EU funds is a high priority on the agendas of governments and universities at present. I will focus on that. I want to draw your attention to a couple of things in that area.

685. As you are perhaps aware, there is a lack of infrastructure and expertise to support academics and businesses in drawing down EU funding. It is more than a lack of infrastructure; it is more like a lack of embedment of expertise close to the research base and research institutes in Northern Ireland. An example of it is to the fore at present. We have a small allocation of funding from the Department for Employment and Learning (DEL), which allows the universities to embed a consultant, on a part-time arrangement. It is proof that having that level of expertise closer to academics and businesses linked into academia makes a huge difference. It has allowed us, since November 2011, to put forward 11 funding applications to a value of up to £30 million. It is a small example, at an operational or tactical level, of how expertise that is closer to the research base makes a huge difference to the drawdown of EU funds.

686. Another aspect that is critical to funding is the Higher Education Innovation Fund (HEIF). It allows the universities to have in place an infrastructure of people and expertise, working alongside academics and brokering on gaps with industry and businesses. It has experienced a small number of cuts in recent years, and that is out of kilter with other parts of the UK where it is seen as a key driver of the economy and a key mechanism by which universities engage with outside organisations and, essentially, exchange knowledge out of the institution. I included an example in our written response. HEIF, in general, leverages between £3 and £5 of income for every £1 of investment from government.

687. As to the process of accessing programmes that support R&D in Northern Ireland, it is fair to say, as I outlined in the response, that it is seen at times as a bureaucratic and drawn-out exercise. I am sure that that issue has been raised consistently. I included the example of the knowledge transfer partnership (KTP) scheme, which essentially involves an academic — a graduate — who is placed in a company and works on a problem. That is a great way of tactically engaging with a range of small and medium-sized enterprises (SMEs) across a region. A national appraisal of the scheme was undertaken in September 2009, and it concluded in February 2010. The scheme is actually endorsed across the whole of the UK. It was adopted and implemented in all parts of the UK except Northern Ireland, where an additional review was conducted in October 2010. We have heard, this week, that the scheme will be launched, hopefully, later in the year. So, as you can see, it is a long process of evaluation and appraisal. As a result of that, our KTPs in Northern Ireland have declined by 30% over the period. That is an example of the implications of a longer-term appraisal of those sorts of schemes on the SME base in Northern Ireland.

688. A number of other schemes are under assessment and appraisal, such as proof of concept, which is a key way in which, for researchers who have early stage ideas, the technology is made available to move those on to an actual application that is used by industry.

689. It is not just about funding and investment, important as that is. It is also about people. Certainly, the Northern Ireland Science Park (NISP) has a CONNECT model, which is a way of increasing the entrepreneurial ambition of the region and bringing together the elements of networking from a social point of view. I endorse and support that. It is incredibly important that universities engage in that arena. I have seen, however, in recent months, perhaps a bit of a scope creep around NISP CONNECT. It is hugely important that it focuses on the entrepreneurs. An increase in entrepreneurs in the region would make a huge difference in building new start-up firms and companies.

690. I touch on a range of other elements in the written response. As the range and models of funding in place in Northern Ireland are largely similar to those across other parts of the UK, I think that it is the implementation of those, the actual beefing up of those, that would make a huge difference to the wider ecosystem here.

691. The Chairperson: Thank you very much. Do you want to add to that, Mr Gallagher?

692. Professor Tony Gallagher (Queen's University Belfast): I am fine.

693. The Chairperson: Thank you for the candid analysis of the situation here with regard to R&D. I have a couple of points to make.

694. It seems to me that Queen's University is attempting to try to bring together research and development and business so that it is, really, business orientated. We are not dealing with pure academic research, although there may be elements of pure academic research. Largely, you are trying to engage with business, apply that research into business and, therefore, into the marketplace and to create innovation. That is the main thrust of what you are doing, is that right?

695. Mr Rutherford: Absolutely. As we are experiencing at the moment, it is about engagement by industry at a much earlier stage. The idea of us pushing our research onto companies or industry is a very old-school approach. It is very much more about engaging much earlier in the process, understanding what the problems of industry and companies are and ensuring that our research pieces are tuned to those needs and that we work in partnership. As I said, HEIF is a key element of the brokerage part of that.

696. The Chairperson: Can we come to HEIF? You are a bit critical of the reduction in funding to HEIF. Is that decided locally? Is that something that DEL or the Northern Ireland Executive decided, or was that decided at a UK level?

697. Mr Rutherford: My assumption is that it is regional.

698. The Chairperson: It is regional.

699. Mr Rutherford: It is a small reduction overall, but it does have implications, as I said, in the context of our driving innovation and having it as a pillar of our strategy in the region.

700. The Chairperson: It is going in the wrong direction. What you are really signalling is that that is valuable stuff. It produces results. For every £1 that you put in, you get £3 back. Therefore, why go in the opposite direction? I think that is really what you are saying.

701. Mr Rutherford: Absolutely.

702. The Chairperson: You have not concentrated on European funding because the research and development is much wider than that. That is very clear from the programmes that you support. Just taking European funding in isolation, particularly framework programme 7 funding, we have not been particularly good at getting that here. Uptake has been fairly poor here in comparison with parts of England, Britain and, indeed, the Republic. Is that really the result of bureaucracy and the difficulties of navigating through the labyrinth that has been created around framework 7 funding?

703. Mr Rutherford: There are, probably, a couple of reasons. Influence in Brussels is critical. Having sustained engagement in Brussels and understanding and being involved in shaping the agenda over there is critical. At some point, it comes down to implementation. There is a range of EU strategies and priorities. It is actually the people on the ground who understand the schemes and networks who can help academics and businesses to navigate a range of complex funding areas. Therefore, as I said, it is twofold. It requires that influencing and lobbying element as well as dedicated expertise that is not out of kilter or in any way disconnected from the research base and companies. It needs to be embedded. You need to understand researchers and how they work and operate.

704. The Chairperson: Where is our deficit? You talked about infrastructure. I think you said that the infrastructure is OK and adequate but there is a problem with people. Is there a lack of knowledge, expertise and experience in accessing that type of funding and, perhaps, other funding as well?

705. Mr Rutherford: I suppose that, at Queen's, I see researchers who have capabilities. There is certainly no issue as regards quality and ambition. It is just a matter of understanding, the ability to take the first step and knowing how to apply. As I said, it takes a certain level of administrative expertise to help researchers to engage in that way.

706. The Chairperson: Finally, the issue of knowledge transfer partnerships came up in evidence from the Belfast Metropolitan College. Because of changes in the criteria, which you touched on in your oral and written submissions, there has been a significant drop in knowledge transfer partnership projects between the universities and SMEs in Northern Ireland over the past year or two. Is that correct?

707. Mr Rutherford: That is correct.

708. The Chairperson: The reason for that is the change in criteria, which has been established at a UK level. Is that correct?

709. Mr Rutherford: It is because of an absence of funding at regional level. Applications go to a national assessment framework. Those assessment frameworks are not necessarily attuned to the needs of a region, hence there is a different set of criteria — a different threshold, I suppose — and a different set of priorities. In that case, applications that might have secured a degree of funding in the region are not funded at national level.

710. The Chairperson: You said that there have been some changes. We heard about some changes during the past week. Are they good or bad?

711. Mr Rutherford: Yes. I am aware of those changes. I think that they are positive. The scheme is likely to move forward now.

712. The Chairperson: Therefore, that could remedy itself?

713. Mr Rutherford: Yes. I think it is about how we optimise it as quickly as possible, given that there has been a hiatus of a couple of years and that a pipeline of industry contacts and companies are interested in engaging in the scheme. It is about moving as quickly as possible on that front.

714. The Chairperson: I am going to move on to another member. Professor Gallagher, if, at any stage, you want to intervene, please feel free to do so.

715. Ms J McCann: You are very welcome; thank you for your presentation. Among the responses we have had so far in evidence sessions and in writing, a lot of people or organisations are saying that it would be helpful to have a one-stop shop that had responsibility for co-ordinating all research and development. At the minute, it is happening in different places. What would that sort of one-stop shop look like? Would it be beneficial to have somewhere for representatives from the different organisations, business or the universities to go to for support or signposting, for instance?

716. In your briefing paper, you refer to the industry-led competence centres, which Invest NI initiatives have funded. Do you see a new model for developing research and development being developed within Invest NI? Would it be helpful if Invest NI looked at it in a different way or if there was a different structure within it?

717. Mr Rutherford: At the highest level of the economic strategy, the Programme for Government and the university strategies, there is a consistency and an alignment in what we are all trying to achieve here in Northern Ireland. As I have indicated, it is, perhaps, the operational and implementation area that is not as cohesive or coherent as it should be.

718. With regard to the one-stop shop, I will use the EU as an exemplar. There is already a capability in Invest NI to support the EU. I do not know whether that has had an impact on the increase and drawdown of funding in recent years. If you are asking me whether that is a suitable home for a one-stop shop across the region, I think it needs dedicated expertise close to the research base and an ability to draw on our research expertise, our industry links and contacts in those areas. I am a big fan of having integrated approaches, as opposed to a detached approach, in that sense.

719. Professor Gallagher: It is worth remembering that, as things stand, the two universities work together very well on some issues. The Science Park is a particularly good example. It is an initiative in which the two universities provide a very good model of how we can promote motivation. The Advanced Composites Centre is another good example. It is an industry-led initiative, which the two universities are involved with, and we hope that a cluster of industries linked to research expertise will develop around that. It is maybe not so much about needing another mechanism to help the thing along; in some senses, the problem is that it takes a long time for decisions to be made. The system has too many audits built into it, which slows everything down, and there is too much risk aversion. All of that is getting in the way of making genuine change quickly. That is the bigger problem.

720. The Chairperson: Does that apply across the board, or is it only in specific areas?

721. Professor Gallagher: I think it is across the board. If you are going to encourage genuine innovation, you need to have quick access to small amounts of cash to try out ideas. You have to be prepared for some of those ideas not to work, but the pay-off is that the things that do work, work well. If you want to create that type of innovative environment, those are the sorts of things you are going to have to put in place. However, we often take ages and ages to make decisions on things and actively drive creativity out of the process.

722. Ms J McCann: A more flexible type of structure is required.

723. Professor Gallagher: Yes.

724. Mr Rutherford: An acceptance of the fact that, in some cases, failure is part of the learning process is also required. It is part of R&D.

725. Mr Frew: If I can, I will go up to the higher level of government and its knowledge and understanding. I think that we would all agree that there is a lack there at the minute and that that could be improved on. Various parts of government will know some aspects of R&D, and other bits of government will know others. We really need that to be joined up, so that we all can get a spectrum of understanding of where we are at in Brussels, Westminster and, I suppose, the Republic of Ireland. We could learn from the Republic of Ireland and the high levels of success that it has had in R&D.

726. In your view, where are the gaps at present? What would be the most appropriate way to fill those gaps?

727. Mr Rutherford: As I said, at the highest level, in the strategies that are in place, there is an alignment across Departments and across each of the schemes. I have been involved in a commercialisation review, which Invest NI is leading on at present. It is acknowledged that the hand-offs across the process of R&D are not always as smooth as they ought to be. As each of the programmes work, as each of the engagements occurs and as each of the pieces of funding is put in place, they are not always cohesive and aligned. That, I guess, is largely a communication issue. I am not sure whether it is a structural issue. Do we need to radically overhaul all the structures, or is just a lack of communication or, perhaps, even a silo approach in some areas of the system?

728. I have indicated in my response that I do not think that anybody has stepped back and looked at elements of best practice across other economies or looked at the system as a holistic area and come up with a sustained, long-term plan. It has to be a long-term ambition here. It is not about a short-term, three-year turnaround with the EU or R&D competence hubs and so on. It has got to be a long-term and sustained period of investment. Tony may want to add to that.

729. Mr Frew: More specifically, on Horizon 2020, what ideas does the university have that we need to engage with or learn more on? Do you have any ideas around that programme? Is there something that we need to learn quickly to get the best benefit out of Horizon 2020?

730. Mr Rutherford: I have mentioned a couple of things already. As you said, the Republic of Ireland has invested heavily over the years in a network of experts across the island who are cohesively and, in some cases, thematically aligned. Again, that links to the ground challenges in Brussels and contained within the Horizon 2020 programme. Here in Northern Ireland, there is the MATRIX framework. Our universities have their capabilities and strengths as well. It is about the alignment of those areas and the embedment of dedicated expertise with a long-term approach on Horizon. It is in the operational parts and the implementation. I do not think that it is in the strategy. Our strategies are understood and clear. It is that implementation arm that is not working.

731. Mr Moutray: You are very welcome this morning. Following on from Paul Frew's question, some respondents to the inquiry so far have indicated that they believe that government must be more connected. What are your thoughts on connectivity and networking, not only between business, academia and government in Northern Ireland but across the Republic of Ireland, Europe and the mainland? Do you see scope for improvement there?

732. Professor Gallagher: There is certainly scope for improvement. One thing that we have been doing in Queen's recently is trying to significantly enhance our engagement with businesses in a variety of ways. In doing that, there is a recognition that we need to improve that. We have done that quite quickly. That will have all sorts of benefits for the programmes we provide and also for the R&D knowledge-transfer opportunities that come out of it. As I said earlier, we have provided some examples — particularly good examples — of that at the moment, such as the Science Park and the Advance Composites Centre, which are very useful models to work with.

733. As for engagement in the UK and Ireland, we are talking to Trinity College Dublin and University College Dublin (UCD) at the moment on innovation work. We are trying to develop that further. There are various funding mechanisms, whereby we have engaged with innovation-type programmes on an all-Ireland basis to try to bring people over and let them engage with businesses. That has often been very successful as well, and it brings in high-quality international expertise to get that across.

734. So, yes, there are plenty of ways in which that type of networking can be improved. Where we have been doing it, you can see the very tangible benefits. There is clearly a hunger in the SME sector for access to that type of expertise as well.

735. Mr Moutray: So that is something that you would like to expand further?

736. Professor Gallagher: Absolutely.

737. Mr Rutherford: There are a few initiatives, some of which are run by InterTradeIreland, that are cross-border. FUSION is a funding initiative that is cross-border. We have engaged in both of those areas heavily. In the context of the EU, it is about getting partners and consortia. If we have cross-border initiatives, that allows the possibility of increasing our partnerships and building links with consortia. If there are ways of accessing information and intelligence on those sorts of areas where there is mutual compatibility and strength, we welcome that as well.

738. Mr Flanagan: Thank you for your presentation, gentlemen, and for taking the time to complete the Committee's form. Many of the respondents that we have spoken to so far have said that not enough is being done by government to promote R&D. Is that something that you would agree with? What do you think government should do to promote R&D? What steps should it take?

739. Mr Rutherford: Moving away from a strategising role to implementing policies is incredibly important. This is about action as well. We have already touched upon speed of response. It is fine having ambition, targets and whatnot in place, but speed of engagement and follow-through in those areas is critical. Also, it is incredibly important to have a joined-up approach. Consistency in approach and in the mechanisms of funding and engagement is also key. There is an absence of detail in some of the strategies. Strategies say that there will be significant investment in R&D and significant investment in innovation, but a quantifiable amount is not given. Is there a degree of financial commitment in that? In the longer term, this is about building a knowledge economy. That is at the forefront of all the strategies.

740. Professor Gallagher: Let me add to that. One of the important things about trying to encourage an innovative environment is to create a situation whereby new opportunities can be seized as soon as they arise. By definition, you are trying to allow new things to develop rather than putting in things that you already know. Sometimes, we get the impression that there is an excessive tendency to try to direct things, as though it were possible to steer things to particular places, when what government should be doing is creating an enabling environment that allows creative opportunities to emerge. Once they emerge, something can be done to try to drive them forward. From a personal point of view, that notion of creating an enabling environment, rather than taking a directive approach, might make a huge difference.

741. Mr Rutherford: Finding a balance of accountability is incredibly important and is inherent in the system. Government must balance a little autonomy and freedom with accountability in the system, in an area that is inherently flexible and unpredictable in its nature.

742. Mr Flanagan: Going back to your point on targets, the Executive have set a target in the draft Programme for Government to get R&D to 3% of GDP. However, at the same time, they cannot tell us what GDP is now. If we cannot predict it for 2020, how will we know what 3% is and, therefore, what we are aiming towards?

743. Your recommendations for what you would like to see done are very broad. They are all logical and I do not think that anybody would argue with them. However, if the Executive could take one specific measure to help to improve the levels of R&D here, what would be the best one?

744. Mr Rutherford: The Higher Education Innovation Fund is the critical piece of people infrastructure that can bridge the gap between the R and the D of R&D. It is the research base that connects with business and other sectors outside the university. Having that as a core, sustained element of funding would enable the university to really improve its business engagement areas, develop its licensing activities and spin-out and attract foreign direct investment into the region. It is the crucial nuts and bolts.

745. Mrs Overend: Thank you very much for your presentation. You mentioned support through the application process. That has come up time and time again with other respondents to the inquiry. Do you find that that is very important to accessing R&D? Furthermore, do you think that it would be beneficial if you had ongoing support, mentoring or training while you go through the process? How do you feel about that? Others have raised that issue. Is it relevant to you?

746. Mr Rutherford: With regard to researchers and academic members of staff, over the years, as funding has increased and become much more complicated and competitive, there has been a need to have individuals in place who understand the system, the necessary nuts and bolts of applications and how to make a successful application. At Queen's, it is recognised that dedicated expertise in helping and supporting the application process is needed. Therefore, I would say that, yes, it is incredibly important, particularly as R&D funding is now constrained internationally. As I said, it is complex and competitive. Ensuring that there is expertise to help us to identify opportunities and target our staff in the best ways is critical. Otherwise, it becomes a scattergun approach, which is burdensome in respect of overheads.

747. Professor Gallagher: The support that is needed is a range of expertise at different points in time. Therefore, the trick is to try to find a way in which it is possible to fold in particular types of expertise at particular times. When a particular type has had its use, it steps out of the picture again. In some senses, the Science Park provides a pretty good example of how that operates, because a constellation of support is provided to people there, which allows them to go from very small to very large. People who are involved in that expertise fold in and out as required. Sometimes, the difficulty is that if you assume that there is a particular mentor or support that you have to have, it may be useful at some point, but if used the entire way through, there is a risk that it could become a drag in the system.

748. Mrs Overend: So the Science Park is a good model for that?

749. Mr Rutherford: Yes. Also, our approach at Queen's is to help people who help themselves. It is not about mentoring for everybody: it is about trying to embed expertise in those people who are winners — those who are most capable. It is about recognising who needs help and at what point in their careers, whether it is during an application process or in their research.

750. Mr Dunne: Thank you for your presentation. A number of issues have been covered. I want to deal briefly with funding opportunities, which have been mentioned. Could more be done to provide funding opportunities that are best suited to firms in Northern Ireland, considering that we have so many small businesses? Among the complaints that we get is that the process is too heavy and complicated. The uptake is very low; it has been eye-opening to see how low it has been. Do you have advice on how that could be improved from the university point of view?

751. Mr Rutherford: I agree with all of those thoughts and comments. R&D engagement is generally fairly low in the region, and it is not helped by the bureaucracy of the schemes.

752. Mr Dunne: It is too heavy.

753. Mr Rutherford: Yes, it is too heavy-handed and out of sync with other needs of business, in relation to the timescales involved. Perhaps there is a role for trade associations and other such organisations to aggregate the needs of SMEs. If there are particular consistent needs or consistent problems, I think the university is able to help more. It is difficult in such a dispersed area where we have such a wide and expansive range of issues. Sometimes it is hard to engage tactically across a huge range. If there were a way of aggregating, consolidating and understanding the needs of business, it would certainly help improve things.

754. Knowledge transfer partnerships, as I have noted, have been a key tool in universities. I think they have been a huge hit and success across the UK. That is a key way of tactically engaging.

755. Mr Dunne: Is it fair to say that short-term funding is available in a lot of cases, but not long term? Risk is a big issue in relation to R&D. Does the risk of committing to funding that, in the long term, may not produce anything, stop people getting involved?

756. Mr Rutherford: It is a consideration in any decision on any type of investment; there is risk attached. As we have indicated, it is an area in which there needs to be a degree of flexibility, understanding of the process and assessment of risk in a rational and logical way. It is fair to say that there is a lack of venture capital investment in Northern Ireland, in comparison with other areas of the UK. Addressing that is a priority in the strategy.

757. Professor Gallagher: I want to reinforce a point I made earlier. The other side of that coin is that we have an overly risk-averse culture. That is reflected in very high levels of audit. The reason why people will not take those steps is that the penalties can be huge, if things do not work. Allowing a degree of risk is necessary and important if we are going to get genuine innovation. It should not matter if some things fail, because, if you want to encourage innovation and gain success, you have to allow that to happen. I understand why people want to play safe, but it dampens down what is possible.

758. Mr Dunne: You mentioned the audit. Were you talking about audit in relation to European funding?

759. Professor Gallagher: It is general audits across all programmes. There is layer after layer of audit.

760. Mr Dunne: European funding is highly audited.

761. Professor Gallagher: Yes, and it creates huge bureaucracies and huge opportunity costs, which drive people away.

762. Mr Dunne: That is a fact; it is restrictive as well.

763. Mr Rutherford: It should be a consideration. We have an ambition to drive up EU funds, but the management of those funds has a high overhead. We are looking to increase the amount of money brought in, but how will we address and manage it if that increase materialises? It comes with a huge amount of overheads. Funding schemes such as INTERREG are hugely costly to administer. I believe that both universities are considering looking carefully at the amount of engagement in those areas simply because of the amount of bureaucracy that is involved.

764. Mr Dunne: I have one more short question. We heard last week about a new composites centre on the Airport Road. How is your R&D engagement for that going?

765. Professor Gallagher: Is it the one in the Titanic Quarter?

766. Mr Dunne: Yes.

767. Professor Gallagher: That has launched. It is a particularly good example of an industry-led initiative, with both universities playing a key role in supporting it. The ambition is that having that sort of facility, with high-quality research and development, will encourage a cluster of companies to develop around it, tapping into the expertise as they need it. I think that it is a particularly good example of the sort of thing that can have hugely beneficial effects for the economy and link in with SMEs and other businesses very effectively.

768. Mr Rutherford: It is an example of both universities here and companies being involved. It is a piece of infrastructure that houses all those types of people in one building and in one place.

769. Mr Dunne: It is a good example. We are looking forward to visiting it. I think that we will get an invite to it at some time.

770. The Chairperson: Gentlemen, that completes the questions. Thank you once again for your very interesting oral and written submissions. It was very helpful.

8 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Professor Tony Bjourson
Mr Tim Brundle

 

University of Ulster

771. The Chairperson: Our next item of business is an oral submission from the University of Ulster. The papers on this item are in members' packs, and include the University of Ulster's very detailed and helpful response to the inquiry, for which we are very grateful. Briefing the Committee are Tim Brundle, director of innovation, and Professor Tony Bjourson, director of the Biomedical Sciences Research Institute. We are very pleased to have you here today and look forward to hearing what you have to say. We already have your written submission, but I invite you to make an opening statement.

772. Mr Tim Brundle (University of Ulster): We would be delighted to do so. We will make a few opening remarks and briefly take the opportunity, on behalf of the University of Ulster, to reinforce and echo some of the comments made this morning by colleagues from Queen's. We are very thankful for the opportunity to be here and thankful that the inquiry is taking place. It is certainly welcomed by the university. We are very pleased to be providing evidence to you.

773. As it says in our submission, we are a unitary institution. As you will be aware, we have four main campuses across Northern Ireland: Belfast; Coleraine; Jordanstown; and Magee. We are a modern, leading university. We have a strong regional mission, which I will come to later. We have performed exceptionally well in developing and enhancing the relevance and quality of our research, innovation and taught programmes. We have established excellence in chosen research areas and contributed substantially to developing regional, economic and societal capacity through technology and knowledge transfer. We are a major contributor to research and innovation capacity in Northern Ireland in support of local business and industry. We have a research strategy that focuses on a selective prioritisation based on performance, and our research base has strengthened and expanded rapidly in respect of funding and quality. We have established research institutes in 16 disciplines across the university.

774. Following the publication of the results of the 2008 research assessment exercise, the independent and authoritative 'Times Higher Education' league tables of research quality placed the university in the top third of UK universities, ahead of many longer-established universities. Of the 25 disciplines that we submitted to the RAE in 2008, 21 had research assessed as being world-leading, with a four-star ranking, and biomedical sciences, which Tony Bjourson leads, nursing and Celtic studies were each ranked in the top three in their field in the UK.

775. Essentially, at its heart, the University of Ulster is about the creation of knowledge through research and the dissemination of that research through teaching and innovation. The production of high-quality, high-impact research is essential to maintain the intellectual and civic mission of the university, and the diffusion of research outputs into the economy are led, internally, by the university's office of innovation, which is, in effect, our one-stop shop for innovation at the university and, externally, by our wholly owned knowledge transfer and investment company, Innovation Ulster Ltd. We believe that a buoyant research base is important, not only for our collective education — that is, is the collective education of the people of this region — but for economic growth and social and civic advancement. We believe that creation and diffusion of knowledge are critical to development, not only economic development.

776. We welcome the inquiry, and we are hoping that the research and the evidence that has been presented to the Committee will have an impact so that we will increase the levels of research activity and innovation activity in Northern Ireland and the competitiveness of the companies in the region. It will also have a social impact on the back of that greater level of research and greater level of diffusion of the outputs of research into society.

777. I am Tim Brundle, director of innovation at the university, and I am also chief executive of Innovation Ulster, which is our technology transfer vehicle. I am also a board member of Invest Northern Ireland, and I am a director of a number of start-up companies that are based on the outputs of research. We were hoping to have with us Professor Hugh McKenna, but, unfortunately, he had to fly off to Italy. I am very grateful that Professor Tony Bjourson, director of the Biomedical Sciences Research Institute, is able to join me. Tony is an academic who has led a world-leading research institute.

778. I will amplify some of the comments that our colleagues at Queen's made a moment ago. The levels of business impact that we see are increasing from the outputs of research. We have seen a much higher degree of engagement from business into university research and development activities, and we have seen a higher outflow of research into the economy. We have seen a much higher degree of engagement from academics in business activities. We reckon that, in 2011, around 37% of our academics are working with companies today. There are a number of reasons behind that. Not only are they seeing the institutional benefits from engaging with industry, both to their teaching and research endeavours, but, as the changes have been made to the research assessment exercise and research excellence framework, we see a much higher degree of emphasis placed on impact. That is the translation of research outputs into the economy, including providing competitiveness for industry; policy inputs and impacts; and societal inputs and impacts. That diffusion is becoming increasingly important for the university sector across the UK, and we are seeing the benefits of that.

779. I will also highlight some comments that were made about economic strategies. At the University of Ulster, we also have an alignment between our corporate goals, the draft economic strategy and the objectives of various task forces and strategy documents in Northern Ireland. There is a strong alignment there. Historically, where the region has fallen down, as Scott Rutherford indicated earlier, is in the implementation. One thing to note is that, when we are dealing with innovation and research-based competitiveness in industry, time is a massively important factor for those companies and projects. One of the examples that was provided earlier was of the knowledge transfer partnership (KTP), where we have, in effect, lost two years of enhanced funding into industry. That is two years of activity that did not happen in a proportion of companies in Northern Ireland. That programme is still running, but at a lower level than it could have been. Therefore, we have lost opportunities for our companies to have an impact.

780. The Higher Education Innovation Fund was also highlighted: we believe that there was around a 16% drop in that. That is the interface between the universities' research world and the economy. That interface translates one into the other and grabs requirements from industry and brings them back into research. We have reduced the level of that activity by 16% at a time when we are highlighting the importance of innovation and R&D to the economy.

781. I will also touch very briefly on issues of bureaucracy, which is a problem that presents many barriers. Cherry Pipes presented evidence to the Committee some weeks ago, and it highlighted that it was spending around £35,000 to get a European framework project proposal prepared. We have seen a range of figures. Anything from £15,000 up to £45,000 is a typical investment to get the project off the ground. This is a competitive environment, and the chances of proceeding with those are small. Therefore, a high degree of investment is required from what is essentially a small-business economy. There is an opportunity there for assistance from government to help those companies to overcome the burden of getting engaged in those programmes.

782. I can give an example of the grant for the research and development programme that is run by Invest Northern Ireland. It provides a very small amount of money to companies that have research concepts that will apply to their competitiveness. It provides a very small amount of money to get those projects off the ground, to get them scoped out, to undertake some validation of the technology and to develop a full project proposal. Therefore, that is grant assistance to get them to the point where the project can start in earnest. That is something that we found very welcome, and it provides more opportunities for collaboration with the universities.

783. I could go on for hours, but it is probably best that I do not.

784. The Chairperson: Thank you very much, Mr Brundle. What you have said is very interesting. I would like to expand a little on the relationship between the university and Invest Northern Ireland, because you seem to have emphasised that in your written and oral submissions. No matter how good the relationship is, it can always be improved. How good is it, and in what way can it be enhanced?

785. Mr Brundle: It works on a number of levels. If you take the example of foreign direct investment, foreign direct investors typically target Northern Ireland because of the quality of the skills here. In looking at that, they are essentially looking for the quality of graduates. When they look at the graduates, they are looking for their availability and their depth of knowledge, as well as for quality and price points. Therefore, as Invest Northern Ireland promotes inward investment to Northern Ireland, we have an active dialogue about our course content and outputs from the university. As Invest Northern Ireland increasingly targets more knowledge-based projects internationally, we find that there is a higher degree of research activity within those projects. Therefore, those companies are looking to the universities to identify the depth of research capability in the university and the specificity of that research to the requirements of those companies, and we are continually involved in that dialogue.

786. That is happening on one level, which is a good thing. Secondly, as company expansions are ongoing across Northern Ireland, where the expansion is based on new technologies or research work, that is something that the universities are commonly engaged in, so we will often be a collaborating partner with companies that are experiencing that level of expansion.

787. On a third level, Invest Northern Ireland provides finance to assist our commercialisation efforts. That is the outflow of our research into the economy in Northern Ireland. To give an example, one scheme that it operates is the proof of concept scheme, which provides a financial contribution to academics who have ideas that may have commercial potential. That helps to de-risk the projects and validate the scalability of the technology arising from the research. It helps us to engage with the marketplace and ensure that the emerging technology is industrially relevant. That scheme has been very effective. Invest Northern Ireland also makes a contribution to the Higher Education Innovation Fund administered by the Department for Employment and Learning. Those are all areas that are beneficial and things that are working well.

788. The Chairperson: You also identified the 16% drop in the Higher Education Innovation Fund for research. That was also mentioned by Queen's. That is a local decision.

789. Mr Brundle: It is.

790. The Chairperson: You would also characterise that as not a very positive way of dealing with what we need to be doing now, which is to try to enhance our research capability. I just want that on the record.

791. There was also a very useful reference in your submission — you did not refer to it in your oral presentation — to the role of venture capital in development here, including business development, industrial development and research. How important is that? It does not seem to be given much prominence. There does not seem to be the same level of venture capital being used here in Northern Ireland as in other parts of Europe.

792. Mr Brundle: No, indeed. Venture capital is incredibly important as a tool to help exploit the economic value of research. If we are to start companies on the back of our research and engage with early-stage, high-technology, knowledge-based companies, those companies have a reliance on private equity, whether that be seed capital, angel investment or venture capital. Scaling those companies and making those opportunities so as to make that research pay for Northern Ireland requires those sources of capital, and venture capital is one. We certainly need an awful lot more venture capital in Northern Ireland.

793. The Chairperson: Can I just stop you there? I am sure you are absolutely right in that, but it seems to be almost an alien concept to a lot of people in business here. That may be reflective of our risk-averse approach to business and other matters of public policy. How do you attract more venture capital and encourage companies to take up opportunities that there might be for venture capital?

794. Mr Brundle: I will answer that in two ways. Belfast hosted the annual Irish venture capital conference yesterday, led by InterTradeIreland. At that conference, the sense that the attendees got was that there has never been more demand for venture capital, more need for venture capital or more interest in venture capital, and there has never been so little money available. So, the levels of competitiveness are increasing massively among those companies.

795. From the university's perspective, we rely on a number of sources of funds to get ideas into the marketplace. We rely on research funds, as you will be aware, and we rely on innovation funds, such as the Higher Education Innovation Fund, to translate that research from the laboratory into an enterprise. One of the comments made earlier was about risk. These are very risky ventures; when they come off, they come off big, and they have a huge economic impact. We need to be doing a lot more of that. However, those kinds of companies are not bankable. They require private equity; they require angel investors, who can give their time, expertise and funds; and they require venture capital. We, as a university, operate our own seed fund; a small venture capital fund from which we have provided some money to our companies to get them started off. That is a private fund, which we created out of necessity, not for any financial return. We did that because there was market failure in that area. We then sought venture capital money all around the world, to try to get those companies scaled. Take the deals that we have done over the past year; we have done around 12 venture capital deals over the past 12 months. Of those, I believe that nine have leveraged venture capital or angel money from outside Northern Ireland, and six have leveraged venture capital money from the United States, most specifically from Silicon Valley.

796. Ms J McCann: You are very welcome to the Committee. Can I just pick up on the role of Invest NI? It was mentioned earlier that you are on the board of Invest NI, so you are probably well placed to answer some questions. The paper says that Invest NI is not actively bringing research opportunities to the university —

797. Mr Brundle: Yes.

798. Ms J McCann: — and that it could do more to identify sources of match funding. It goes on to say that there needs to be a closer connection between Invest and the universities to develop that shared understanding. In some of the presentations that we have received — you will have heard me mention this earlier — it is very clear that people are saying that there needs to be one place, if you like, where support and all that can filter through. I know that the draft economic strategy calls for an innovation council. Do we need to have a fresh look at this? Do we need some sort of structure for the business organisations that are interested in research and development, the universities, the regional colleges and SMEs? Do you feel that there is now a need for that to happen? Would that be placed, for instance, in Invest NI, to replace whatever is there at the moment? Do you sense that that would be a good way of going forward on that?

799. Mr Brundle: Invest has an active European team that is brokering links between companies and universities in Northern Ireland and elsewhere in Europe. That is something, certainly, to be welcomed. The point for the universities is that we go out and win our own business, whether that is with companies that Invest is promoting, with which we will go and seek research partnerships, research council money or European framework money. It is the research institute directors and their teams in universities who are the most active in pursuing that activity. Tony can come in on that in a moment.

800. I think that a one-stop shop is a very interesting idea, not only to bring together the market intelligence about research opportunities that exist, which might be principally in Europe but could be elsewhere, but to have those collected. It would also provide practical assistance in helping people access that money and remove the many barriers that exist between the applicants and the funds. There are a number of roles that such a thing could play.

801. To go back to the innovation council idea, we are big fans of MATRIX and the work it has done to plot a technological progression of Northern Ireland and identify opportunities there. It is not a scientific advisor to the Assembly or the Executive. That is something that I do not feel we are sufficiently providing for. Tony, do you want to say something on that?

802. Professor Tony Bjourson (University of Ulster): I agree with Tim when he said that one of the failures was implementation. He mentioned MATRIX, and I was part of its life and health sciences horizon panel, where there was a very strong commitment and buy-in from the major stakeholders involved in the various sectors, whether in ICT, life and health sciences, etc. In the life and health sciences sector, the first report of MATRIX was in 2008, I believe, and this is 2012. I am still waiting to see its implementation, quite honestly. I think that an innovation council is a great idea, but it cannot be another talking shop. There have to be clear, dynamic, time-limited deliverables for achievement and roll-out of recommendations.

803. The life and health sciences MATRIX panel recommended home-based care and personalised medicine as two of its priorities for the next five to 10 years for Northern Ireland. We are four years into the 10 years. We are rolling out personalised medicine, but we are, essentially, doing it ourselves, for example, at the Clinical Translational Research and Innovation Centre (C-TRIC) in Altnagelvin. That was a recognition that you need to bring all of the stakeholders to the party. You need clinicians who use drugs and devices, you need the researchers like us, who develop them, and you need commercial companies, because, as university researchers, we can come up with the best drugs or the best diagnostics in the world, but, unless they are commercialised, quite frankly, there is going to be no benefit for any patients. If you think about it, how many times have you gone to a hospital or clinic and been given a drug or prescribed a product that did not have a company brand name of some sort on it? That is because there have to be all the regulations associated with that.

804. There is gap between discovery at the laboratory bench and clinical utility. The office of innovation at Innovation Ulster has a series of gates, which I commend. One of the weaknesses that we saw was in bringing the stakeholders together. For the majority of clinicians, their day job is treating people. They do not really get paid to be businessmen. The majority of them give freely of their time. Similarly, my day job is doing research and teaching. I am not, first and foremost, a businessman. I do that through our office of innovation. Creating a stakeholder forum was required, so I suppose C-TRIC was a relatively low-cost initiative that brought in the clinicians; businessmen, in the form of drug companies or diagnostics companies; and, the most important component, the patients, because you must have representation from all of the stakeholders. So, although I recognise that an innovation council would be an excellent idea, I urge that time-limited delivery is key.

805. Ms J McCann: Whose responsibility is that commercialisation of the product now? It is obviously not happening. How do you think it could happen in a future structure?

806. Professor Bjourson: I would hate to create the impression that commercialisation is not happening.

807. Ms J McCann: But it is not happening at the level that it should.

808. Professor Bjourson: Yes. The other issue is that it is probably not a good idea to copy people, because you will only end up being second best. We had huge problems establishing the Clinical Translational Research and Innovation Centre. People said, "There are no examples of it elsewhere. Do you expect us to take a risk and put funding into that sort of initiative?" We said that we have to be creative and innovative, but we did not have an exemplar model to point to. Academics, by nature, are risk takers. Research is a risky business, and whether it is facilitated by Invest Northern Ireland or government, academics will endeavour to achieve their objectives. I think that the policy pursued by the University of Ulster, in the form of establishing the Ulster Innovation Fund, addresses that in many ways at a university level, with the board of the company calling in academics for their expertise. I think that people are sometimes very hesitant to put their hands up and say, "I am not the best person to answer that question. We maybe need to take advice on that". I think that we do pretty well at providing that in the office of innovation.

809. Mr Brundle: From a commercialisation perspective, our role is to de-risk a project and to make it as attractive as possible in order to get industry to take the lead. We want companies, ideally local ones, leading those types of projects. However, in many cases, they are not going to take raw data and research out of the laboratory, because that requires investment, be it through proof of concept or venture capital.

810. Mrs Overend: Thank you very much for your presentation. You are obviously passionate about the subject. You mentioned that there seems to have been an increase in R&D in recent times. Can you provide statistical evidence of that? There are more links with small and medium-sized enterprises (SMEs) than I had first anticipated, or maybe it is just a case of my knowledge being increased. Is there something that we can do to promote how successful such links are? Surely we should use that as an opportunity to get the message out so that more SMEs engage in R&D.

811. Mr Brundle: I agree completely. We have a number of data sources that we will be able to share. One of the data sources we use is an annual survey, the 'Higher Education — Business and Community Interaction Survey', which each university in the UK is required to complete. It is very detailed and sets the levels of business and community engagement. We can provide the raw materials and benchmarks for that to the Committee.

812. Mrs Overend: What I am saying is that we are so busy getting on with the work when we should be using the opportunity to promote what we do and to get the message out about what opportunities are there.

813. Mr Brundle: I agree completely.

814. Mr Dunne: Thank you very much for your presentation. We were impressed by your enthusiasm and knowledge of the subject. I think that you had the benefit of listening in on our previous questions. We were intending to run along similar lines for both parties, but we will maybe have to change that plan slightly. My points relate to funding. We have found that there is great frustration, especially among manufacturers and those carrying out research, because of the problems in accessing European funding. You said that the university has 25 framework projects. Do they relate to European funding?

815. Mr Brundle: Yes.

816. Mr Dunne: They do? Solely? So, you have gone through that pain barrier and have been able to access the funding. Why do you think you have succeeded where others have failed?

817. Mr Brundle: First, I do not think that we have gone through the pain barrier. We are still in pain. [Laughter.]

818. Professor Bjourson: With European framework programmes, it is critical to have the appropriate networks in place. I have been involved in all types of research funding.

819. Mr Dunne: Mainly the pharmaceutical type?

820. Professor Bjourson: I was involved in the yeast genome sequencing programme in Belfast years ago. They are fundamentally different projects, and the different types of funding are quite different. The UK-based research council funding is, primarily, individual principal investigator-led. Historically, research councils have focused funding primarily on basic research that does not or would not in the past have commercial exploitation as the primary objective. It is where a single lab or a single researcher applies for a research programme of £300,000, £400,000 or £500,000. That is critical as well, because that basic-discovery, curiosity-driven research, which, when you analyse it, may not have any obvious commercial exploitation potential, is still the bedrock that, eventually, is the foundation of applied research. It is a balanced portfolio, which includes funding for basic research and intermediate research.

821. The EU framework programmes in particular involve multiple partners.

822. Mr Dunne: That is where small firms find it frustrating.

823. Professor Bjourson: It must be extremely difficult.

824. Mr Dunne: It is.

825. Professor Bjourson: Never mind the European framework programmes, a lot of the funding bodies require bureaucracy, administration, filling in time sheets and auditing. My personal view is that it is extremely difficult for small companies in particular.

826. Mr Brundle: There is a role for government — directly or by sponsoring — in finding a solution to take a lot of that administrative pain away from all of us. We are a large university, and we have a very skilled team of research administrators, but those programmes are still difficult for us, never mind how difficult they must be for a start-up company or an SME.

827. Professor Bjourson: An academic mentor being costed into the proposal is a possible solution.

828. Mr Brundle: We have seen some examples, elsewhere in Europe, where there are consulting companies and parts of government that provide administrative resource, drafting resources and financial planning resources to help companies into framework programmes. We have not been terribly active on that here.

829. Mr Dunne: We visited a large pharmaceutical company that does a lot of R&D work. It has some reservations about the support that it gets from Invest. That day, the emphasis was on more money being required from government for the sort of development work that it does. It works on pharmaceutical R&D, and the benefits that flow from that are great and would be good for the health service and the economy.

830. Professor Bjourson: As a university, not through any government directives, we have gone out to industry and asked local companies in Northern Ireland, such as Randox, Almac, Norbrook and Warner Chilcott, and companies in the Republic of Ireland a simple question, which is, "how can we help?" That does not mean that we are a charitable organisation; we have to cover our costs as well. There are ways in which you can help each other for mutual benefit. For example, if we are appointing new members of staff for taught programme delivery and we happen to know that a particular pharmaceutical company has an interest in a particular disease area or a particular drug, we can write that into the job specification of the person who we are recruiting anyway. Once that person is appointed you have an immediate alignment between the university department and the commercial company, and nobody has spent an extra pound. That is the strategy that we are embarking on.

831. We are basically asking the companies how we can better align our business objectives as a university research organisation or higher education institute with them as a commercial company so that it is a win-win situation for both parties. We are not being driven to do that. We see that as an absolute requirement. Rather than going to companies, as universities may have done historically, and saying that they should be doing this or that, we are basically asking what they need from a product development perspective but also from the taught programme provision perspective. We ask them whether the graduates or postgraduates that we, as a university, are generating are fit for purpose for their workforce. We have invited industrial representatives onto our course validation advisory teams, for example. They have ownership of it. If the courses are not fit for purpose, we know. We have tailored and altered our taught programmes to better align and provide a highly skilled workforce, not just for our current indigenous companies.

832. Tim and I were talking about, and some of you might be aware of, the Global Pharmaceutical Centre of Excellence that came to Northern Ireland looking to locate here. It was a good example where there was a better connect between the stakeholders, including the university, politicians and the regional council. In talking to those foreign direct investors, what is important for them is not only the availability of a skilled research institution, either Queen's University or the University of Ulster, but a ready supply of a highly skilled workforce — we can provide that information for them — and also the quality of life, because if teams are moving from other countries to here and bringing their families, they want to know what the quality of life is, whether the education system is good and whether there are nice beaches. We talk about better connections, but that connection between the whole package, from an Invest Northern Ireland perspective, is quite important. It is not my job to act as a tour guide. Everybody has their remit, but I would suggest that joining up that circle and describing and presenting the entire package is very important for foreign direct investment.

833. Mr Brundle: He is not a bad tour guide. [Laughter.] I read the evidence from the visit to Almac with great interest.

834. Mr Dunne: That is what we were hinting at earlier.

835. Mr Brundle: An issue for a company like that, which is highly innovative, with a high degree of economic impact, will be the amount of money and the amount of time it takes to get something from the laboratory to the market place. You are talking about seven to 12 years. We are facing exactly the same issues. Taking research from Tony's research institute into the marketplace might take four years of development activity before we even get outside the university, after which there could be another six or 10 years of development. That is a lot of time and costs an awful lot of money. We do not have the money available to do that in Northern Ireland at the moment. If it is research in the life sciences, which is an area in which we have some of the most skilled research and some of the most valuable intellectual property — it is a real jewel in our crown — we cannot take that right through to the marketplace because of the limitation of funds. So, what will tend to happen is that the university will invest in that and undertake some early-stage development work in Northern Ireland. Then, the onward benefits will be exploited elsewhere in the world. The fact that they are out there and will reach the bedside is a good thing. Benefits will flow back into the universities or the companies on the back of that, but we are only seeing a small proportion of the economic value that we could accrue if we had the investment funds available to us.

836. Mr Dunne: Is there a real role there for Invest to move up to the next stage in support of R&D? It is a high-risk area, and government probably does not see that as where it wants to go. It is maybe difficult for you to answer that. Your enthusiasm has come through today. We perhaps need to look at that issue more, because somebody will have to move forward on it.

837. Professor Bjourson: There was a strategic decision in the Republic of Ireland to focus on the pharmaceutical sector, and it has representation from every major pharmaceutical company in the world.

838. Mr Dunne: Manufacturing?

839. Professor Bjourson: Manufacturing and research. The pharmaceutical sector and the type of jobs that it provides are highly paid and highly skilled and are protected, to some degree, from an economic downturn. People get sick, probably sicker, in an economic downturn. So, government may want to take strategic decisions at a higher level to ensure that there is top-level support for the ecosystem and for developing, for example, the pharmaceutical sector in Northern Ireland. Northern Ireland is limited in its size, so I do not think that it is feasible to do it in isolation from the UK and the Republic of Ireland. However, we can strategically target a sector such as that and provide the soft landing for foreign direct investors in the form of friendly tour guides. [Laughter.]

840. Mr Dunne: From the universities. Thank you very much.

841. The Chairperson: We have come to the end of our questions. Once again, I thank you for your oral and written submissions. They were very interesting and very helpful to us in our inquiry.

15 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Phil Flanagan
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray

Witnesses:

Dr Norman Apsley
Mr Frank Hewitt
Dr Alan Watts

 

Northern Ireland Science Park

842. The Chairperson: Briefing the Committee today are Dr Norman Apsley, chief executive officer, and Mr Frank Hewitt, chairperson, of the Northern Ireland Science Park and Dr Alan Watts, director of Halo Business Angel Network (HBAN).

843. First, you are very welcome to our Committee today. I just want to formally thank you for the use of your premises. I think that it is very appropriate that we meet here in the Science Park. This is part of our inquiry into research and development. It is very appropriate that we are here. Thank you for your very detailed written response to the inquiry. We look forward to hearing what you have to say. There will be questions after you make an opening presentation. I hand over to you, Mr Hewitt.

844. Mr Frank Hewitt (Northern Ireland Science Park): Chairman, thank you very much. I extend to you a very warm welcome to the Northern Ireland Science Park (NISP). I know that some members have visited us in the past. Those of you who are coming here for the first time are very welcome indeed. We are absolutely delighted that you have chosen to have your meeting here for a number of reasons. One of those is that we believe that the Northern Ireland Science Park has played, and will continue to play, a very important role in the development of an enterprise- and innovation-based economy in Northern Ireland. It is also very timely that you should visit us now, because this is a very important stage in the development of the Northern Ireland Science Park; we may touch on that later in our presentation.

845. The Northern Ireland Science Park was established in 1999 as a not-for-profit foundation by the then Department of Economic Development, which is now the Department of Enterprise, Trade and Investment. Our mission is for the Northern Ireland Science Park to become a networked, self-supporting, internationally recognised science park that is a commercially and research-driven centre for knowledge-based industries, serving all of Northern Ireland.

846. We started work for real on the site in mid-2002 on what was a near-derelict 25-acre site at the north end of Queen's Island. When you take a tour of our campus later today, you will see five large Science Park buildings. The UK's pre-eminent centre for secure IT is the Institute of Electronics, Communications and Information Technology (ECIT) building. You will also see the historic Pump House, which was brought back from virtual dereliction and is now off the buildings at risk register. We are delighted to be able to say that all our buildings are completely let. That includes the new 50,000 square feet Concourse II building that you will see on your tour this afternoon.

847. By the end of this year, approximately 2,000 people will be employed on this site. The vast majority of those will have first degrees, and a large minority will have master's degrees and PhDs. I am also delighted to say that they will receive salaries appropriate to the qualifications that they hold. There are approximately 110 companies on the site. The livings from transactions outside Northern Ireland benefit the Northern Ireland economy to the extent of approximately £80 million a year. In other words, every year, £80 million goes into the local economy from wages and salaries paid to the employees of the companies that are located on the site.

848. We estimate that we will attract around 50,000 paying visitors to the campus as part of their interest in the Titanic enterprise. Among those visitors, and to my mind one of the most important groups, will be over 100 school outings. They are children who we invite to come to the Northern Ireland Science Park, not only to enjoy the heritage of engineering and science that exists in Northern Ireland but to see what the future might hold for the Northern Ireland economy and for them. To keep everyone involved, we created, with Facebook's help and sponsorship, a social network. It is for the generation of innovation for the most likely to succeed young people and to keep them informed about and inspired by the role models who work here and the case studies of the companies that have grown and developed on the site. Our hope is that those young people, as they grow and gain experience and knowledge, may either return to Northern Ireland or remain here and add to the gross value added (GVA) of the economy.

849. Returning to the matter of the day, economic commentators recognise four key elements in a vibrant knowledge economy, ripe with the commercialisation of research, which is the object, I understand, of your current study. First is the creation of knowledge itself; the second prerequisite is risk capital; the third prerequisite is the involvement of and exposure to a range of business support activities, for example the activities of lawyers, accountants, bankers, etc; and the fourth is the provision of a particular kind of property offering. We believe that all of those elements are available in the Northern Ireland Science Park today.

850. I will deal first with the creation of knowledge itself. Northern Ireland researchers, particularly in areas such as IT security, are well respected internationally, but we still fail to earn our just rewards from national and supranational funds. We need to engage more at earlier stages to help set agendas and benefit financially from both national and EU funding. The second prerequisite is, as I have said, risk capital. We have some good beginnings to tell you about, such as our Halo project, and Dr Watts will talk to you about that in a second. However, we have to recognise that we are still far behind areas such as Scotland and the Republic of Ireland. The Republic of Ireland, in particular, has a large and growing risk capital fund, which, at the moment, approaches something in the order of €750 million. Those two elements alone are not going to generate what we wish to see as a knowledge-based economy. Sufficiency in this area also comes from the inclusion in the mix of the business professionals: executives, lawyers, accountants, bankers, etc, and people known and respected across those disparate boundaries who are prepared to act as trusted emissaries and go-betweens. In other words, we need to engage the wider business community here in helping to encourage entrepreneurialism and knowledge development. That latter element is a key role in the range of facilities offered by the Northern Ireland Science Park. The final element is the provision of accommodation. As you will see, we have bespoke buildings, which offer a very high degree of flexibility and, thereby, make the location attractive for a wide range of science-based activities.

851. NISP CONNECT is the organisation that we founded on the San Diego model, which, as you probably know, was studied and recommended by such as Michael Porter in his study of that city's rise from Cold War bust to 21st century knowledge boom. For those who do not know the San Diego area, it became a strongly vibrant area in the 1970s and 1980s, based mainly on the US defence industry. As that industry contracted, jobs were lost, industries disappeared and San Diego, effectively, had to reinvent itself. The model that they adopted in San Diego is very largely the one that we are currently emulating in the Northern Ireland Science Park.

852. We feel that we found a particular edge in developing CONNECT in the identification and recruitment of Steve Orr, who happens to be a Northern Ireland entrepreneur who went to the United States, was very successful and then returned to Northern Ireland to bring his own knowledge and experience to benefit young people in Northern Ireland who wished to set up and develop their own businesses. It is not a case of Steve giving academic advice as to how they might do it, Steve is in a position to tell developing entrepreneurs how they can do it. To help him in that task, he has enlisted something in the order of 1,000 experienced business people in Northern Ireland who are prepared to provide help, support, advice and expertise on a pro bono basis to help those young, developing companies take their place in the world economy.

853. In everything that we do, the focus is on the entrepreneurial scientist and technologist and helping them to take their ideas to market, whether as the founder of a new business or as part of a global corporation. We believe that if we are to exploit our research to advantage in our own economy, both routes are essential. Indeed, it has been our experience that one very often mutates into the other.

854. To sum up, we believe that, through the Northern Ireland Science Park, we have created what we like to call an innovation ecosystem and an atmosphere where young companies can come along, grow, develop and build their expertise at very little cost to themselves. We will go into that in some greater detail. We also provide what we like to call a soft landing for international science-based companies that wish to look at Northern Ireland as a possible investment location. We offer them the opportunity to land in the Northern Ireland Science Park and to explore and develop their links with the local Northern Ireland economy, and, if they wish, they can then relocate to bigger premises elsewhere. Our experience has been that, once they come here, they rather like to stay, and we have found that science-based companies, in particular, like the atmosphere here and like the fact that there is an environment and a network in which they can interact with other science-based companies and young, talented people.

855. I have been chair of the Northern Ireland Science Park for just over four years. It is, without question, one of the most exciting things that I have done in my entire career. To come to this part of Belfast and see the development of young, dynamic companies is not only encouraging but is a great indication of what Northern Ireland can become.

856. The Chairperson: Thank you very much, Mr Hewitt. Your colleagues are very welcome to contribute to this discussion. I have been here before, and it is a very exciting place to visit. It is striking that, 10 years ago, this area was derelict, but the site has now not only been built on but has attracted high-quality scientific research and development. That is the really exciting part. It continues to prosper and expand, and, therefore, as I said previously, it is appropriate for us to come here and learn from you. I will ask a question first, and my colleagues will come in in due course. Could you expand a little bit on the CONNECT programme and on the Halo Business Angel Network?

857. Dr Norman Apsley (Northern Ireland Science Park): I will do CONNECT and Alan will do Halo. I apologise on behalf of Steve Orr; he would have been here but he is otherwise engaged in Derry. The essence of CONNECT is that it understands implicitly that the researchers with whom you are dealing are bright and often at the top of their game in their area. For example, ECIT, across the road, will have some of the top engineers in Europe in that environment, and they can earn a decent salary just by doing more research. If the research here stops, they can go anywhere in the world. They can get Green Cards, and they can get invitations to visit China. They can get whatever they need. CONNECT starts from the premise that those are people who do not need a leg up but who need encouragement and, almost, seduction into the world of business. As I said as we started, they often do not know the world of business, even to the extent of not knowing the name of their own banker or their own lawyer — usually, they do not have one — and, if you are going to do business, you need to meet those people.

858. The word "CONNECT" was picked by Mary Walshok, the founder, whom some of you have met, deliberately to bridge those silos. It also recognised that everyone in their own silo was busy. A silo does not form because you want it to be there but because you want to be efficient in what you do. Therefore, you have to find ways of making people want to cross silos, and that is what we have a series of engagements on. From memory, we have about six styles of engagement in which various people come together with the research base. They are doing such things as selecting the winners of a £25K award, but, actually, what they are doing is learning to trust each other and respect each other, so that, when they need capital and business support, people know who are good, who are not good and who needs it. That is the key to CONNECT.

859. The engagements are carefully worked out, sometimes not even knowingly, if you like, by us. We follow Mary's position, but we have tuned them to our environment. For example, we can fill this room in particular 20 times a year with workshops, which we call Frameworks. There is not a soul in here other than new entrepreneurs. We do not let anyone else in, so they can feel free to ask silly questions. They are not briefed by me or Steve or Alan or any paid official on such things as intellectual property or the founding of a board; they are briefed by proper lawyers and accountants, and they meet up to four people who have done it before. That is the kind of room that we can provide, and it does not cost us anything. The room is paid for by the sponsors and so on. That is the nature of CONNECT.

860. The Chairperson: If you have an idea and want to develop it, CONNECT is the way to go, and you will be given the basic assistance that you need to enter the marketplace and become more commercial in your approach?

861. Dr Apsley: Yes, except that it is tough love. You will also be stopped very quickly if it does not work.

862. The Chairperson: If it does not work, it does not work.

863. Dr Apsley: That saves you time, and it saves us time. The two things go together, and, fundamentally, you are absolutely right.

864. The Chairperson: How many do not work?

865. Dr Apsley: We do not really keep count. We deliberately do not keep a memory, if you like, so that people come back again. We believe in the Californian model that trying is the best thing and failing is not a bad thing. Failing through fraud or through lying is a bad thing. That will go around our community like wildfire, and those people will never reappear. However, there is no shame in trying and failing.

866. If you have time, I can give you one example that I like and in which I was personally involved. A couple of physicists from Queen's University thought that they had a business idea. We held a meeting of our Springboard type and introduced them to experts in the field that they had chosen to try to get into, and they discovered that their idea would not work because they had not realised that, sitting across here in Channel Commercial Park, is a Japanese company that is expert in what they had thought they would be expert in. The experts that they were introduced to also told them what the real problem was, and they were able to go back to the university and bid for research money to try to solve the real problem, which, in this case, was ground-source heat pumps for houses. The company asked whether there was any way of telling whether it would work before drilling the hole, which was the biggest problem. They are still thinking about it. That is the kind of thing that we do, and that was a good failure.

867. The Chairperson: Thank you very much, Dr Apsley.

868. Dr Alan Watts (Northern Ireland Science Park): First, I will add to what Norman said about the CONNECT programme, because I was involved in mentoring companies through the programme before I came onto the staff of the Science Park. I will give you a slightly alternative way of looking at it. Let us face it, Northern Ireland has a very long history. It is 100 years since the Titanic, and, in its day, Northern Ireland had state-of-the-art ideas, and I do not need to tell you the long litany of good ideas. However, when people have come up with great ideas, we have been very bad, historically, at translating those into commercial success. The ideas tend to come from very bright people who are not necessarily the most commercial. As the name implies, CONNECT connects them with people who have experience. There is no money involved, but they work with them and introduce them to other people.

869. As Norman said, part of it is about killing ideas quickly or not. Assuming that it is a good idea, it is, then, a question of telling them what they do not already know. They do not know that they do not know it, because they do not understand how to build a business or a board — all of the commercial stuff. Therefore, in my mind, CONNECT is the vital missing link, which, if we are honest, we have largely been missing for a very long time in this Province. It is taking good ideas, of which we have plenty, and converting them into commercial success. That early link to get them to point where an organisation like mine could put money into them — where they are investor-ready, to use the jargon — is missing. I really think that that is what CONNECT is about. I hope that that is helpful.

870. The Chairperson: It is very helpful indeed.

871. What about the Halo Business Angel Network? What does that do?

872. Dr Watts: The first thing that everybody says is that it is a 'Dragons' Den' for Northern Ireland. That programme is helpful in the sense that it raises people's awareness of what angel investing is about. I have to tell you that real life is nothing like the programme. It is actually a nice experience, not an entertainment process. It is a group of well over 100, mostly Northern Ireland-experienced, business people who have some money. Although they are interested in making money, they are more interested in putting something back. We take a number of companies every year, prepare them, put them in front of that audience and offer the business people the chance to get involved. Effectively, we are a dating agency. We get them together. If they like each other, ultimately, the business people will invest. Often, the companies are start-up companies, but not necessarily.

873. I will give you some figures. Since we started the network in 2009, our angels have invested well over £3 million of their own private money in local companies. No public money is involved at all. I hope that, by the end of our third year, I will be able to say that they have invested £4 million in three years.

874. On the face of it, it is a success story. In our second year of operation, the British Business Angels' Association voted us the top angel network in the UK. Therefore, we are doing some things right. On the other hand, when you look at it and benchmark it against other areas, you see that Scotland is actually one of the leading areas in the world for angel investing. Most people think that it is America. They are correct in thinking that America is one of the leaders. However, oddly enough, Scotland is doing a lot better than, say, England. In Scotland, angel investors invest over four times more per head of population than they do in England. Of course, England includes London, so that is quite surprising.

875. They have been at it for 20 years; we have been at it for a few years. There are a lot of structural issues, such as improving the angels and training them. There are a lot of things that we need to do. We believe that, given time, we can increase the amount of angel investing by an order of magnitude. Fundamentally, it is, largely, local, high-net-worth people who are putting their money into companies in Northern Ireland. The companies should share one characteristic, which is high growth potential.

876. I also want to add two points of detail. We are unique among UK angel networks in that we make use of an online private video site, which means that any angels who are unable to get to a meeting will watch online. By the way, normally, around 50 come along. Therefore, it is very unlike the TV programme, in which there are five people. You pitch to 50 people. Another 20 watch online. Think of your odds. Around seven companies pitch to around 70 people. You can see that the dynamics of the odds have changed compared with those of the TV programme. It also means that we have angels who are based, for example, in England. I do not mean ex-pats; I mean that there are people there who believe that the deal flow in Northern Ireland is good enough that they pay to join Halo and watch via the video site. They do invest. Again, it is, perhaps, not what you would think.

877. I will mention something that I know is close to your hearts. You will all have seen 'The Shore' receive its Oscar recently. You may not be aware that funding for that came through Halo. The film-makers pitched here. Because they were unable to do it at a meeting due to timing, they put up a pitch on the private video site. I sent an email to all of the angels, which was headed, rather cheekily, "Your chance to be at the Oscars". The rest, as they say, is history.

878. The Chairperson: Very good. It is a great success. I have a couple of other questions. We have been looking at access to European funding for research and development. Of course, we have come across the situation in which many companies in Northern Ireland will not apply for funding simply because the process is so difficult, particularly for framework programme 7. I know that the European Commission is aware of that and will try to remedy it and make it more accessible and user-friendly with Horizon 2020. However, your submission pointed out other European funding. You talked about the Eurostars programme, and we discussed that a few months ago in Brussels. What is your experience of European funding?

879. Dr Apsley: My personal experience is slightly outdated. I led a framework 2 programme, which tells you how long ago it was. My general point about Eurostars in particular is that we do not take advantage. Building confidence with Europe is just like we talked about in CONNECT with our own silos. The people have to be known. I call it building the esteem of our researchers, their research and the outputs of what they do. That is what you do through Eurostars and other programmes. You have to start early to get your people known, because they will then be invited onto committees.

880. A number from the public sector have that reputation and esteem but are not eligible because they are public sector. So, we have wasted some of that. However, there is only one way to start building it, and that is to do everything we can to get people onto the appropriate registers. I am also a great believer in learned societies. If you are able to be in a learned society, you ought to be there and take part in it. That is a philosophy we operate in the Science Park. So, it is a case of getting your personal esteem up and to bring up the esteem of the nation, and that will have its reward.

881. There are more ordinary bread-and-butter things. I happen to be aware from yesterday's MATRIX meeting that the Government intends to fund professional go-betweens who will help to interpret some of the Europeanese in those documents, and that is very welcome. That will undoubtedly help us to make a better fist of it than we do at the moment.

882. The Chairperson: Your submission states that one big problem in Northern Ireland is the lack of venture capital. It goes on to say that that is reflected in the 2011 'Knowledge economy index baseline report 2011'. The report is very interesting and made comparisons with the San Diego model. Will you expand on that statement about the lack of venture capital?

883. Dr Apsley: With your permission, Alan is our expert.

884. Dr Watts: Just so that we are speaking in the same language, people talk about venture capital and get a little bit confused between seed capital and capital given by venture capital companies. For simplicity, we tend to say venture capital. However, the two are separate and distinct because you will appreciate that a company at the very early, risky stages is when it needs seed capital. It is generally acknowledged that whenever there are seed funds, and there are seed funds all around Britain and the world, the best they will ever do is return about 85% of their money. In other words, it is a loss-making proposition but there are good reasons for doing it.

885. Venture capital is generally done by the venture capital industry — some of the big names you will have read about — and that is where the business has developed. It has probably got revenue and the venture capital comes in to grow the business. So, you are in business and, with that extra money, instead of growing 10 times in five years, you grow 10 times in two years. So, I make a distinction between the two.

886. We have one seed fund in Northern Ireland. It is government money and is administered by an organisation called E-Synergy . In broad terms, it has £5 million to invest in five years. There are also two £1 million funds for investing in universities, and there is some proof of concept funding, which is very early stage funding. One could argue about the figures, but you may say that there is less than £10 million, and that is fair. If you compare that with Southern Ireland, they were very clever at the time of rescuing their banks, and one of the conditions for the banks was that they put money into seed funds. There has been €124 million of seed funding from the banks and about the same again from the South's innovation fund. Therefore, there is an order of magnitude difference in seed funding between Northern Ireland and the South. The level of angel investing is in and around those levels, but it tends to come alongside seed funding. The amount of angel money that is available in Northern Ireland and in Southern Ireland is roughly what you would expect from the different populations. There is not a big difference in that area, but there are some improvements that we can make.

887. However, we have a problem with the venture capital (VC) industry here. Northern Ireland is sub-scale and too small, and there are currently no Northern Ireland venture capital companies that can invest in new ventures. One company has taken on a welcome £7 million fund from Invest Northern Ireland to co-invest with angels, and that fund will be used to bulk up angel money. It is based on the Scottish model; it is a good thing, and I very much approve of it. However, in effect, it has taken that company out of the VC market. One company, Crescent Capital, has won a tender and is producing a £30 million fund of which £10 million has been subvented from government. It sort of takes second place in the pecking order, and, common to other VC companies, it is struggling to raise the remaining £20 million of that fund. For the past two years, there have been no VC funds locally. The good news is that some Dublin funds and one or two London-based funds have come across and invested in what they believe to be exceptional ventures. Those investments have proven to be very good for them, but you will appreciate that the number of those investments is very small.

888. Therefore, we have too little seed funding on an order of magnitude and almost no VC money. Any comparison that you care to make with other regions shows that we have a serious problem. The innovation report shows that if we do not fix that problem, it will be the number one constraint to growing the types of company in the knowledge economy that we talked about.

889. Mr Hewitt: I want to give a supplementary answer to your question about the interaction with the EU and the complexity of applying for grants. One of our strategic ambitions is to develop other science parks at remote locations. That ambition includes the development of a science park on the Fort George site in Derry/Londonderry. In order to take that project forward, we have submitted an application through the Special EU Programmes Body (SEUPB) to the EU for approximately £14 million in funding. We recognise the fact that all Departments, whether national, regional or Europe-wide, have a responsibility to appraise projects carefully. However, it is probably true to say that the speed at which the appraisal of that project has proceeded has been disappointing. We are not a large organisation, but we have access to considerable expertise. We have had to draw on that expertise to pursue the application, and small organisations that do not have that access would find it difficult and daunting to make such applications. I would welcome any moves by the Committee or the Assembly to make the process of applying for European funding a simpler and more user-friendly process. It tends to be reiterative and people find themselves answering the same questions in slightly different formats.

890. Where our ambition for Derry is concerned, our proposal is predicated on being able to get up and get into business within a certain timescale. We have not always been convinced that the SEUPB and other bodies are totally aware of the timescale within which we have to operate. That is not a criticism in any way. It is an observation of the process that I think they have to go through. Anything that can streamline the process would be beneficial not only to us — that would be a very selfish observation — but to other organisations in Northern Ireland that are seeking funding. The funding bodies have to realise that business opportunities present themselves in certain timescales and that if people cannot respond to those timescales, the opportunity will very often slip away.

891. The Chairperson: Thank you very much, Mr Hewitt. That reflects what a number of organisations said in evidence to the Committee. I am grateful to you for reiterating that.

892. Dr Watts, what can be done to improve the situation on venture capital? Is it just something that the market develops?

893. Dr Watts: Quite a lot can be done. The Science Park is already doing something, in that we run a VC forum. Through the forum, we deliberately reach out to venture capital companies in Dublin and London, get to know them and build up a relationship. Once a year, we invite them over here to see, on the back of a major event, about six of our best companies. So we are bringing them over to shoot fish in a barrel — that is the expression that we use. The companies are already lined up, so it is made really easy for them. They see the best, and generally they are very impressed. To be honest, when they came across at the beginning, they said, "We felt that we ought to come over, but we did not really think that we would see very much", and then they were blown away with the quality. It is about building relationships, because those companies have not yet invested. That is one thing that can be done.

894. A new €30 million life sciences fund was announced in Southern Ireland today. The Government there have taken some more money of the type to which I referred, set it to one side and made it available in a creative deal with a San Francisco VC. That VC will then move to Ireland, set up an office and invest some of its money, along with some of that semi-government money. So the Government have been very proactive. They have also used the Irish–American angle, and rightly so. So a number of things can be done.

895. Geographically, we will never be strong enough on our own to have very large native venture capital companies. However, we could have offices here for some of the best ones and make very good use of the fact that Dublin is only an hour away. A lot of companies are looking to set up in Dublin, but they could set up here and effectively cover both.

896. Let me explain why there is a problem in the South as well. The South has a massive amount of seed money. However, all the companies running along this road are heading towards a cliff because, although there is a lot more VC money down there than there is here, there is not nearly enough. It is a runway, and people will be heading towards a cliff unless they get the next piece in place. It is like a series of elevators. However, as I say, quite a lot of things can be done.

897. Dr Apsley: I want to add to the point about the venture forum. I think that the venture forum is, by a long shot, the best joint venture that we have with the universities. The shopping list is determined by Alan and Steve, along with a key individual from each university. They go off to firms in Dublin, London and, hopefully in the future when we have a little more travel money, New York, where they beard the dragon in his den and find out what they want. They then come back and report to the private secretary here, who helps us to determine which fish will go into the barrel. It is done entirely with private secretary input, which is crucial. As Alan says, venture money comes from firms, which have boards and dealmakers. So it has to be made very efficient for them. The very first thing that I learned when we started thinking about a science park is that dealmakers do not get out of bed for anything other than a large sum of money. It has to be made as efficient as possible for them to do that, which is what we do.

898. The second issue that I want to mention, which is nearly is as good as venture money, is early customer. The other form of money, which I do not think that we use enough but which I know we have new plans to try, is called the small business research initiative (SBRI). It was not invented by me. It is about neither small business nor research, so it is the worst-named initiative in the world, and people usually just refer to it by its initials. It was invented by the Americans. As you may know, it was born because, under the general agreement on trade and tariffs (GATT), Governments are not allowed to be the giver of the only contract that sustains a firm. That would be illegal under state aid rules. However, one exception was made for early products or first customers. The Americans pioneered it, and Europe followed. We are quite laggardly in our use of it. It would allow government to procure something for use as real procurement but in a way that was very early, so you could share and measure the benefits of using it before you went into a real procurement. The kind of thing that could have been done, and which we have done here but in a different way, was the Wrightbus, which was flying up and down the road there accessing our antennas for radio and then measuring that to show that you could do a video stream of the bus. In my opinion, that could have been procured and working for a year under SBRI and then made available in that way to Las Vegas and wherever else it was being sold. We could develop SBRI. I know that, in recent times, DETI has an aspiration to grow £50 million with SBRI, and I think that there are ways of pushing that forward.

899. Mr McKay: Obviously, much of the success and potential success is based on connectivity and networking. In a previous life as a member of the Committee for Finance and Personnel, we looked at the issue of academia, business and government and how they interrelate. At that time, some of the witnesses — I think that it was Victor Hewitt and John Simpson — flagged up a concern about departmental officials and civil servants and the culture here in the North, in comparison with London and Dublin. For example, you would have had seminars with academics from Queen's University and the equivalent, and there would always have been departmental officials there with a listening ear. However, that does not seem to happen here. Is that a concern, or do we need to address the cultural issue as regards government and the silos that Departments have formed into over the years?

900. Mr Hewitt: I will answer that from a strategic point of view, and I will ask Norman to answer from an operational point of view. There are a couple of dimensions. First, the two universities have been involved in the project virtually from the start. They are, effectively, stakeholders in the Northern Ireland Science Park Foundation, which is our top company, as it were. The two vice chancellors sit on the board of the foundation, and university representatives sit on some of the subsidiary companies, because we have a property company, holding companies, and so on.

901. As chairman of the foundation, the input from my university colleagues is exemplary. They are hugely supportive of what we do. As well as giving us vocal support, they are huge contributors to the strategic development of the park and have remained so. I want to record the fact that I value the input from the universities very highly.

902. If I may, I want to touch on the relationships with Departments and officials. It is largely due to the foresight of the Department of Enterprise, Trade and Investment that we have the Science Park here, and it was something of an entrepreneurial decision in itself by the civil servants of the day to invest such a significant amount of money in the park at the start. Since then, the relationship with the Department of Enterprise, Trade and Investment has largely been light touch. Obviously, the Department cannot walk away totally, because, had it not been for its £23 million, we would not be here. Therefore, it has a responsibility to ensure that we continue to operate effectively and professionally. However, it is probably true to say that it has decided on a light-touch relationship, and I assume that is because it believes that, effectively, we are doing what it originally wanted us to do. We get almost no interference from the Department on the day-to-day operations. That said, officials are always on the other end of the phone if we need advice or support. I certainly get that advice and support from both the permanent secretary and Minister Foster, so it is important to record that at this stage.

903. From a strategic point of view, we have an increasingly productive relationship with Invest NI, which has realised over the past three to four years that the Northern Ireland Science Park is a highly valuable component part of the Northern Ireland offering. If you were to speak to our property director, for example, he would say that a large number of the visits to the park have been stimulated by Invest NI. It has been hugely supportive of our proposal to develop on the Fort George site in the north-west. So, I think that the relationship is pretty near the balance that we would like to strike.

904. I hesitate to say this as a former civil servant, but I would not want too much departmental interference in the way in which the Northern Ireland Science Park operates. Although we are a not-for-profit organisation, we are a commercially minded and commercially driven organisation. So, we are a not-for-profit organisation, but we are also a not-for-loss organisation, and I find that the relationship that we have at the moment is at just about the right balance. I could not honestly say that I get any difficult or challenging interference from Departments in what we do, and, when we ask for help and support, someone is normally prepared to talk to us.

905. Dr Apsley: I could maybe offer a different cut on your question. All that Frank says is absolutely true, but I wonder whether your question is asking whether government uses the experts that it has in its universities. I certainly do not think that that is the case. I think that there is a great fear that the universities are partisan. We need to work around that, because the US beats us hands down as any government Department can go to any university on any topic and know that it will pay for a report and get the unsullied truth. We have an expectation that consultants will somehow do that, but I have to admit that I am sceptical about that. I would rather depend on a good university department that publishes its work and exposes it to the scrutiny of its peers to give us the truth in particular areas. So, if that is what you meant by your question, I do not think that there is nearly enough of that.

906. However, having said that, there are a number of fora where the two or three silos that you are talking about come together. The Science Park is one, as Frank said, and MATRIX is another where all three are there all the time. At a lecture that John McKay and I gave at Queen's a week or two ago, the introduction was made by David Sterling. The chief executive club at Queen's has a good number of civil servant chief executives, as well as business ones. So, there are fora where they all meet, but that does not extend far enough into the operational day-to-day level, which it could do to great value.

907. Mr McKay: In the response, you raised some issues about businesses, particularly SMEs, which I am concerned about. They need mentoring, role play workshops, ice breaking, programmed engagements, and so on. Certainly, part of the problem with SMEs is cultural, and there is a fear factor and a lack of mentoring. Who will do what you flagged up as needing to be done? Should it be government or InterTradeIreland? Who will tackle that piece of work?

908. Dr Apsley: I suspect that government will pay for it, but I suggest that the successful parties of the recent past are the people to do it. As I said, I met Cherry Pipes, which we have no involvement with, at a European meeting that I was asked to chair and again in London when it won the award. There are other parties. We did not flag existing companies using the fruits of research, and one of the best schemes in the whole world was the scheme originally called the Teaching Company Scheme, which is now called the Knowledge Transfer Partnerships. Northern Ireland invested very heavily in that, and it is very successful.

909. Some of those, and Cherry Pipes is one, went on to develop from the local knowledge technology partnership into being the leader of a European programme. So , I think that the Cherry family and their associates would be good mentors for anyone wanting to do that. I do not know them well, you understand, but that is where I would go to find them.

910. However, I think that government need to fund it. As Frank said, we are not-for-profit, but we do not want to make a loss. Those companies are for profit, and the family has invested heavily. They cannot put money into doing that work for others. They need help, but I am sure they would be willing to do it.

911. We were talking to one of our own companies, which you will meet at lunchtime, about how it might help with e-exports. Some of the people, chairmen and board members, and behind me where Bob and Barbara are sitting, are a retinue of such mentors. Those are the people to do it, but I think that government will have to pay a little bit of the bill, if not all of it.

912. Dr Watts: We talked a lot about Connect earlier. Mr McKay is quite right to highlight mentoring. It is vital, and there is a cultural issue with SMEs. When you produce, if you like, a grouping — "community" is the best word — such as Connect and they come to meetings in a non-threatening situation and they gradually get to know other entrepreneurs and start to link in with experienced people who have knowledge that they do not, the process of mentoring becomes more natural. We suggest that part of the answer, although not the complete answer, is already beginning to grow here in the Science Park.

913. Mr McKay: Are schemes such as Connect being flagged up to communities and councils at grass roots level?

914. Dr Apsley: I think so, but there is an awful hurdle for facilitation, because it is not the direct doer. The outcome that you want is not a direct consequence of the facilitation. Facilitation is needed, but it is the other parties who do or who get the measure who might get the result. It is very hard to get that appraised successfully. That is one of the problems that we have had and one of the problems that Connect had in getting funded. If it had not been for the fact that I had hangover from Belfast City Council, which came originally from Invest in Belfast, and a leg-up in a slightly underhand way from the Department, we could not have got started.

915. I do not think that anyone else will get started. Even now, it is hard for people to see how it works and the way that they report the return. One benefit of our relationship with the Department is that it is quite soft on us. However, the hard bit for us is that we will have to find other funding for it in a couple of years' time. We may need the help of everyone around this table ere long. I hope that that is helpful.

916. Ms J McCann: Thanks very much for a very interesting presentation. You spoke about developing the knowledge-based economy and how R&D and innovation are clearly essential to building the economy. You said that sometimes people may have an idea but that that does not necessarily become a commercial business. You also elaborated on your connection with the universities.

917. The creative industries are a new field that people are going into, and their knowledge and skills are not necessarily university based. How would young people access, for instance, the Connect programme, the business angel network or venture capital? What is the first port of call for young people who have the knowledge and skills? From when they are totes, kids now are much more hi-tech than the rest of us. What would be their first port of call in developing those skills and getting help? It may be a risk, but would that facility be there through those two programmes for young people to do that?

918. Dr Apsley: There is no barrier or block to either programme in dealing with the creative industries. As we said, 'The Shore' got its Halo funding through that, and on site here is also one of the top gaming companies for Northern Ireland. The issue is simply that there just would not be the resource.

919. There are resources that we work with on that. I cannot remember the names of all the hubs, but certainly in the city there is a creative industries officer who is a regular visitor. We link through him, and he will filter. Some of the young people may need the kind of help you get from, say, the FE college up the road, where they teach a lot of the basics on how you do that, and, as they filter up, they may then need access to this. We need help in making that selection, otherwise we would be swamped. However, there is no barrier other than resource.

920. Dr Watts: I would like to go back the point about Halo. I talked about 'The Shore'. However, more recently, an organisation came through and has funding from Halo for a cartoon character set that is a little bit like 'Mr Men'. As it happens, we have a Halo meeting next week at which a very well-known entertainer will be looking to franchise out what he does across Britain and Europe. We are starting to get creative industries coming to us, and it is really a matter of us having to reach out. People are beginning to become aware of the issue, and 'The Shore' has helped a lot. Angel investing is not just about engineering companies and things like that. Also, the work that Mark Nagurski is doing up in Derry is connected to the City of Culture. He is involved in the Digital Derry stuff.

921. Ms J McCann: What was that name, please?

922. Dr Watts: Mark Nagurski. He is developing a lot and is working effectively with a lot of media and art-based companies trying to bring them through. Some of those companies will come to us.

923. Dr Apsley: Can I make a suggestion to the Committee about the answer to that question? We are the host to an Invest NI collaborative network called Digital Northern Ireland 2020. That is basically a programme that the community asked us to set up after our Kelvin event to show basically what happens if you have low latency, high bandwidth connectivity of Northern Ireland in a number of sites, such as Derry and some of the county towns. Sinclair Stockman returned from France, where he now lives, and he runs that for us. However, there are a number of players such as Greg Maguire, who is the creative engine behind one of the companies that produced 'Avatar'.

924. Ms J McCann: 'Avatar', yes. I was at that workshop where he spoke.

925. Dr Apsley: Greg came through our networks and is now a professor at the University of Ulster. Anyway, for all the reasons that you said, the point is that there is a subset of Sinclair's group looking at that. It is a different dynamic.

926. The universities are involved more than you might think, and there is more of a connection than you might think, but you are absolutely right. People such as Darryl Collins recognise that you can take kids directly, as it were, from school and use their creativity and train it into doing useful work in that way for all concerned. It is not my area of expertise, but I suggest that you invite Sinclair to bring a small group to your Committee at some stage in the future and prepare for it with that question. Then I think you will get a useful answer.

927. Mr Hewitt: Can I just answer Ms McCann's question in another way? There is an important dimension to retaining the character of a science park, which is that the industries that locate here are fundamentally science based. That is the basic concept here, and that is what makes a park such as the Northern Ireland Science Park attractive to international companies such as Dow Chemical and Microsoft and so on. It is the fact that science is done here that makes it attractive.

928. The creative industries are increasingly becoming science based. The whole question of digitisation and so on is now an increasingly important part of the creative industries. So, although there are some aspects of the creative industries that do not necessarily fit well in the panoply of companies that we have here, we very strongly welcome other areas of that industry. I believe that one of the advantages that we have is our proximity to the Paint Hall film studios, which you passed on your way in and which are currently being developed. So, there is enormous capacity for co-operation between ourselves and those organisations and industries in the creative sector. However, it is important to stress that only certain aspects of that industry would fit well in the Science Park environment.

929. The other thing that we did not say at the start was that we have quite strict tenancy criteria that we apply to companies coming here. It is not that we do not want to fill our space or make companies welcome, but part of the uniqueness of the Northern Ireland Science Park lies in the fact that most of our industries here are, in one way or another, based on science of one kind or another. It is very important that we retain that characteristic, otherwise we could just become a business park. We are not a business park; we are a science park, and it is very important that we retain that distinctive character. I hope that I, in no way, have provided a negative response to your question; I was just trying to define the areas of that sector that could profitably locate here.

930. The Chairperson: I think that it is very useful to make that distinction between a science park and a business park.

931. Mr Hewitt: Exactly.

932. Mr Frew: Gentlemen, thank you for your presentation. I want to take you back to the funding of research and development from the various bodies and layers of government right up to Brussels. It was put to us last week that government bodies and funding groups do not fund failure. That is a big issue for them. You said that a bedrock and foundation of research and creating something is in the failures that you have first, and those failures can be useful and are not necessarily bad. How do you see the funding groups in Brussels, Westminster and Northern Ireland evolving to suit innovation, so that there is not such a stigma around failure and it is possible to realise the benefits of funding projects that have not worked but which could lead to something successful? Do you see that as a gap? If so, how should that be filled?

933. Mr Hewitt: I will deal with that at a high level and then hand over to Norman, who is much more knowledgeable about the practical side of that. One of the most interesting companies that I have dealt with in my career is Seagate in Derry. I was fortunate enough to be part of the team that worked to get Seagate to locate there. I recall conversations with Al Shugart, the chairman of Seagate at that time. To my recollection, he had failed on a number of occasions to set up a company before he finally succeeded in establishing Seagate, which remains one of the premier manufacturers of hard disks in the world. That highlighted to me exactly the point that you made. In other parts of the world, it is possible for people who have had failures, sometime multiple failures, to progress and to build businesses.

934. In the United States there is limited government funding, so people have to raise funding from friends and relations in the first place and then from entrepreneurial banks and venture capital companies and so on. As Alan indicated, that structure simply does not yet exist in Northern Ireland. The other aspect that one has to bear in mind is that, very often, the first port of call for small and large companies in Northern Ireland will be a government agency of one kind or another. Currently, that is Invest NI. In my view, Invest NI is much more entrepreneurial than some of its predecessors. However, that said, there is an understandable wariness on the part of government agencies to take risks with public money, and that is a very responsible attitude. Nevertheless, government, and, with respect, that includes all of you, have to realise that business success is never guaranteed. If we are going to expand this economy, we have to be prepared to accept the fact that there will be failures as far as investment is concerned and that judgements have to be made more on a portfolio basis. That is the way venture capital companies make their assessment, by working on the assumption that a certain number of their investments will fail and a certain number will be successful. Again, with all due respect to former colleagues, the Public Accounts Committee looms large in the minds of public servants and I think there has to be a change of attitude and an acceptance that risk is part of doing business. If you are involved in business, as Invest NI is, there is a risk attached. Overall, where government is concerned — government remains the biggest funder of industrial development in Northern Ireland — there has to be greater acceptance that business involves risk, and that as long as the appropriate steps are taken to mitigate those risks, you have to accept that as part of doing business.

935. Dr Apsley: That is all absolutely right, but I will look at it from a different angle. Most of the national and supranational funding is for science or technology, and as long as you say that that is what you are going to do, there is no risk of failure, because you are going to improve knowledge even if the experiment you are offering does not work. That is one way to get around that and to use all that money.

936. To give a slightly specious or funny example from way back, my friend was a chemical engineer and got money from government for writing papers on topics such as the behaviour of spheroid objects in viscous media. Spillers was his sponsor, and it had just given him the latest machine that made Mars bars. He was putting nuts into something like a Mars bar, which is what Spillers paid for, and was very rich as a result, but all his academic work was on the behaviour of spheroid objects in viscous media. That is really the difference that we have to identify: who does what? In that case, Spillers was doing what it should do, because that was in the private sector for its gain, but the world was learning about his work. You have to cleverly use the two sides all the time. His papers did not say that he was doing this research so he could build a machine to make Snickers bars; he did the research to understand the science. That is one point.

937. People here think of DeLorean as great. There was nothing wrong with a stainless steel car at the time — stainless steel was the way manufacturing seemed to be going, because working with aluminium was too difficult — so technically, although DeLorean may have been a crook or may have been something else, I do not know, there was nothing wrong with attempting to build a stainless steel car with the technology at the time. Northern Ireland and DeLorean, even, were not to know that steels were being improved to the point where you could make thinner and thinner ordinary steel that would not rust, and also that others were using aluminum. That is just the way the world works. If he had said that he wanted to research stainless steel cars and got money for that, we would never have seen anything wrong with that. How you chose what to fund is part of how you calculate that risk.

938. The other current example I want to highlight is Nortel, which grew up from what started in the 1990s as a simple cable manufacturer. It grew because it put $3 billion of turnover into research. One of our board members at the time was the technical director. It has fallen back to $1 billion, but that is still pretty big. It would not have been here otherwise. Not only that, every research team that I know that was there is back here in Northern Ireland.

939. One of the most important units in Weavers Court is Intune Networks; there are three of them here in the science park, in Bytemobile and a couple of other companies. One of them was called Intelliden and is now part of IBM, which has now acquired another company in Belfast, so IBM corporate is growing in Belfast. Was that a failure? Was anything that we gave to Nortel a failure? It has regrown now as three global companies and several that may well turn into global companies. There was an announcement that Hermann Hauser, one of the biggest technical investors in the world, has just become a board member of Intune Networks. When you call something a failure, you often put that label on too early; you have to wait and take the bigger picture. That is the other dimension that we need to get round.

940. Mr Frew: I have one further question; I will try to be brief. Some of our SMEs would tell us that they are just so busy doing what they do on a daily basis that they cannot develop the R&D side of things, nor can they pursue funding, because, for them, it means hiring a new employee or a team of employees to do that. Is there a danger that small companies could sell their soul to try to get money, and, in so doing, lose sight of what they are trying to produce? Is that something that we should be aware of and concerned about?

941. Dr Apsley: I am not sure that I know enough to answer that precisely, but you are absolutely right: a small company — even a small science park — spends much of its life trying to stay alive. There is no doubt that that is what dominates. A company will only take a risk on R&D if it perceives a bigger risk of losing the whole company as a result of something else. The Cherry family's company took a risk by turning a concrete pipe maker into a recycled plastic pipe maker. They are balancing those risks all the time, but what they are telling you is that, in normal daily life, just staying alive is the dominant thing. Then, of course, there are trade associations and bigger groupings whom we could listen to and work with, and so could the universities.

942. As I also said, we do have really good schemes, such as the knowledge transfer partnership. However, there is another thing that we could do. We tend to put publicity into the scheme and say, "Do this and do that and you will get 50%". Not one single piece of publicity was created out of the success of Cherry Pipes, for example. The year before, a knowledge transfer partnership in Ulster was the country's best; it had no publicity, to the extent that I do not even know which company won the award, I just know that because Vince Cable said it when he made the announcement. We could report the success of all the projects so that others can learn from that, and it can help them to balance risks.

943. Mr Frew: Yes, I understand.

944. Dr Apsley: We are trying to do it by barracking at them and telling them that they are not doing enough R&D, but they are working really hard to stay alive. You have to give them a bit of inducement the other way.

945. Mr Dunne: Thank you very much, gentlemen, for your presentation. I apologise for being late. I want to make a couple of points, although they have mostly been covered in other members' questions. How do you market your products and services in Northern Ireland? I am relatively new to this Committee and to the Assembly, and I was not very aware of the good work that you are doing. It is important that you go out and sell yourselves a bit more, especially to the larger manufacturers and to the SMEs that we have talked about, telling them about the services that are available and the opportunities that are there.

946. We are all impressed by what we have seen and heard from you today.; your professionalism has come through. You talked about having 2,000 staff and 110 companies. How is that managed? Are they going in and out of those companies? I understand that the companies are located here. Can you clarify that for me?

947. Mr Hewitt: I will kick off, if I may. I will put my hands up now and say that we probably have not marketed ourselves as aggressively as we should. At the moment, we are putting together a programme that will substantially raise our profile. In the start-up phase of the science park we were focusing on building, so we were not achieving the levels of success that we are currently enjoying. In the last two to three years, we have had such a level of interest shown by companies coming here, as evidenced by the fact that we are full at the moment, that we have not had a need to market ourselves with the objective of filling space.

948. The marketing challenge for us is really a Northern Ireland marketing challenge. It is being part of the product offering and part of what Northern Ireland has to sell to international companies. We have worked quite closely with Invest NI to ensure that, where it is talking to science-based companies, the Northern Ireland Science Park is part of what it markets. I will give you an example of that. Just after the initiative of Secretary of State Clinton and her envoy Declan Kelly, a number of US companies came across to Northern Ireland. The First Minister and deputy First Minister hosted a number of those at Stormont. As a direct result of that, Dow Chemical came along to us and said that it would like to locate in the Northern Ireland Science Park, and it is still here.

949. We are still slightly disappointed — I am certainly disappointed — that we have not got the awareness through to public representatives like yourselves at the level that I would like to see. That said, there are very few Ministers in the Executive who have not been here on a number of occasions. The ones with whom we work closely, such as Minister Foster, are here regularly. We have also had visits by the junior Ministers in the Office of the First Minister and deputy First Minister. We have embarked on a programme that, hopefully, within a matter of months, will mean that there will be very few of your Executive colleagues who do not know a little bit about the Northern Ireland Science Park.

950. We are a very small organisation with very limited funds. You are looking at about half of the team beside me here. We do not have a big team. We are in the process of recruiting a new public relations and communications agency. You will undoubtedly see a lot more publicity on the Northern Ireland Science Park in the coming months and year.

951. It is a difficult concept to explain. I hope you will have got to understand a bit more about it this morning, but, if you had not been here and seen it, touched it and felt it for yourselves, it would have been difficult for you to understand exactly what the Northern Ireland Science Park is about. It is difficult for us to convey that. Although we have articles in newspapers and so on, and we always make sure that visits to the park are highlighted in the media — no doubt you will find pictures of yourselves in the papers in the next few days — it is still a very difficult thing to get across. The last thing I will say — I have to be careful about how I say this, for obvious reasons — is that I feel that the media does the Northern Ireland Science Park, and, indeed, the Northern Ireland economy, a disservice.

952. Mr Dunne: And the Assembly.

953. Mr Hewitt: I could not possibly comment on that. My feeling is that — I know this from other positions that I have been involved in — it is very difficult to get the Northern Ireland media interested in the positive aspects of what is happening here. If a company closes you can bet that there will be a reporter from UTV or BBC standing outside the company announcing the fact that there have been 200 job losses or whatever. To try to persuade the media to cover positive stories remains a serious challenge for us. If it is complicated, as the Northern Ireland Science Park is, that makes it even more difficult for us to interest them. That said, we have noted more interest from the media in what is going on. I think there is an intrigue factor: there are things happening here that they probably were not aware of.

954. The Chairperson: I am just thinking of the headline:

"DETI Committee visits science park on the ides of March without incident".

955. Mr Hewitt: It could be even worse if you were photographed standing alongside the Thompson Dock.

956. Dr Apsley: Can I comment on the 2,000 staff? They all belong to their own companies, and you are going to meet some of them. What Frank said is absolutely true, but, at the same time, the lion's share of credit goes to those companies that are all in growth. That is the other wee bit of the balancing act that we try to do when it comes to the media. You are going to see SAP later, and SAP will show you the future of the internet. To be honest, that has been available for the press to come and see for some time. I am disappointed in the fact that we do not have a technical press that would try to make stories out of that or out of any of the other good news stories that are around, because that would all help and add grist to the mill. We have to be conscious of the resource, as Frank said, and that is the one thing that is maxed out. We have not got a single desk that we could let at the minute.

957. Mr Dunne: That is good.

958. Dr Apsley: No, it is not good. That is not how a science park should be; it should always have something empty to make way for expansion. That is part of the rule book.

959. Mr Dunne: You need to extend.

960. Dr Apsley: We cannot get the finance to do that.

961. The Chairperson: Is that in the sense that you want people to be moving on and more people coming in?

962. Dr Apsley: There is a lot of churn. The science parks were representative of the fact that the world changed. When the concept started in California in the 1950s, it was because science-based companies were anathema to the property industry of the day, because they had dirty, nasty things, they needed a lot of power and they involved chemicals and so on. Therefore, the university had to take a handle of that and build something that could cope with it. However, it also had to cope with the fact that they were volatile and that they grew quickly or they died quickly. Therefore, they were like gypsies in the sense that some stayed and some did not want to know. That is where the concept came from, and it is still valid. Just before we came here, I signed a lease for a small but exciting company. However, they may be gone next week or another one may be replaced. The big companies are the ones that sign, but even then they sign for five to 10 years, not the 25 years that would be wanted in the centre of town. There are differences like that.

963. The Chairperson: That brings our questions to an end. Thank you very much for a very interesting session. We are delighted to be here, and we will look around the science park after the meeting has ended.

22 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Paul Frew
Ms Jennifer McCann
Mr Stephen Moutray
Mrs Sandra Overend

Witnesses:

Dr Mike Camlin
Professor John Davis
Mr Joel Ferguson
Professor Seamus Kennedy

 

Agri-Food and Biosciences Institute

964. The Chairperson: I welcome all of our witnesses to the Committee meeting. We will be briefed by Professor Seamus Kennedy, the chief executive officer of the Agri-Food and Biosciences Institute (AFBI); Dr Mike Camlin, the deputy chief executive officer; Professor John Davis; and Mr Joel Ferguson, the acting head of corporate services. I thank you for the paper that you have given us in response to the Committee's request for evidence. It is a very useful document. We look forward to hearing from you this morning. Would you like to start by making an opening statement? Thank you very much, Professor Kennedy.

965. Professor Seamus Kennedy (Agri-Food and Biosciences Institute): Chairman and members of the Committee, thank you for the opportunity to speak to you today. I was going to introduce my colleagues. However, you have already, very aptly, done so. AFBI is a non-departmental public body (NDPB) sponsored by the Department of Agriculture and Rural Development. The institute was created in April 2006 from an amalgamation of the existing DARD science service and the Agricultural Research Institute of Northern Ireland, which was based at Hillsborough. Therefore, we are a relatively young NDPB.

966. The institute provides research and development, statutory, analytical and specialist advice services to DARD and other Departments, including the Department of Culture, Arts and Leisure (DCAL) and the Department of the Environment (DOE), and the Food Standards Agency. We have a wide range of local, national and even international public sector and private sector customers. Our work is mainly carried out in the areas of animal and plant health, animal welfare, crop production, marine and freshwater fisheries and ecosystems, the environment, food safety and innovation, and agrifood and rural economics. Therefore, we are a broad church with regard to the scientific disciplines that we cover.

967. As recognised in the Northern Ireland Executive's recently announced Programme for Government 2011-15 and associated economic strategy, the agrifood industry is currently one of the bright spots in the local economy, with significant potential for export-led growth. The sector currently has a value of over £3 billion per annum and sustains approximately 90,000 people in employment, which represents about 20% of total private sector employment in Northern Ireland. Growth of the sector will undoubtedly require innovation to develop more value-added products. If the industry is to compete in international markets, it must try to increase the number of value-added products that it sells, as opposed to commodity products.

968. AFBI's scientific work supports the sector in enhancing its competitiveness and helping to protect it from animal, plant health and environmental threats. We particularly welcome the setting up of the DETI/DARD Food Strategy Board and hope that it will help to shape the future of the R&D innovation agenda for the sector. We also support the work of MATRIX in helping to promote agrifood research and innovation and the Invest NI-funded development of an agrifood competence centre. That is not yet out of the traps, but it is in development.

969. AFBI's total revenue in 2010-11 was approximately £54 million. Approximately 25% of our income is derived from outside our grant-in-aid from the Department, and we have been growing that non-DARD funding substantially since our formation. The institute primarily serves the local industry and DARD. However, we have also developed collaborative links with a number of institutes in various countries, including those as far away as China and India. Closer to home, we are working with Queen's University and the University of Ulster and discussing how we can increase the level of collaboration between AFBI and the two universities.

970. Examples of the types of work that we carry out for the Department of Agriculture and Rural Development in support of the agrifood sector include statutory testing for BSE, bovine tuberculosis, brucellosis and salmonella. We also carry out testing of veterinary drug residues, pesticide analysis of food and plant health testing. The provision of an effective local emergency response to threats to the food chain, animal and plant health, and the environment is an important function of AFBI. Examples of that type of work include the response to the 2001 foot-and-mouth disease outbreaks, when a local testing facility was set up in our veterinary sciences division, and that resulted in Northern Ireland gaining entry to export markets eight months ahead of Great Britain. Another example came in 2008, when the bluetongue virus was inadvertently introduced to a farm in north Antrim. AFBI investigated and developed scientific data that resulted in the European Commission changing its policy on animal movements. Other examples include the dioxin feed-contamination incident in 2008 and surveillance for avian and H1N1 pandemic influenza viruses. We are currently preparing for testing for the Schmallenberg virus, which is the latest animal disease threat to emerge in Europe.

971. A large proportion of our statutory work is accredited to ISO 17025 standards, which is the international standard for testing laboratories. All our research projects are carried out to ISO 9001 standards.

972. The reason that I mentioned the emergency response was mainly to make the link with R&D. The ability of AFBI to carry out an effective emergency response is dependent on participation in R&D projects in, as it were, peacetime to develop the required state-of-the-art skills and technologies. AFBI adds value to DARD's AFBI-directed research programme by winning additional complementary research funding from organisations such as the Department for Environment, Food and Rural Affairs (DEFRA); the Department of Agriculture, Food and the Marine in the Republic of Ireland; the European Union; the Food Standards Agency; AgriSearch, the local farmers levy body; the Biotechnology and Biological Sciences Research Council (BBSRC) — we are not directly eligible for BBSRC funding, but we are eligible as a subcontractor to an eligible organisation; a range of commercial companies; and DARD's industry-led research challenge fund.

973. I think that it is true to say that AFBI is less well known as a research organisation than the two local universities. However, we are a significant research contractor. As an example of research activity, AFBI has had 13 successful European Union framework and INTERREG applications, six unsuccessful applications and 10 pending applications since 2008. The total value to AFBI of confirmed and pending EU projects is £4·8 million since 2008. In line with the Executive's Programme for Government and the aims of the Barroso task force, AFBI is aiming to increase its drawdown of European R&D funding by placing additional staff in our R&D support office, developing links with other scientific institutes at home and abroad, and increasing the institute's profile in Brussels with assistance from Invest NI and the Executive's Brussels office. AFBI's R&D tends to be applied in nature and directed to solving practical problems faced by the industry and government policymakers. We also work closely with the College of Agriculture, Food and Rural Enterprise (CAFRE) to ensure that the results of our R&D are transferred to the agrifood industry. In fact, we have participated in almost 2,000 knowledge and technology transfer events since the formation of AFBI in April 2006.

974. The UK Department for Business, Innovation and Skills sixth annual survey of public sector research establishments (PSREs) found that they filed fewer patents than universities but had a higher income from licensing intellectual property (IP), despite employing fewer staff in commercialisation offices. In fact, AFBI's current royalty income stream from licensing IP is around £4 million per annum, albeit from a small number of products. One of the disadvantages of being an NDPB in the research innovation community is that AFBI is not eligible for several research and innovation support programmes such as the Higher Education Innovation Fund, which are open to universities, the BBSRC and other UK research councils, and the US-Ireland R&D Partnership Programme.

975. In summary, we believe that AFBI has the scientific expertise and facilities to carry out its core functions for the Agriculture Department and other Departments and agencies and to contribute significantly to further development of the knowledge-based bioeconomy of Northern Ireland, which we all seek to develop. AFBI can also play a major role in the Executive's aim of increasing the level of drawdown from European R&D funding — there is a target of £64 million to be drawn down over the next four years — and assisting in the general increase in the level of R&D and innovation in Northern Ireland. With that, my colleagues and I would be happy to answer your questions, as far as we can.

976. The Chairperson: Thank you very much, Professor Kennedy. The paper and this morning's presentation are very interesting. I am trying to understand AFBI. It is not an academic institution in the same sense as a university, but it is a research institute. That is an advantage and a disadvantage in respect of accessing the funding that higher education attracts. Is there any way that you can get round that? Do you get round it already? Can you act as a subcontractor or something like that?

977. Professor S Kennedy: In respect of UK research council funding, we can act as a subcontractor, although the subcontracts are normally for relatively small amounts of money. We are not eligible for the Higher Education Innovation Fund at the moment, but we hope that —

978. The Chairperson: Is that a UK fund?

979. Professor S Kennedy: It is primarily a Northern Ireland fund. We hope that we can gain recognition for that funding.

980. The Chairperson: Can I just stop you there? I do not mean to interrupt you, but is there any way that that could be done? It seems to me to be an obvious thing to permit.

981. Professor S Kennedy: We would like to discuss that with DETI and Invest NI. Your earlier remarks were absolutely right; I suppose we are an unusual beast in the sense that we are not a university. We provide a service primarily to government, but, at the same time, we want to maximise the use of our assets to stimulate and help protect the economy more widely.

982. In recent years, we have developed very good relationships with Invest NI, and it has come to recognise that AFBI has a role to play in supporting innovation in Northern Ireland, particularly in the agrifood sector. Invest has opened some of its programmes to us; for example, proof of concept. We have several grants from Invest NI to do that. It has been very supportive of visits to establish research collaborations and so on, and we are also eligible for its wider grant programme. In the past few years, there has been very good recognition of the role that AFBI can play and support from Invest NI. We would like to develop that further.

983. The Chairperson: You are fairly complimentary about the work that Invest NI is doing to encourage research and development, and your relationship with it is a good and productive one. Is there any way that can be improved? I am not suggesting that you be critical of Invest Northern Ireland, but is there any way that it could be improved?

984. Professor S Kennedy: The issues that we have come up against are largely practical; for example, Invest NI has to operate within state-aid rules, Audit Office rules and so on. Practicalities, such as the amount of overheads that are eligible for inclusion in grants, are an issue for us. AFBI does not have a budget of its own as such, so we have to cover our costs. The rules around state aid and the complexity of the levels of overheads that can be funded through various grants are real, practical issues for us. We are working with the Department of Agriculture in particular, as our sponsor branch, to try to overcome some of these issues. We know what we have to do to draw down more money, but a lot of it comes down to practical issues such as overheads. The complexity of the application process for European funding can demotivate staff, so we need to think better about how we put in support mechanisms —

985. The Chairperson: Can we enlarge on that a little bit? It is an observation that you have made in your submission about the burdensome nature of EU applications; you referred to framework 7 in particular. Do you have any comment to make on that? Is there any way in which government could better assist with those applications? It is a common complaint; it is not a complaint that just comes from your good selves. It is a common complaint, particularly among the private sector and smaller businesses, that it is a labyrinthine process, very difficult to navigate and very difficult to arrive at a successful conclusion in a timely fashion. Do you have any comments on that?

986. Professor S Kennedy: My colleagues may want to come in and comment on this as well. Potentially having a one-stop shop in Northern Ireland to which, not just the universities and AFBI, but our small and medium-sized enterprises (SMEs) in particular, who also find it difficult to navigate the European R&D process, could come, may be worth considering. By "one-stop shop", I mean an organisation or a unit within an existing organisation that could carry out some of the intelligence, find out what calls are coming up and what is of particular interest to the European Commission, and get that information out to all the players, both the public sector research communities, including the universities, and private sector companies that may be interested. It could carry out that market intelligence, find what is available and also provide support by guiding them through the process. That is a key to success basically.

987. The Chairperson: So, in that one-stop shop, you would need a team of experts in different fields to help you and to guide you through the difficult processes. Where would you put that one-stop shop? For example, would you put it in Invest Northern Ireland?

988. Professor S Kennedy: Invest has certainly done a lot of work on that. I am also mindful that we have a very active innovation community in the form of the Northern Ireland Science Park (NISP), and it should also be considered. In the science park, businesses tend to work very fast, and they are in touch with the private sector. In the public sector, we are sometimes a wee bit slower than we normally should be. Consideration should possibly be given to the NISP as a base for such a role.

989. The Chairperson: Do you have any comment on Horizon 2020 and what you might expect from that? Hopefully, it will be much better than framework programme 7, with less bureaucracy and fewer of the difficulties that have been adverted to.

990. Professor S Kennedy: The very fact that the Committee is discussing R&D and innovation today indicates the importance that the Executive place on R&D and innovation. This Committee's role will raise the profile of that. I believe that all Departments are inputting into the Barroso task force, and that helps to raise the profile. We know where we need to go with the strategy, but it really boils down to the practical details of how we draw down funding. Compare that with the situation in the Republic of Ireland, where Enterprise Ireland, I understand, provides support to SMEs and public sector organisations in drawing down European funding and has been very successful in doing so. We could potentially study how it has been done elsewhere.

991. The Chairperson: That is a good example of the successful application of, for want of a better term, a one-stop-shop type of help to industry and perhaps even to the universities.

992. Professor S Kennedy: We also need to recognise that, in Horizon 2020, the R&D funding that is potentially available is somewhere in the order of £80 billion, which clearly makes any Northern Ireland Executive research funding appear small. All Departments, when developing our research agenda, have to be mindful of the bigger European agenda out there and make sure that the R&D that we want to promote internally fits in with the European research agenda.

993. Dr Mike Camlin (Agri-Food and Biosciences Institute): You mentioned Enterprise Ireland. Over the years, our scientific colleagues in the Republic have had a much closer understanding of the systems in Europe because of their closeness to the Departments and because of the Departments' closeness to the European systems. That needs to be worked on a little bit harder here to put us in the position where our networking is better and where we can get into Europe and find out how the thing works. We could look at mentoring from scientists who have been successful and bring them into the bodies that we are talking about to help those who are making applications. That is all quite important.

994. Mr Joel Ferguson (Agri-Food and Biosciences Institute): In the Republic, they benefit from having a body of national contact points that are very closely integrated into Europe through the funding programmes and through the different thematic areas, whereas, here, we basically share with the other regions in the UK, and that obviously dilutes the amount of contact that we have with them. There are some good examples of organisations in Europe and locally that have helped draw down certain types of European funding. Locally, we have NI-CO, which, as a company owned by Invest Northern Ireland, basically focuses on the international development funding. That is a good example of a company that is set up to focus on the administrative burden of making applications, make that easier for the experts and support the project management once a project has got off the ground.

995. There are other examples in other parts of Europe of similar types of organisations that have been established to make the bids and manage the projects once they have been established. It takes away that learning curve that everyone new coming to European applications has to undertake when they are starting to pull together a bid and then when they have to deliver that project. There are good examples that are worth having a look at.

996. Mr Moutray: Thank you for presenting to us this morning. Reference has been made to the administrative burden on the private sector. How does the administrative burden impact on AFBI and the resources that you have?

997. Professor S Kennedy: It impacts on us as well. I suppose we have the advantage in that a number of our scientists have good experience in applying for R&D projects, not only in Europe but in a variety of areas, whereas businesses, particularly SMEs, are busy trying to keep their head above water and make a profit at the end of the year. That is their daily business, and, for many of them, to actually lift their heads from the daily challenges to consider R&D is a big issue in itself. When you add in the administrative burden, I think it makes it impossible for a lot of them. They really do need support, probably more so than the likes of AFBI.

998. Ms J McCann: Thank you very much for your presentation. It is very interesting that you offer some practical examples of where it is working in other places. From what we are hearing from other people who have presented to us, and as you mentioned in your opening remarks, the development of the agrifood sector will provide a huge boost to the economy here in terms of the export-led growth that is needed in that sector. I want to concentrate on an area, notwithstanding the European funding and the difficulties. You did say that it is a huge amount of money, and we need that sort of expertise to be delivered to our SMEs and the people who want to draw that down, because otherwise we are not going to get it. The match funding is another difficulty. In terms of the commercialisation of the R&D, you go from having a good idea and a sense of how we can grow and develop the sector through export growth and international markets. We are hearing from the other organisations that there seems to be a bit of a difficulty in taking that practical step to turn an idea into something that is viable and could be marketed. Are there ways in which you think that part of it could be improved?

999. Professor S Kennedy: I mentioned AFBI's royalty stream, which came from a small number of animal vaccines. The initial work predated AFBI and was carried out in DARD's science service a number of years ago, but then it was linked with commercial companies — the companies involved in that case were multinational companies — and they developed the product to a commercial product and took it through the licensing process required to place a product on the market. They also look after the marketing side of that. AFBI, as part of the agreement with them, takes in a royalty stream. That particular model has worked very well. A model that we are currently investigating is the possibility of AFBI forming a joint venture with a commercial company to take forward another piece of technology. We have a proposal with the Department of Agriculture and Rural Development, and hopefully that will receive DARD and Department of Finance and Personnel (DFP) approval. That is a very exciting example of how the public sector can work very closely with the private sector to bring the results of R&D right through the commercialisation phase to result in products on the market.

1000. Ms J McCann: In terms of developing the SME sector in what you are doing, you are talking about more collaboration and Departments working together. You mentioned a one-stop shop, but have you any ideas on how we can develop that to work more strategically in order to draw down the European funding that is there and also to ensure that we have a marketable product at the end of it?

1001. Professor S Kennedy: The public sector at all levels should recognise that R&D and innovation are not luxuries to be added on to the day job. There is a tendency for policy makers in particular to be concerned about the issues in their in-tray on any particular day. That is correct: there is the day job essentially. However, we need to integrate R&D and innovation into the day job of the public sector at all levels so that they are not seen as optional extras. They have to become embedded in our work.

1002. We talk about developing a knowledge-based bioeconomy. By that, we mean that we cannot compete with cheaper-labour countries on wage levels alone. We can succeed and develop our economy only through the knowledge and intellectual capacity of our people, which is considerable. We need to recognise across all Civil Service Departments and the public sector that the only future for Northern Ireland is through developing that knowledge and intellectual capital and placing R&D and innovation at the centre of the agenda of every Department, not at just the top but down through all official levels. Maybe that is not a very detailed answer, but that is an important issue.

1003. The other issue is that we have a clunky bureaucracy in Northern Ireland and are very cautious and risk-averse in the public sector. We need to look at that culture and realise that, if we are to compete internationally, we maybe need to become not a little more reckless in our approach to risk but to take a more enlightened approach to it and not allow our concern about the Public Accounts Committee and the Northern Ireland Audit Office's requirements to police public spending to stifle innovation and stop us taking any chances in investing and developing our economy.

1004. Ms J McCann: OK, thank you.

1005. Mrs Overend: Thank you very much for a very interesting presentation. I take what you say about research and development in that we do not have to know the answers before we start. That is what we tend to do and play it safe. Do you feel it would be beneficial to promote more the work that you can do? You talked about promoting innovation in Departments, but is there more we could do to promote research and innovation throughout the private sector as well, and how could we could that? Obviously, you want to reach out to the private sector as well.

1006. Professor S Kennedy: Yes, it is, absolutely. AFBI has considerable contacts with private sector companies. The Invest NI voucher scheme has been very useful for SMEs, and we have worked with a number of companies through that. However, a lot needs to be done. Potentially, we could have a conference in Northern Ireland, bringing in the public sector and SMEs, to hear from the SMEs what practical issues they have and why they do not become engaged in R&D and innovation and to look at their needs. It is a very difficult question to answer.

1007. Mrs Overend: It is. Do you think they would come to a conference? Most of them are just getting on with their work. It is very difficult to engage with them.

1008. Professor S Kennedy: It is. Obviously, the smaller number of big companies realise that they need R&D and innovation to survive and grow but that smaller level is the issue.

1009. Mrs Overend: Are there other organisations in the UK that are similar to AFBI that you could learn from, or are you ahead of the game?

1010. Professor S Kennedy: There are no probably no organisations in the UK directly comparable with AFBI with regard to the range of work we do. We carry out statutory work for government with R&D specialist advice, diagnostics and surveillance work. We are aware of many organisations in the UK. We have been in touch with the Moredun Research Institute in Scotland, for example, and we have looked very carefully at its business model. We have also looked at the Scottish Agricultural College. We are trying to learn from them and see how they can innovate. There are some common lessons. They need to have very good basic internal management processes, particularly around finance, in place. They also have very strong links with the industry.

1011. Again, in the overall culture, the whole of government support has to be aimed at fostering innovation and allowing public sector bodies, such as ourselves, more freedom to carry out more work for the private sector. I mentioned the joint venture that we proposed, which is just a small example, but we hope it will be a pathfinder that will indicate to government that public sector bodies such as AFBI can leverage the considerable asset that they have for the benefit of the wider economy.

1012. Dr Camlin: I will take up the point that Seamus made about statutory work. One of AFBI's strengths is its good contacts with the industry, from producers right across the food sector. The other thing is that we have a solid body of science that is there for statutory support to DARD, which leads on to special advice and putting out R&D to the industry. There is a strength there in that our scientists all have good contacts with the different industry sectors. If we can build on that, there is a chance of the sectors becoming more enlightened about the need for R&D and for them to support R&D and further it. The solid science that we have, because of our statutory work, gives us a considerable advantage in this whole thing.

1013. Mrs Overend: Absolutely.

1014. Mr Ferguson: I want to make a couple of points in support of what Seamus said. In specific programmes, some work well and, in others, there is room to improve or to help us. With regard to the likes of the competence centre initiative with Invest Northern Ireland, we are working on two: one with the agrifood sector and the other with the renewable energy sector. Those are both very good forums and structures for bringing together the industry and getting it to take a lead to drive forward early stage R&D in their areas. They are also very good forums for listening to the industry and hearing what it needs in R&D support. So, from our perspective, they are both very important initiatives and we hope to see them get off the ground soon.

1015. There are a couple of other programmes as well. On the commercialisation side of things, we are trying to find partners to take forward commercial opportunities. In the past, in some cases, we have had to look internationally for commercial partners to license technologies because locally we have not had the relationships or the companies have not been here. The likes of the CONNECT programme at the science park is doing a lot of work to try to bring together entrepreneurs and build teams around opportunities. For us, the venture that we are looking at now, which Seamus referred to, is very much something that has been born out of the CONNECT programme and the contacts that that has helped to build.

1016. Invest NI ran a pilot programme in the US for the life and health sciences sector, in which AFBI participated. Essentially, consultants in the US helped to make commercial links. AFBI also participated in a trade mission to the east coast of the US. As a result, it created relationships and made contacts that opened up a lot of doors. That kind of programme is very helpful. On the back of that, we are now looking to put a person in the Northern Ireland Bureau in Washington to help develop those contacts further.

1017. I have one last point, which is about HEIF. Research spend in AFBI probably amounts to something like £10 million a year overall. Other public sector organisations, such as the Health Department, also have a substantial research spend. When you add those together, we are probably up there with the universities in our total amount of spend. The universities, the Department for Employment and Learning (DEL) and the Department of Enterprise, Trade and Investment (DETI) see the importance of HEIF to help bridge the gap between R&D and commercialisation and innovation, and that gap is well filled by HEIF. However, as Seamus said, that is an area where AFBI and other areas, such as health, are not supported. So, there is definitely room for some kind of review to see whether that kind of support can be provided to organisations such as ours.

1018. Professor John Davis (Agri-Food and Biosciences Institute): From the research provider's perspective, one of the difficulties that we face is that the level of R&D appreciation and activity in the private sector in Northern Ireland is quite thin. We have only a few relatively large companies, such as Bombardier and Norbrook, which actively engage in R&D. That creates difficulties in that we lack critical mass of R&D in the private sector. Taking the wider view, we need to attract more research and development-intensive companies into Northern Ireland's private sector. To my mind, the relative lack of activity in R&D is holding back productivity. We are a relatively low-productivity region. We need to close the productivity gap with the rest of the UK.

1019. I do not have answers to this issue. R&D tax credits may be one option that could be considered. The Economic Research Institute of Northern Ireland did a study on this some time ago. It is a slow-burning fuse; it can improve the R&D intensity, but it may be 10 years before that can be converted into new economic activity, fresh employment and additional employment. So, there is a structural problem in R&D in Northern Ireland that has to be addressed strategically. The culture needs to change.

1020. Mr McKay: I apologise for being late for the presentation. The debate is interesting. Agrifood is always quoted as one of the green shoots in this difficult economic time locally. We need to look at R&D to ensure that we are ahead of the curve going forward. As Professor Davis said, it is about culture — we are a risk-averse people. Risks that are taken have to be accounted for through the Civil Service, etc, and investing in R&D is viewed as a possible waste of money. We need to address that cultural view, which people in parts of the economy still hold. It is an interesting debate, and we need to be more forward-looking in the way that other leaders in this field are in the international economy.

1021. Are you finding that, as other sectors of the economy take a dip into R&D, people with certain skill sets are looking towards taking their skills to agrifood and maybe tourism? Has that been of benefit to the agrifood sector? How does that fit in with R&D?

1022. Professor S Kennedy: The availability of skills in the industry as a whole is becoming a constraint. Particularly in food production, food technologists are thin on the ground. CAFRE's courses are full. Queen's University's agrifood courses are full, and that is the same throughout the British Isles. Agrifood has come into a good position as a career prospect for school leavers and so on. We are definitely reaching the stage — I hear this from companies in the sector — of finding it difficult to recruit people with appropriate skills.

1023. Mr McKay: Are there many skill sets in other sectors that are directly applicable to agrifood?

1024. For example, when we visited the college in Newtownards, staff there said that there were people who had worked in construction for years, are now out of work but have skill sets that would slot perfectly into the renewables sector. Is there any equivalent to that?

1025. Professor S Kennedy: The diversification of agriculture into renewable energy is a good example. That is definitely a case where the engineering and technical skills of people in the construction industry could be diverted, although the renewable energy industry is still relatively undeveloped at this stage. However, it has enormous potential.

1026. Professor Davis: We are doing some research on the constraints of the current skill sets available to the agrifood sector, particular the food processing sector, and to see to what extent the skills available match the development needs of food processing companies, particularly in penetrating the very sophisticated European market that we have on our doorstep, which presents significant opportunities for adding value to basic farm commodities. I will hold my fire because we do not know the exact findings. However, the results should be available later this year.

1027. Mr McKay: In relation to the export and international markets and our level of R&D development, are there many countries in the same boat as us with regard to our approach to R&D, or are most of our competitors ahead at the curve? I am trying to think ahead about the danger of being left behind if we do not address this cultural averseness to R&D.

1028. Professor Davis: Quite a lot of research is taking place on the links between R&D and innovation and productivity. The big message is that there has been a withdrawal of public sector support for R&D with regard to agrifood in the Western World in the past 20 years, and that has tended to be linked to lower productivity growth. So, that underscores the importance of maintaining the level of R&D to support productivity growth and diversification in the industry.

1029. Mr Frew: You link R&D with productivity, especially in the agrifood sector. Import bans have been lifted Europe-wide and all round the world, including America. How big a challenge is the lifting of import bans to Northern Ireland? We can also see the BRIC countries on the horizon, and Brazil is probably the most prominent with regard to meat imports. How big a challenge is that for agrifood companies, and how can advancing R&D help to combat that and help us compete against those massive importers?

1030. Professor Davis: You are right: it does intensify the global competitiveness. The penetration of the European market by South American supplies, for example, is a big challenge for the local industry. It underscores the importance of us becoming more competitive. We cannot sit back; we have to respond to that. We are R&D providers, and we think that R&D is rather important. However, there is lots of literature to suggest that the effort to improve the competitiveness of the local sector is highly dependent on the knowledge that comes from the R&D sector, provided it is transmitted into the industry in an accessible and relevant way.

1031. Professor S Kennedy: I am not an expert in the economics of it, but I think that it is generally considered less of a threat than it might have been five or 10 years ago because of the development of markets in Asia and even in South America and Brazil. Those markets will take a lot of the product that might formerly have been imported to Europe from South America, for example. Brazil is consuming a lot more of its own beef production, and it is opening markets in Asia. I will not say that it is not a threat, as John has said, but it may be less of a threat than it used to be.

1032. The basic point is that we need to innovate. If we look at the dairy sector, we see that global milk production has increased substantially over the past year, and it is predicted to increase even more. New Zealand is producing vast quantities. If Northern Ireland is to compete, we have to go for innovation and value-added products, because I do not think that we can compete simply on a commodity basis.

1033. Dr Camlin: My colleague made the exact point that I was going to make. It is not about commodities; it is about value-added and the research input into value-added. Making that work is the way in which the industry here will be competitive. Commodities will not work for a little place such as Northern Ireland.

1034. The Chairperson: But if you have high-quality commodities, which I think we have, it helps to add value.

1035. Dr Camlin: Yes, absolutely.

1036. The Chairperson: You need research and development to stimulate innovation and create added value. Is that really what you are saying?

1037. Dr Camlin: Yes. What we are really saying, as Seamus just said, is that we will not compete with other places on milk and meat as bare commodities on the supermarket shelf. Where we will compete is if we can add value to those commodities, make them innovative and add value to the whole process. R&D can do that.

1038. Mr Frew: We have a really good product to sell. The fact that they eat grass is the first thing. We have linked R&D to production. How big a link is there between R&D and food security, and how big a concern do you have about it? Is there a link, and should we be concerned about it?

1039. Professor S Kennedy: There is definitely a risk. We talked earlier about the increasing markets for food throughout the world. We know that the population is projected to increase to nine billion by 2050; that is only a median estimate, so it could be higher or lower. Climate change comes into it. Parts of the world will not be able to produce as much food as they have in the past. Food security definitely becomes a big issue, and innovation very much has to play into that.

1040. Professor Davis: Absolutely. The other dimension of food security is to intensify in a sustainable way. We must produce more food but in an environmentally neutral fashion.

1041. Professor S Kennedy: The indications from the CAP reform are that sustainability and the environment are still very high on the European agenda. Therefore, as John said, we have to produce more value-added products but do it in a sustainable manner. All that requires R&D and innovation.

1042. Mr Frew: I have another wee question, because you have hit on a point about the CAP reform and the research and development side of it. I can understand why the environmental measures in the new CAP have been implanted, but what I hear from the environmentalist lobby is that they will have the opposite effect and could create monoculture rather than crop diversification. How big a concern does AFBI have about the new CAP?

1043. Professor S Kennedy: On your first comment: the European Commission appears to be approaching it from the point of view that one size fits all. We look around Northern Ireland and see that the farming community's environmental stewardship is excellent. You only have to look at the hedgerows and green fields to see that. We have certain issues with water pollution, but those are being tackled.

1044. Maybe John could respond to your question.

1045. Professor Davis: Do you mean that the issue is the greening of pillar 1?

1046. Mr Frew: Yes, the greening of pillar 1 and the environmentalist-type policy in it. We might not necessarily agree with the measures, but we understand why they have been put in. The point I am making is that even the environmentalist lobby in Northern Ireland is saying that we should be very concerned because the measures could well have the opposite effect to greening because they are so stringent and restrictive. The three-crop diversification rule, ecological areas, and how we even measure that as a paying agency could move farming away from food production and, I suppose, arable production. If you are made to grow three crops at various scales, the producer will just say, "This is not worth it." That could create a monoculture of suckler cows — dairy, rather than a broad mix.

1047. Professor Davis: Yes; I take your point. I think that there are difficulties with that, considering the relatively small-scale farming that we have in Northern Ireland. There is a lot of debate going on, and I do not know exactly how this will all turn out. I think there is a possibility that there will be some regionalisation to take account of the structure of farming in different regions. It is really designed to try to get away from a monoculture of large cereal-growing areas where landscapes can become completely dominated by single crops.

1048. Mr Frew: Maize.

1049. Professor Davis: Here in Northern Ireland, a farmer may be growing 10 acres of barley to feed some cattle. He is not going to want to diversify that; it is just not practical. There is a lot of debate going on in the Commission about how that will work out in practice.

1050. The Chairperson: You will realise, gentlemen, that Mr Frew is Chair of the Agriculture Committee. [Laughter.] We talked a lot about Europe, and we talked a little bit about the USA. Could we be doing more in relation to the USA? This morning, we have seen reports about the US relaxing bans on imports and so on. Leaving aside agrifood as such — I know this is a wee bit outside your remit — is there more we could be doing on other exports and encouraging research and development so that we can increase our exports to the United States? Maybe that is beyond your remit.

1051. Professor S Kennedy: I think the answer is yes. I know of a small example from County Armagh, where a small company is shipping apple juice to the United States to test the market. Obviously, there is a vast market in the United States of 250 million people but they have a very well-developed agriculture industry themselves so, if we are to compete, I think we have to go back to the clean, green, wholesome image of Northern Ireland produce and sell it on that basis, plus value-added.

1052. The Chairperson: You seem to have a working relationship with the science park. Is it a fairly close one?

1053. Professor S Kennedy: It is a very close one. AFBI, with the two local universities and commercial companies, sponsors the annual £25K awards. We have found that process very beneficial to our own scientists because, formerly, our scientists might have done R&D, produced scientific papers, and left it at that. Participation in that competition has given them very good training in how to actually bring R&D to the next stage of innovation, commercialisation, and producing a business plan. We have very good links with the science park in that direction. As I said earlier, we are very impressed with the innovative community there, and we think that culture can add value to AFBI's R&D activities.

1054. The Chairperson: We were there last week; it was very interesting and very impressive.

1055. Professor Davis, you mentioned renewable energy. Does that form part of the research that you are doing in AFBI?

1056. Professor Davis: We have a renewable energy centre at our facility in Hillsborough.

1057. The Chairperson: How significant is that in relation to your overall work?

1058. Professor S Kennedy: It is very significant. We have had a programme on producing biomass for many years. Mike knows the details of that. We have been working on how to grow willow in the most efficient manner; how to protect against diseases; and how to grow miscanthus. We have also been experimenting with some other plants, such as elephant grass.

1059. In the past few years, we have succeeded in obtaining money from the Secretary of State's scheme to develop a renewable energy centre at Hillsborough. We have a system for combusting the willow and other biomass products. There is a district heating loop around the farm, in some of the main farm buildings. Over the past two years, we have produced a lot of practical data on the energy inputs, the energy outputs, the costs of the inputs and the costs of the outputs. That information is very relevant to farmers in Northern Ireland who are interested in going down the renewable energy route.

1060. We also have an anaerobic digester, which, first, looked at the economics of digesting slurry, and which is now looking at the economics of digesting slurry and grass together. We will extend that to other crops.

1061. The Chairperson: That is a combination.

1062. Professor S Kennedy: Yes. We have published a lot of the figures, and they are available on our website. We found different results in Germany, for example. That emphasises the importance of carrying out the research locally, in respect of our own products that are available for digestion and the climatic situation.

1063. We have also looked at the quality of the digestate as a fertiliser and shown that the availability of the main nutrients in the digestate is better than in the raw manure. It is a demonstration project for the industry, and it is producing a lot of very important data.

1064. The Chairperson: If that was commercially viable, it could transform local economies, I would have thought.

1065. Professor S Kennedy: Absolutely. With the recent changes in the renewables obligation certificates, it makes the whole process a lot more attractive to farmers.

1066. Dr Camlin: I want to mention one of the interesting areas in which we have been very successful recently. In an INTERREG proposal, we have been successful with a proposal for bioremediation. We are using municipal waste and farm waste to feed into the agriculture sector to feed the willow biomass, and that completes the loop. We are, in fact, adding municipal waste to willow and back into renewable energy. That is another useful area we are working with. We also have links with the east coast of the US in that area. It is quite an interesting and exciting area for us, and it links the agriculture sector with the municipal end.

1067. The Chairperson: It is quite exciting.

1068. Mr Frew: I will follow up on that. I know that this area is something that the farming community can diversify into, and there will be a lot of positives with it. However, is there a concern that we could shift the emphasis from food production to fuel?

1069. Dr Camlin: Food versus fuel; it is quite a debate.

1070. Mr Frew: In some areas, there could be potential for an imbalance. Is that something that concerns you?

1071. Dr Camlin: Look at what is happening in the States: so much corn is being grown for energy rather than for food. It is something that has to be kept in balance; you are absolutely right. We have not got an enormous amount of land available to us in Northern Ireland, so growing willows on high-quality land that could be used for other things might not be the right thing to do. We have to be very careful about that; I think you are right.

1072. The Chairperson: If you are dealing with agricultural waste —

1073. Mr Frew: Chicken litter.

1074. The Chairperson: If you are using waste from agricultural production, it gets round the problem that Mr Frew identified.

1075. Dr Camlin: We have problems with municipal waste and farm waste. If we can help deal with those problems, maybe there is an answer to that. I agree that we have to keep the food versus fuel balance in mind.

1076. Mrs Overend: I thought that was very interesting. When plans are submitted for schemes such as anaerobic digestion, people are very set against them. Surely, because you are linked with government, your research could be fed back for its use. Will you work towards Government Departments using more renewables, using the results of your research to find good ways of using renewables and try to change the public's perception and convince them that renewables are a good way to go and that anaerobic digestion systems, etc, are acceptable?

1077. Professor S Kennedy: That is true. We give our data to DARD, which is very interested in using it for policy development. As well as that, we have a considerable number of visitors to the renewable energy centre and the anaerobic digester. There is no smell or nuisance from it; it is a very clean technology.

1078. Mrs Overend: I appreciate that you are talking to DARD, but it is really important to talk to the other Departments and educate them about what you are doing. Everybody can say, "There are the farmers, at it again" —

1079. Mr Frew: Do you mean the DOE?

1080. Mrs Overend: Every Department. Departments could have a link with the agriculture sector to create energy. The emphasis needs to be on getting that information out to all Departments.

1081. Professor S Kennedy: I agree; there is probably more that we could do along those lines.

1082. Mrs Overend: Thank you very much.

1083. The Chairperson: Mrs Overend makes a very good point: this is something for the Government to take on board, not simply one Department. I suppose that is a self-evident proposition.

1084. There was a point Mr Ferguson raised about centres of competence. What does that mean? Those are not established yet, are they?

1085. Mr Ferguson: They are in the process of being established. Invest NI, after looking at other regions in Europe, has identified that as a model for bringing together industry and companies, large and small, to work together in specific areas. The basic model is that Invest NI would provide a substantial amount of funding over a fairly substantial period of up to five years for the centres to carry out early-stage R&D. The model is that the companies get together, work together and identify the research that they want to carry out, so it is very much industry led.

1086. AFBI, Queen's and the University of Ulster worked together in the early stages with the companies to bring them together to get a centre formed on agrifood. We are working very closely with the QUESTOR Centre at Queen's and with the University of Ulster to do the same thing in renewable energies. Essentially, there are bodies of companies that are working with Invest NI to get those centres up and running. They are at the stage where they are preparing business cases and plans for Invest NI to consider and, hopefully, approve for funding.

1087. The Chairperson: You talked about attracting or securing in the region of £14 million per annum, outside DARD grant-in-aid. Are those moneys raised through commercial work with private companies?

1088. Professor S Kennedy: It is done through a range of work, essentially commercial work for private companies. There is also some government funding, and we are including our European funding. It is all our income outside the set grant-in-aid.

1089. The Chairperson: I am just trying to figure out how much is coming from the pure private sector as opposed to any other government or semi-government organisations.

1090. Professor S Kennedy: Probably about £4 million.

1091. The Chairperson: The rest is made up of European funding and some indirect government funding?

1092. Professor S Kennedy: Yes, and we have a royalty stream, which I referred to earlier, that comes from private companies. That is about £4 million.

1093. The Chairperson: Is that in addition to the £4 million that you identified?

1094. Professor S Kennedy: It is in addition to the commercial contracts that we carry out for commercial companies.

1095. The Chairperson: Are the royalties included in that £14 million?

1096. Professor S Kennedy: They are.

1097. The Chairperson: OK. I think that that is everything. Thank you very much. It was a very interesting and very useful presentation and discussion.

1098. Professor S Kennedy: Thank you very much.

1099. The Chairperson: Thank you for coming. If there are any further questions, may we write to you?

1100. Professor S Kennedy: Certainly. If there is any more information that you would like, please contact us.

1101. The Chairperson: Thank you very much.

22 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Daithí McKay (Deputy Chairperson)
Mr Gordon Dunne
Mr Paul Frew
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Mr Graeme Hutchinson
Mr Ciaran McGarrity
Mr Bernard McKeown

 

Department of Enterprise, Trade and Investment

1102. The Chairperson: I welcome Mr Graeme Hutchinson, head of the Department's economic policy division; Mr Ciaran McGarrity, the principal officer in the innovation policy unit; and Mr Bernard McKeown, the principal officer of the foresight and horizon scanning unit. You can explain to me what that means later on.

1103. Thank you very much for coming along. We are disappointed that we did not get your written documentation in a timely fashion; we received it only yesterday. A number of Committee members have commented on the lateness of the document. I emphasise again to the Department the need for the timely production of documentation. It is simply not acceptable. This matter was raised at the Chairpersons' Liaison Group, and there is a general discontent and a feeling among Chairpersons, who reflect the views of the Committees, that this is not acceptable. I would like you to convey that to the Department.

1104. Nonetheless, we have received the document, so I invite you to make an opening statement, after which we will ask questions.

1105. Mr Graeme Hutchinson (Department of Enterprise, Trade and Investment): We are delighted to be here to participate in what we consider a very important inquiry for the Department and, indeed, for the economy as a whole. I apologise for the lateness of the evidence to the Committee. I will go through some of the material that we cover in our written evidence, if that would be helpful.

1106. The Chairperson: Thank you very much, Mr Hutchinson.

1107. Mr Hutchinson: We welcome the inquiry for two reasons. First, innovation and R&D, as it is in the economic strategy, is our top priority to drive growth at the regional level. Any material that helps to progress our activities in innovation and R&D can only help. Secondly, we welcome the timing of the inquiry. The economic strategy highlights the fact that we are involved in producing an innovation strategy in 2012 as the successor to the regional innovation action plan, which the Committee considered last year and, indeed, broadly endorsed.

1108. As part of my opening remarks, I will briefly focus on the content of the inquiry on innovation and R&D and what the Department has been doing to date on prioritising action on that, and then I will give you a flavour of the innovation strategy work that we are undertaking in 2012.

1109. The publication of the economic strategy last week was an important milestone for the Executive. It marked the end of the work that began with the independent review of economic policy that Minister Foster launched, and which was reported on in September 2009. Given the heavy emphasis that the Barnett review placed on innovation and R&D, it is worth pausing to say that the Department has learned lessons from the Barnett review recommendations, such as the need to prioritise exports and value-added foreign direct investment (FDI) at the regional level.

1110. One of the key recommendations in the Barnett review was that R&D and innovation should be considered the most important long-term driver of regional economic growth. That is why it is cited as our top driver in the economic strategy. The emphasis on flexibility with Invest NI was a key issue in the Barnett review, and we have raised delegated limits so that Invest now has more autonomy to operate in innovation and R&D. The delegated limits for innovation and R&D were £2 million and are now £6 million. That gives Invest NI more flexibility and freedom to operate and to support innovation and R&D.

1111. The two priorities of the framework for growth, which Minister Foster launched in January last year, are rebalancing the economy over the longer term and rebuilding it in the short to medium term, given the impact of the recession on the labour market. That was very much informed by the independent review of economic policy (IREP). Under rebalancing, we have five priorities, and the first, intentionally, is to stimulate innovation, R&D and creativity. It is top of the stack, and, for a regional economy, it is imperative that that is recognised as the top driver for growth. Obviously, that must be supported by the other priorities, not least improving the relevance and use of skills to support that R&D agenda.

1112. In the framework document that was launched last year, we highlighted the fact that, over the previous Programme for Government period, spend on economic development had far outstripped overall growth, certainly in respect of current expenditure. Between 2007 and 2010, spending on economic development increased by 30%, compared with an increase in overall expenditure by the Executive of just shy of 13%. One of the key points in that document was that the biggest increase in the priorities was in stimulating innovation, R&D and creativity. Over that 2007 to 2010 period, that increased by 80%, so, as we move to populate an innovation strategy, we are not starting from scratch. Over the previous Programme for Government period, there was significant growth in spend on innovation and R&D, but we live in a competitive world, and other UK regions and global competitors are equally carrying out the same prioritisation and investment.

1113. That framework was then embedded into the economic strategy. As members will know, it is included in section 4 of the strategy, which was launched last week. The strategy includes an evidence pack, which was launched on the strategy's website. I trust that it articulated our recent success in innovation and R&D, including the largest increase in total R&D spend since 2008, a 40% increase between 2008 and 2009, and a further 8% between 2009 and 2010. That reflects some of the progress that has been made in that area, but we recognise that much more needs to be done. The UK in itself may not be a good comparator. As our evidence pack highlights, its spend relative to the overall economy's output is much less, compared with other countries such as Sweden, Finland and Israel.

1114. On the matter of firms that are engaged in innovation, we have one or two that the statistics classify as "innovative active", but it is only one or two. Our UK competitors and more global competitors have much in excess of that.

1115. On the strategy's priorities for innovation and R&D, the Department has led on the MATRIX work, from which we have identified the priority areas of telecoms and ICT; life and health sciences; agrifood; advanced materials; and advanced engineering. Those are our priority sectors. That is not to exclude other sectors, but those are identified by business as the areas that are really lifting the big burdens in exports and R&D. Companies that are active in those areas account for over three quarters of the spend on R&D already in Northern Ireland, so clearly there is a lot that we can do to accelerate and make progress in those areas. That makes the obvious and important point that R&D and innovation is not an end in itself, but is about encouraging companies to export. For them to go into the global markets, they must be more innovative and R&D intensive.

1116. The Committee will have gone through the strategy in detail. The key highlights in the area of innovation and R&D include supporting £300 million of investment in R&D, with at least 20% — a fifth — coming from small and medium-sized enterprises (SMEs). Another is for 500 businesses to undertake R&D for the first time. Having gone through your evidence about the importance of cradle-to-grave support for companies engaging in R&D, we are very much seized of that. Obviously, it is not only a DETI strategy but an Executive strategy, so it includes actions on agrifood, the creative industries and other areas, all to support the overarching objective of the strategy to promote 25,000 jobs and to increase manufacturing exports by 20%. It is also worth remembering that the Department is involved with DFP and OFMDFM in rebalancing the economy with the UK and the Treasury. We believe that corporation tax will have a material impact on innovation and R&D, stimulating growth in the business base with value-added businesses coming in and strengthening supply chains with local companies.

1117. The economic strategy identifies the sectors that we might be able to increase more significantly with access to that policy lever. Those areas include technical and R&D centres, fund management, private equity within financial services and within life and health sciences. You have already received evidence from Almac and others in the bioscience and pharma sectors, but we think we can scale and grow those areas, with access to a lever that attracts companies not for cost, but for profit. Going forward, R&D and innovation is about improving the profitability of companies.

1118. As I said, we also welcome the Committee's inquiry on the grounds of its timing. This year, I have lead responsibility for producing the innovation strategy that is signalled in the economic strategy. We have recruited Mike Kitson from the University of Cambridge. He was very helpful in building our evidence base for the economic strategy. We have brought him in to help frame the key priorities as far as the innovation strategy is concerned. I will be very happy to come back to the Committee when that strategy is in sharper focus. However, some of the key areas that we are looking at include the need for greater collaboration. You will have heard before in evidence from the universities about the Triple Helix — the linkage between business, academia and government — and how best that can be done. We already have programmes in that area in respect of innovation vouchers and knowledge transfer partnerships, but the economic and innovation strategies have highlighted the need to explore with the science park how it can evolve into a more open innovation centre. I know that you have heard evidence from the science park, but that is a key priority, we believe, in strengthening the collaboration between those actors in innovation and R&D.

1119. Access to finance will be a critical issue. That is not to say that we should divorce it from Invest NI's wider access to capital strategy. It has interventions, and I am happy to speak at more length on that later in respect of debt finance and equity finance. It is about giving help to companies that are finding it difficult to access finance. That will more likely be the case in innovation and R&D than in other support packages. Therefore, Invest NI's access to capital is over £100 million, which is levered through public and private sources. It is about matching that with what we will do under innovation and R&D.

1120. In respect of the concept of internationalisation of R&D and innovation, it is about reaching out to our global competitors to work in partnership with them. Framework programme 7 has been a very big issue for the Committee, and we are seized of that. Ciaran is leading on the review of the support structures that we have had to support and maximise drawdown on the framework. We will be able to speak at length on the more specific things that we have already actioned about having people to co-ordinate and bring together the key players to maximise drawdown. Therefore, that will be a key priority.

1121. With regard to prioritisation, as you will know, with the emphasis on smart specialisation, Horizon 2020 states that there are certain areas that will be able to secure support. That is how we have sought to maximise that alignment between our priority sectors in the economic and innovation strategies with what we will have, going forward, in maximising drawdown.

1122. My final point is about leadership. We welcome the Committee's emphasis on that area, because it is a key top driver of growth. The economic strategy suggests and highlights the potential of having an innovation council that would be not only Government led, but harnessed at a high level with universities and businesses to drive forward growth.

1123. We have carried out an extensive review of best practice globally, including Finland, Singapore, and down to areas such as Estonia and the ROI. They have all been prioritising at that high level the tripartite arrangements between business, academia and government. We will see that and have some actions as part of that in our innovation strategy. Needless to say, we will have targets as part of that innovation strategy, and we will seek to balance the ambitious nature of those against a degree of realism as to where we are coming from in trying to grow the knowledge-based economy in Northern Ireland.

1124. Chair, that is probably enough from me in respect of my opening remarks. I have given you a flavour of our submission, and I reiterate our apologies for the lateness of the submission to the inquiry.

1125. The Chairperson: Thank you very much, Mr Hutchinson. I think one of the most interesting comments during the previous session with the Agri-Food and Biosciences Institute (AFBI) was made by Professor Davis, who said that there was a lack of critical mass in R&D in Northern Ireland. He felt that some of the barriers to increasing R&D were structural or cultural. I am not sure whether he is right, but I suspect he is. How do you view it? There seems to be a problem in that, outside of a few major companies, we cannot get a spread of R&D across a wider range of companies in different sectors.

1126. Mr Hutchinson: I think that there is a systemic problem within the business base. We talk about a small or medium-sized enterprise based economy, but it is more micro-based, with companies that employ fewer than 10 people. To them, innovation and R&D must be considered a cost; they do not really recognise that, although it might initially be a cost, it brings long-term benefits. We have referenced some points in section 2 of the economic strategy on those long-standing structural issues; not just about the preponderance of small-company economy, but the lack of large companies. That goes back to my earlier point about corporation tax. What policy lever could we access that would attract large companies to locate here, not for cost reasons, but to access the skills base? We believe that corporation tax needs to be seen in the context of your inquiry on innovation and R&D. It is about large companies setting up and the evidence that we have from ROI about the spillover effect of knowledge.

1127. The Chairperson: If I could usefully stop you there, you are going back really to the Barnett review, which is the basic approach to plugging that productivity gap, giving Invest Northern Ireland more flexibility, putting emphasis on exports in respect of industry and business, and attracting high-value jobs. I think what you are really saying — I do not want to put words into your mouth — is that the microbusiness base of much of our private sector is really not a sufficient basis for developing R&D to the level that we should have.

1128. Mr Hutchinson: There are actions in the Programme for Government and the economic strategy about having 20% of R&D coming from SMEs, but to reach our overarching goal of converging with living standards in other competitive countries on the basis solely of investing in micro-based companies in R&D, we do not think that would be sufficient.

1129. The Chairperson: That is unrealistic.

1130. Mr Hutchinson: It is. It is necessary to continue to invest in those companies and to skill them so that they see and are seized of the need and opportunities in innovation and R&D, but it is not sufficient, certainly not in the context of converging with living standards elsewhere.

1131. Mr Ciaran McGarrity (Department of Enterprise, Trade and Investment): The key challenge in dealing with microbusinesses, as Graeme was outlining, is to get more companies to be innovative. R&D is a subset of innovation. Innovation drives productivity; the evidence is clear from the UK and other parts of the world. The National Endowment for Science, Technology and the Arts (NESTA) estimates that 18% of innovation activity is R&D.R&D is not for everybody, although it is a key driver of exports. If we can get more microbusinesses to be innovative through skills, leadership and management, that is one way to make progress. We must look at the broader concept of innovation. Then, when companies, through MATRIX and other vehicles, see where opportunities are in the future, we can encourage innovative companies to move into those sectors and markets. Through initiatives such as Invest NI and other delivery bodies, we can encourage greater collaboration between the knowledge base in academia, and those companies. However, companies need to be innovative. Graeme has already outlined our level of innovative capacity. We need to move up that scale. That is one of the targets that we have set.

1132. The Chairperson: I do not want to be pedantic about it, but there is a difference between innovation and research and development.

1133. Mr McGarrity: Absolutely. Innovation is about change. It is about adding value from a new product, process or system. R&D can be used to deliver that. So, too, can skills, design and creativity.

1134. Mr Hutchinson: It is worth emphasising, Chair, that our support packages through Invest NI differ depending on what the company needs. Therefore, R&D will receive different types of support, such as early-stage research and development, through to wider capability advice from innovation advisers. That is an important point to stress. Yes; they are different, so, in recognising that, our support packages also need to be different.

1135. The Chairperson: You referred to the total expenditure on research and development in Northern Ireland in 2010. It was £521·4 million, which was an increase of £36·6 million, or 8%, on the 2009 figure. My understanding is that the largest chunk of that comes from the top companies here. That reinforces the point that you have been making. I suppose that, if we really want to see a significant increase in actual research and development, the only solution, going back to what you said originally, is to attract high-quality companies to Northern Ireland.

1136. Mr Hutchinson: Yes, and aligning them to our skills. The danger is in attracting value-added FDI that sits in splendid isolation from other companies in the local business space. The lesson that we learned from other countries is that you must align your pitch for FDI to sectors where we already have strengths, albeit in small companies that are active in those sectors. Then, you seek to ensure that there are supply chain linkages, particularly if they are in manufacturing. If they are in tradable services, we have other forms that can link them to large companies. Evidence shows that that is the way to ensure the biggest impact on productivity and export performance.

1137. The Chairperson: That is the five markets that have been identified under MATRIX?

1138. Mr Hutchinson: Yes. Again, the emphasis is that they are defined by business. It is not government saying that those are the areas; it is business. We have worked with business through that MATRIX work, which Bernard was leading. You referred to his rather elongated title earlier, Chair. It really asks whether they will be the sectors for ever and a day, and the answer is no. We need to keep refreshing, and that is where foresight and horizon scanning come in. As I said earlier, those areas already account for three quarters of our R&D and export performance. MATRIX has already started to look at the green economy and sustainable energy to see what global market opportunities exist in that sector for local businesses.

1139. The Chairperson: I have one final point on European funding. Our drawdown under framework programme 7 does not seem to have been very successful. I know that you are doing work on Horizon 2020. Are you confident that you can increase the drawdown? I suppose that it depends on an awful lot of factors, including the responsiveness of the European Commission to reform the Horizon 2020 funding processes. How do you view it at the moment? Are you optimistic or pessimistic about change?

1140. Mr Hutchinson: For my team, I always try to retain a positive and optimistic outlook on these things.

1141. The Chairperson: Just like myself. That is why I am in politics. [Laughter.]

1142. Mr Hutchinson: I am not sure whether I should rejoin by saying that that is similar in the Civil Service. [Laughter.] The key issue is that the building blocks are there to ensure that we maximise a greater level of drawdown than we have to date. There is work with the Horizon 2020 co-ordinator and the strategy to establish thematic leads under those priority areas. We now have people in Brussels through Invest NI and the Barroso task force working in those areas on a two-way level: to the Commission, to emphasise that we are open to maximise or increase our drawdown; and also locally through Invest NI, with executives working with companies that are already in receipt of R&D and are more likely to make applications to framework 7.

1143. We certainly have actions in place to ensure improved and maximised drawdown. However, it goes back to the challenges of an SME-based economy. It is a costly and elongated exercise for many companies to engage with framework 7. The challenges are recognised.

1144. Mr McGarrity: Can we do better? Yes.

1145. The Chairperson: That is the question, I suppose.

1146. Mr McGarrity: Yes, absolutely, but, as Graeme outlined, we recognise that. That is why we went through the process and the Committee saw the conclusions of the cross-sectoral group. It was not government saying this, but business, academia and government working together on the opportunities that do exist and the actions that we need to take to improve our participation. However, government does not draw down on the framework — we have to encourage, support and cajole.

1147. We can improve. However, going back to the point that we made at the start, R&D is relevant or applicable to only a number of companies here. It is about the broader concept of innovation. Indeed, Horizon 2020 goes beyond R&D, in recognition of that point. There is recognition that we can improve, but in the context of growth in the wider economy, we can also take other actions closer to home. We should not lose sight of that.

1148. Mr McKay: One respondent raised the issue of increasing funding drawdown from Europe, and recognised that Invest NI is very supportive. However, it is completely different from Enterprise Ireland, which is much more supportive and advanced in that area. Is that something we could look at? Is there co-operation with Enterprise Ireland on this or opportunities there to up our game?

1149. Mr Hutchinson: The challenge is that it is a different economy in the ROI. It has more academic institutions and more value-added companies, given the policy lever it has had for many years of low corporation tax. We have had discussions with them and they themselves recognise the challenges that even they have in maximising drawdown. Comparing them with where we are at the moment, however, is slightly unfair because of the nature of our business base here and the fact that, traditionally, with academia, we are talking about two higher education establishments in the North.

1150. We certainly continue through Invest at a policy level to work with not only Enterprise Ireland and others, but we have meetings with the Technology Strategy Board in GB because this is a systemic problem across all countries.

1151. Mr McKay: We know that Bombardier or Shorts have linkages with the University of Galway. Universities across the island are already involved in R&D, so you need to look at where that is available, as well as across the water.

1152. Mr Hutchinson: We consider innovation vouchers a very effective mechanism on the innovation side. There is scope to access providers who can work and collaborate through innovation vouchers on a North/South basis. We recognise that. I suppose my only point is with regard to the Chair's point about how ambitious we can be, going forward. You may consider this a defensive point, but the NI business base has not changed materially. It is still micro-based and many companies in many sectors consider R&D to be something that they have not embraced before, so it is a matter of overcoming that challenge.

1153. Mr McKay: Some of the respondents that we have already heard from have criticised not only the culture in the business community but the culture across the public sector. There is responsibility for R&D in OFMDFM, and respondents have raised the issue of the Public Accounts Committee (PAC), and so on. How is the Department looking at and raising that issue cross-departmentally to try to address it? I recognise what you said about bringing in Mike Kitson from the University of Cambridge. However, historically, government has not used local universities as much as they could; it has steered more towards using consultants than universities. Can we change that, and are we changing that?

1154. Mr Hutchinson: On your second point about Mike Kitson from the University of Cambridge and other academics, in our research programme we have been more academic focused than consultancy based. That is by dint of the fact that the output is and has been more value added.

1155. On your previous point about what we are doing, the Department set up a steering group to review the support structures that we have — I mentioned this in my opening remarks — for maximising drawdown. The steering group was cross-departmental and also included members of the CBI and the science park. It was set up with a view to saying that things are clearly not working as well as they should, and asking what we need to improve.

1156. One of the key things that came out in that review, which Ciaran led, is the need to have someone to co-ordinate across businesses and academia the potential for companies and academia in framework programmes. We will appoint a person shortly to fulfil that role. As part of that exercise, we also saw the Commission place an emphasis — in the context of Horizon 2020 and, to a lesser extent, on framework 7 — on smart specialisation. Earlier this year, someone was appointed from within the Department specifically to work on smart specialisation. They will develop that strategy, which will be part and parcel of the programme. They will identify the key areas that we will prioritise and how we ensure that there are greater linkages between the different people to support and maximise drawdown. Have you any points to add, Ciaran?

1157. Mr McGarrity: On the comparative analysis, the Republic of Ireland is a member state of the EU. That is why its regional contact points in the network, for example Enterprise Ireland, have direct access to Brussels. We are a region of a member state, and the UK has similar support network of contact points. So, in that sense, we are not comparing like with like. The point is that, in moving forward, we can improve the co-ordination across government, as Graeme outlined. For example, we now have DHSSPS, DOE and DARD taking a more proactive approach to the whole concept of recognising the framework. That is because constituents and stakeholders of theirs will or could be key participants in the framework programme. That is starting to move forward, and the Committee has seen the recommendations that emerged from that framework group.

1158. To reiterate what Graeme said, DETI's commitment includes putting resources in place now to bring all of that together to identify where additional resources are, such as thematic leads or advice on how we bring universities and business closer together in the framework. Universities are the key driver in this.

1159. Mr McKay: Chair, I have a quick point about an issue that we raised before this session. This is not the first time that the Committee has had papers arrive late. I think all members expressed their disappointment at that, and we certainly accept your apology. What was the reason for that lateness?

1160. Mr Hutchinson: We have had a really busy period because of work on the economic strategy, corporation tax and regional aid issues. I can only reiterate my personal apology for getting the evidence to you at such late notice. I will take back and reflect to the relevant people that you have indicated that this is a wider issue.

1161. Mr McKay: My concern is that the Department and you, as civil servants, also deal with businesses and FDI opportunities. If this is happening not only to us but to other parties that you deal with, that is a serious concern. The fact is that this is happening across Departments and the Assembly, and it is simply not good enough at this level of governance.

1162. Mr Frew: Gentlemen, thank you for your presentation and your answers so far. I want to explore an area that came up every time we received a presentation during this inquiry. That is the need to have a change of attitude to the tolerance of risk. I had 20 years in the private sector, and I also declare an interest as a former member of the PAC. I understand that everyone on that Committee has a job to do, and I took it as seriously as anybody else, if not more so. We have a job to do in scrutinising how we do things, our performance and the decisions that we take. However, sometimes, as I sat on that Committee, I would have loved an official from a Department or a government body to have said, "You know something, we took a risk, and this time it did not work out." I wanted to hear them being that bullish. As a government, we have to take risks. In the private sector, those businesses that do not take risks every day are the businesses that do not grow and the businesses that die. If we want our economy to grow in the way that we say we do, we have look more like and be more like the private sector. If the witnesses to this inquiry have not made outright criticisms, they have acknowledged that it needs to change. What would you say to that? How would you counter it?

1163. Mr Hutchinson: Having gone through the evidence, I know that the science park and other contributors were very clear in articulating their view of the need to be more tolerant to risk. As a civil servant, the obvious point to make is that, although you cannot de-risk projects, you can put mechanisms in place to manage that risk. That is a point that IREP, or the Barnett review, made. I was secretary to the panel that carried out the review, and it was clear on the need for Invest NI — it is, as the panel put it, the "tip-of-the-spear" of the support from government and the Executive — to have a mechanism to support more projects, and especially innovation and R&D projects that are traditionally riskier.

1164. Within the powers that we have, we have taken some steps towards that. For example, we have given Invest NI more autonomy, although it still has to operate within the usual green book mechanisms of approving and appraising projects. Another recommendation that IREP made was that we should look at how we evaluate and assess innovation and R&D projects. We did that, and that led to a change in Invest NI's appraisal mechanisms, not for the purposes of risk avoidance but to see how that risk can be managed and, more importantly, how we can capture the non-specific and wider benefits from innovation and R&D projects that will spill out from companies to the region and beyond.

1165. In summary, Paul, as far as we can, we have taken steps to address the issue. It is a wider issue than just saying that the Department needs to embrace DFP, the Audit Office and even the PAC, as you mentioned. MATRIX also highlighted that as an issue and recommended that we should have a portfolio approach to risk. That would mean that, as you said, some projects would fail; however, if we have a basket of projects that, overall, positively add value to the economy, those would get the green tick.

1166. Mr Bernard McKeown (Department of Enterprise, Trade and Investment): I will to add to that and take a step back to the earlier point about encouraging smaller companies to engage in R&D and innovation. One of the priority areas that MATRIX identified was that of collaboration and encouraging companies, universities, FE colleges and other institutions to work together towards identified market opportunities. In itself, that brings an additional tier of concern about how risk is managed as there are so many partners involved. MATRIX continues to look at what it has described as a "first stop shop" to help to navigate through the various support mechanisms that are available. What is needed in such a context is not so much a single point of entry but someone who knows how to get through the various support programmes and the various advice and guidance on entering the services available. That would then allow the system to work more efficiently. It does not mean changing anything. It simply means putting a management structure in place that can oversee and overarch a number of sectors and a number of ways of doing things.

1167. I think that the need to further build on some of the MATRIX work has been touched on in what has been described as open innovation, which is encouraging more partners to work together in order to bring to the table a greater degree of capability and to build more critical mass into the process, as the Chairman said at the start. A number of support programmes in Invest NI could be agglomerated, because they would behave much more effectively together than they do apart. Likewise, there are other players outside government in universities, colleges and businesses' research bases where things could be done better together. Collaboration would help to deal with some of those risk issues as well.

1168. Mr Hutchinson: In summary, we recognise that it is an issue. If that point were made in Europe, via the report, we would certainly see that as helpful, because, as I said, we are only one part of the bigger picture. There is a building consensus, through MATRIX, IREP and the Committee, that this is a key issue. A knowledge-based economy will bring more risk than one not based on knowledge, because it requires investment in areas where future streams of revenue are uncertain. However, you are still dealing with government money, so there is a balance between putting in mechanisms to manage the risk and, at the same time, running the risk of a risk, as you indicated in your question.

1169. Mr Frew: I want to take that a stage further. What I say might be controversial, but I say it with a private sector hat on. Is there an acknowledgement that we are ready to invest in failure in order to gain knowledge? That is maybe hard to get your head round. Are we there yet? Do you see signs that we could move to that position? This is a societal thing; it is not just government. The media and everybody else will latch onto something that fails and beat it until it is black and blue. Then, they will leave it and move on to beat something else. However, out of that, there could be growth in indirect ways that nobody will ever foresee. Hindsight is a wonderful thing; it is great. I suppose that PAC has lumps of that, as does the Comptroller and Auditor General. Are we in a position where it would be acceptable to invest in failure in order to gain knowledge?

1170. Mr Hutchinson: I do not think that we are there at all. However, I think that we are in a better place than we were in 2008 following IREP, which was academic-driven, with some private sector people on the panel, such as John Wright, ex-chief executive of Northern Bank. We are certainly giving that message very clearly. As I said earlier, that led to Invest NI having increased autonomy and relooking at its appraisal mechanisms. Some changes have been made. However, I do not think that we could have gone as far as you indicated in your remarks, because we are still custodians of public money and need to make sure that we abide by all the rigours that are there for good reason, in respect of governance and ensuring spend is put in the right place at the right time.

1171. The Chairperson: Arising out of what Mr McKeown said to Mr Frew in relation to a one-stop shop, I take it that you mean that in respect of assisting people who are trying to access research funding either from Europe or from other bodies, but principally Europe?

1172. Mr McKeown: Not principally Europe; by whatever means are available. It is certainly an area that we have looked at since the MATRIX report identified it. We conducted a series of mapping exercises to identify the sorts of innovation and R&D support that are available across the region. There are many, and many are complementary. The challenge that we are looking at in the next step of that is how we put in place a system of management that makes it seamless to tie those support programmes together and put in place a team or series of individuals who are capable of understanding the full plethora of what is available, not just — it is important to say — what is available from government and from public funds but what businesses bring to the table. It is not always funding that is the issue. Sometimes it is advice, knowledge, mentoring, association with other businesses and working into supply chains. Without wishing to labour the jargon, it is touching on an open innovation model, in which companies, academia, government and all the institutions that play a part in the system are working with one other. MATRIX identified that they could do that by working with business to identify main market opportunities, which touches on Graeme's point about smart specialisation, identifying what the region does particularly well and where the future global markets are going to be, which we know we will have the capability to move towards. That kind of model is being looked at for collaborations.

1173. The Chairperson: You referred to a mapping exercise. I would be interested in that if it is available. Where would you put the one-stop shop? Would it be in the Department, in Invest Northern Ireland or outside any of those?

1174. Mr McKeown: It would need to be what Mike Kitson, in the work he has done for us to date, described as boundary spanning, which means that close association with one sector, one discipline and one organisation would probably not be where it should ideally be associated. It should have the ability to work on an equal footing and in an objective way with business, government and academia. I suspect that it would also require people with remarkable skills — they do exist — who can work in those three environments and be comfortable in them, and who also have the ability to identify market opportunities and understand the needs of the participants. I suppose that, if our thoughts are leading anywhere, they are leading towards seeing the science park as an ideal host.

1175. The Chairperson: That is interesting.

1176. Ms J McCann: Thanks very much for your presentation. It is very interesting listening to you answering some of the questions. You are basically saying that there are two levels. There are the smaller and medium-sized microbusinesses and innovation that is going to make them grow, create employment opportunities and market whatever product they are going to do, and then there is the wider knowledge-based skills base that you can sell either to those companies coming in or to the international market to export your expertise. I am just thinking about what you were saying there. I was going to ask a different question, but you were talking about the collaboration and that. Even in some of the smaller businesses, for instance, if it is a knowledge-based product they are going to market — I am looking at the life and health sciences, for instance, maybe some sort of research on drugs or that type of pharmaceutical small business — it is about trying to drawdown the funding for some of those smaller businesses. Maybe the expertise that they have could be exported to other markets if there was some more help through the like of Invest NI or whatever.

1177. It is not just about financial help all the time. It is about support and encouragement. I worked in funding for a while in the community sector, and sometimes you can fit an application into the funding criteria, as opposed to the other way around. I am just wondering about something like that one-stop shop that you talked about, for instance, so that people could go and access information on how they go about that. I agree with you that, for a lot of smaller businesses, it will be about innovation, not research and development. I think that you could work collaboratively with some of the regional colleges, for instance. We were up at the South Eastern Regional College (SERC), which seemed to work very well on renewable energies. There are some ways of looking at it. Could that be put in place? From what the other group was saying, there seems to be a lot of funding there from Europe, but it is just trying to draw it down. If that type of small group of people could be put somewhere where people could go and talk that all through, and, as I said, fit your application into what the criteria are, would that be an option?

1178. Mr Hutchinson: Absolutely. As part of the innovation strategy, these guys have been harping on about the issue of a map. MATRIX may have done it, but the Department leads on this innovation strategy. In some senses, the innovation and R&D market is chaotic, and there are so many actors and players involved in giving financial and non-financial support. So, at the very least, at one level, the innovation strategy can articulate externally what is needed by whom and where you go for that support. That will be done as part of that innovation strategy. Secondly, as Bernard has indicated, one of the actions in the economic strategy is to explore open innovation with NISP, and Mike Kitson has been involved in giving companies advice to develop their capabilities. We certainly see that that could be a role that the science park could perform, because it is not necessarily about giving finance, as you said, Jennifer.

1179. Ms J McCann: You mentioned some of the emerging economies, such as Brazil, Russia, India and China. There is not a lot of knowledge about that, particularly among smaller businesses. Again, it is about showing people the way for the future, because it will not be the same old same old if we are to grow the economy in the way it needs to be grown, particularly if we are to create employment for people. We need to map out that role and path for people, and we need to look beyond at what the future will be.

1180. Mrs Overend: Thank you very much for your presentation. Some of my points have already been covered. We are talking about the barriers to R&D, and in your paper you did not include lack of awareness, information and understanding of opportunities. That is really what we have been talking about. That seems to be a major thing. I visited my local further education college and the InnoTech Centre in Cookstown, and the work that it is doing with very small businesses sounds absolutely fantastic. Those businesses get to know about that through word of mouth. I do not know how that is being promoted. They just find out from somebody else who was successful. We need to build on that. We also need to keep contact with those companies and further develop them. You talked earlier about networks, and it is very important to continue contact with those.

1181. Mr Hutchinson: We talk about the triple helix; it is about academia, business and government working together. Given the make-up of companies in NI, they may be, and traditionally have been, more likely to link to the colleges but not necessarily to HE. It is not either/or; it is both. As you say, rightly, it is about trying to articulate what is happening and what more could happen to facilitate that collaboration. Every road seems to lead back to improving knowledge of what is available and to collaborate to ensure that we are all — in government and outside of it, in academia — working to a shared objective, which we hope to articulate clearly in the innovation strategy.

1182. Mrs Overend: What they are doing should be collected by government because we need to concentrate on and build upon the skills. We need better communication.

1183. Mr Dunne: I welcome the panel. Thank you very much for your contribution; it has been very informative. We have had several sessions on this, and a lot of evidence has been gathered. We are all very aware that an awful lot of genuine facilitators are trying to do very much the same job. I know that you have touched on that, but I have written a note saying that something needs to be done to, perhaps, bring them all together and to make sure that there is not duplication and that industry and commerce are fully aware of what is going on and what is available. We have all been impressed by what we have been shown and advised on, and new members especially are very much impressed by the commitment to do something about trying to move the whole economy forward.

1184. Is there a risk that, with so many different players doing their own thing, no one is looking at the overall strategy and how it is delivered?

1185. You mentioned innovation, and you said that very few firms are innovation active. Graeme, will you elaborate a bit more on that? I think that you said that one or two of the big players were at that stage. The other points have been well covered. What strikes us is the poor pick-up by firms. We were at a large pharmaceutical company; you will know which one I am talking about from the evidence. We were surprised that it was not accessing European funding, and we wondered why it never bothered or never got round to it. We all have our own feelings. It has other sources of funding because of the work that it does for other players. I felt that it put the onus back on us a bit to try to put more pressure on Invest NI to take more risks, as my colleague talked about earlier. There is a belief that Invest NI will go so far but not far enough in relation to getting involved in the larger areas of risk and trying to move the whole thing forward.

1186. We have heard an awful lot of evidence about SMEs and how difficult it is for them. They are busy doing the day job, which they have to do to succeed. They do not want to get diverted and take risks that they feel are not worth taking. So many companies are unwilling to get involved because there is a risk of a transfer of knowledge. If they work on design or innovation, there could be leakage. Those issues need to be addressed as well to give people assurances. I always remember the issue of trying to get partners in Europe for SMEs. That is most difficult for small firms throughout Northern Ireland. It seems to be very difficult, and we certainly received evidence that it was.

1187. My last point is about Horizon 2020. What can we all do to make sure that it is smarter and more accessible to all the various players? Sorry about that; I have rambled on, but there were a number of points.

1188. Mr Hutchinson: I will respond in no particular order. So many individuals and organisations are involved in stimulating innovation, R&D and creativity, as the economic strategy has outlined that, if we do not have an innovation strategy that articulates who does what and when, and how companies can access support and communicate what support, financial and otherwise, is out there, that risk would very much materialise.

1189. If SMEs or any companies collaborate with one another in sectors in which they could potentially be competitors, especially in innovation and R&D, in which intellectual property (IP) becomes an issue, there is always a risk with open innovation concepts about how you manage. Innovation centres are being opened in Finland, Sweden and Israel. Any knowledge-based economy will have them to a large degree. The risks need to be managed rather than sidestepped or avoided. They can be managed. With MATRIX, we have seen companies coming together and collaborating when they see the global market opportunities that are presented to them. They overcome the concern or risk that they have with each other when they see the potential for growth through exports and the global engagements.

1190. On Horizon 2020, we have actions in place to ensure that we are in a better place to maximise drawdown. The EU Commissioner for R&D has been over, and Minister Foster really stressed the need to simplify that procedure for SMEs in particular. We understand that she will be making a subsequent visit later this year, and those points will be made again to ensure, as best we can, that we can make it as easy as possible for SMEs to engage in the framework collectively to get drawdown of this programme for NI.

1191. Mr Dunne: There was a point about the larger companies not getting involved. Is there a risk that, rather than going for European funding or going after Invest NI, which is, perhaps, more accessible and more customer-focused —

1192. Mr Hutchinson: It is more local.

1193. Mr Dunne: That is right; it puts the onus back on us to make sure that Invest NI is as flexible as possible. I gathered that and thought that it was an issue.

1194. Mr Hutchinson: That is coming up in our discussions; it is certainly very much an issue with framework 7 funding.

1195. Mr McGarrity: There is a key point, and I made it at the start. We can put all the support that we can in place, but it is firms and universities that make the applications. It depends on what stage a firm is at in a project life cycle, as to whether it will go to framework. Framework 7 funding is not immediate cash flow. You have heard the evidence. There is a lot of time involved; there could be 18 months between submitting an application and seeing a drawdown of finance. For an SME, that is out, but a larger firm might not need it.

1196. There are many good examples of firms in Northern Ireland that invest in framework projects. It is about collaboration with partners throughout Europe and about new expertise and new knowledge. The firms you mentioned may not need it at that point in time. How do we get them to do it? It comes back to visibility and culture, which we mentioned at the start, and it comes back to collaboration. We need more Northern Ireland companies collaborating with firms outside Northern Ireland, whether that is through a framework programme or through separate trade agreements. It is about sharing knowledge and learning from experience. That is what we need to do. If the Committee's inquiry is going in the direction of looking at what can be done, it is about visibility and the need to lift our heads above the parapet and exploring ways to make new connections.

1197. I want to pick up on your point about how SMEs find partners. On a practical level, Invest NI runs the Enterprise Europe Network, which we will tell you more about next week. It exists specifically to help and support SMEs in finding partners across the European Union. The support is there; the issue is visibility. They work very hard at trying to engage with companies and in helping companies to identify potential partners. The partner might not be there, but it helps companies in trying to identify potential partners in academia and businesses across Europe. There is support; the issue is about getting companies in and wanting to access it and letting them see how to access it.

1198. The Chairperson: I think one of the points in relation to the company mentioned by Mr Dunne is, or was, the elongation of the application and the practical outcome with regard to the commercialisation of whatever was being produced. In addition to that, there was the subject area, because the European Union has certain subject areas, and I think it did not quite fit into the subject area.

1199. There are no further questions from members, but I would like to know your views on venture capital. We have heard that there is insufficient venture capital. It is does not feature very highly in what you have submitted to us, but I presume you will agree that there is a need for venture capital here, but there is not enough. Can anything be done about it? How important is it with regard to R&D?

1200. Mr Hutchinson: Venture capital is critical, as is, more widely, risk capital with equity investment. Through its access to capital strategy, Invest NI has the growth fund. It is debt financing for small projects. There is also the co-investment fund, which was recently launched. Minister Foster announced it a few weeks ago. That is about stimulating non-banking sources for access to finance for business expansion. It cannot be seen in isolation from innovation, R&D or Invest NI's support packages. Maybe it is an issue for us to ensure that we articulate that it is about innovation, R&D and creativity, alongside access to capital, which Invest NI is supporting through its various initiatives. Companies that might not be able to avail themselves of traditional sources of financing can go there, nonetheless. Obviously, it is a question of scale, and Invest NI can only do so much with the finances that it has and that it can lever through the private sector. However, we have the NISPO funds, the co-investment fund and the growth loan fund. In excess of £100 million is going, or at least potentially going, into the private sector for companies to avail themselves of in these areas.

1201. The Chairperson: In its submission, AFBI said that European funding was very difficult to find and that companies were not drawing down funds. However, they also mentioned the UK Technology Strategy Board, and the fact that there was not as big a take-up of whatever funding it might have available. Do you agree with that?

1202. Mr Hutchinson: We work through Invest NI with the Technology Strategy Board on initiatives and knowledge transfer. The chief executive of the Technology Strategy Board hopes to be here in April.

1203. The Chairperson: AFBI raised that issue, and, perhaps, you could ask him about that. There does not seem to be sufficient interest or enough successful applications from Northern Ireland firms. That is something that might be looked at. I understand the position about European funding, but this should be an easier route, and I am not sure why that situation exists.

1204. My final point is about the centres of competence. Are they up and running yet?

1205. Mr Hutchinson: We have an action in the comprehensive action plan to establish four competence centres in —

1206. The Chairperson: Yes, I noticed that. Is that a work in progress?

1207. Mr Hutchinson: Yes, it is a work in progress.

1208. The Chairperson: OK. Thank you very much. This has been a very useful conversation. If we have any further questions, we will write to you, and I am sure that you will give us a response.

29 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Paul Frew
Mr Paul Givan
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Dr Joanne Coyle
Ms Carol Keery

 

Invest NI

1209. The Chairperson: Briefing the Committee today are Carol Keery, director of innovation, research and technology at Invest Northern Ireland, and Dr Joanne Coyle of the collaborative R&D support service. I welcome you both here this morning; I am delighted that you could attend. We have received written material from you, with which we were very pleased. Would you like to make an opening statement, after which we can ask questions? Thank you very much.

1210. Ms Carol Keery (Invest NI): Thank you for the opportunity to come along today. As you have said, my name is Carol Keery, and I am director of innovation, research and technology at Invest NI. I am accompanied by my colleague Dr Joanne Coyle, who heads up the collaborative R&D support service. I know that we are coming to you at the end of a long list of providers of evidence.

1211. The Chairperson: Yes; we have kept the good wine for last.

1212. Ms Keery: That is exactly what I was going to say. If you will bear with us, I would like to present the evidence from Invest NI.

1213. I will start by outlining our remit. We operate as a non-departmental public body and as Northern Ireland's economic development agency. In effect, we are the operating arm of the Department of Enterprise, Trade and Investment (DETI). We provide comprehensive support for businesses by effectively delivering the government's economic development strategies, making the most efficient use of available resources and providing high-quality services and programmes, support and expert advice. Principally, we support businesses in the manufacturing and tradable services sector.

1214. In the context of the Northern Ireland Executive's Programme for Government and the associated economic strategy, our corporate plan sets out how we will contribute to the rebalancing and rebuilding of our local economy to increase the overall standard of living by driving up productivity growth and employment.

1215. A key objective of Invest NI is to promote enhanced levels of R&D as a source of new technologies, products and processes and as a key driver of productivity growth and, ultimately, economic growth. Through the range of interventions at our disposal, Invest NI is committed to driving market-led innovation in the Northern Ireland business base. We are also committed to increasing the scale, quality and speed of R&D from the initial concept through to full commercial application. To that end, we provide support from cradle to grave.

1216. A key indicator of R&D activity is business expenditure in R&D (BERD). I am afraid that we are, probably, heavily loaded with acronyms; hopefully you will bear with us. Despite recent record growth in levels of BERD in Northern Ireland, where it rose by 95% between 2005 and 2010 — in financial terms, that is from £176 million to £344 million in that period — the rationale for government intervention to incentivise R&D spend remains strong. That rationale is linked to the consistently small number of companies that do R&D — or, at least, those that recognise that they do R&D, as that is an issue — and the concentration of BERD in the 10 biggest-spending companies, which accounted for 59% of the total spend in 2010. In addition, externally owned companies accounted for 68% of the total BERD.

1217. Therefore, although there has been much to applaud, there remain a number of systemic weaknesses in the business base that would need to be addressed if we are to achieve the desired and necessary levels of economic growth. In recognition of R&D as a key driver of economic growth, Invest NI has allocated a growing proportion of its budget to incentivising R&D activity. In the period 2008-2011, which was our last corporate plan period, the budget that was available to support R&D alone increased from £19 million per annum to £46 million, which represented 28% of the total Invest NI budget.

1218. In the four years of the current corporate plan, which covers the period 2011-15, the R&D budget is projected to average £31 million per annum. Of that budget, around 80% will go directly to businesses with the remainder allocated to the research base in pursuit of higher levels of research, commercialisation and knowledge exchange. One of the main facilitators of that increased budget for R&D is its easy alignment to European regional development fund (ERDF) criteria. Currently, 80% of the annual budget that I hold is ERDF funded, making that a very efficient way of maximising the drawdown of EU structural funds into Northern Ireland. In total, Invest NI will draw down £245 million of ERDF money in the period from 2007 to 2013 to fund R&D support. Anyone who has experience of ERDF funds will know that that is not without its difficulties. ERDF, if I may say so, is a very unforgiving fund and one that can cause a number of burdens with regard to how it is managed.

1219. As a result of that increase in budget and subsequent increase in the number of projects that are supported, Northern Ireland experienced the second largest percentage increase of all UK regions in the total R&D spend in 2010. In 2010, BERD grew from 0·6% of GVA to 1·2%, placing Northern Ireland sixth of the 12 UK regions in relation to BERD, just below the UK average. That is a significant achievement but, nonetheless, there needs to be some realism about what we can achieve going forward. BERD will be required to at least double in quantum if Northern Ireland is to meet the European target of 3% GVA by 2020. That will be very challenging, given the systemic weaknesses in the economy and the business base, which I already alluded to. For all the stakeholders in the R&D ecosystem, but particularly for Invest Northern Ireland, there remains a significant challenge in mobilising individuals and firms, particularly small- and medium-sized enterprises (SMEs), to increase their capacity and capability to innovate either on their own or, more increasingly, through collaboration, by entering into collaborative research programmes that bring benefits to a wider spectrum of businesses in the economy.

1220. I alluded to the fact that 80% of the R&D budget goes directly to businesses through R&D grants. I believe that we have one of the most flexible R&D programmes in the UK. In 2008, Invest NI was one of the first economic development agencies to embrace the new EU R&D and innovation state aid guidelines. We were second only to the South. The Commission's guidelines sought to reinforce the importance that the Commission placed on incentivising R&D and innovation, and permitted the provision of enhanced levels of support for SMEs and higher risk R&D projects. Through that framework, Invest NI revised its support to maximise its flexibility through the introduction of a single grant: the grant for R&D. Previously, we had over five schemes. A key feature of the grant was the flexibility it brought in responding to the needs of businesses. Although the grant for R&D is now the main support mechanism, there remain a number of other support mechanisms to facilitate businesses getting into and progressing up the innovation escalator. The progression of businesses up the escalator is not necessarily linear, and businesses can enter at any point in their development. It is for that reason that we have to be very flexible in how we respond to the range of needs that businesses present. We cater for businesses with no history of undertaking R&D and those with sophisticated R&D functions such as Almac, which I know you heard from. We deal with the full range of R&D, from R&D in a bucket — in the food sector, in respect of how to mix the best sauce — right through to the development of the most sophisticated technology that is new to the world, particularly in the health and life sciences sector and the IT industry.

1221. I note that you specifically asked about competence centres during the previous session, when DETI presented to you, and you were advised that they are a work in progress. That is, in fact, the case. The competence centre programme is our latest initiative. It is designed to enhance levels of R&D and to provide collaborating businesses with the opportunity to agree and contract high-risk, long-term research that is currently outside their capability and capacity. The competence centres will be virtual large-scale entities that will require a period of transformational, long-term strategic investment by Invest NI to encourage greater and more efficient interaction between businesses, researchers and the public sector in pursuit of leading-edge R&D. We have five proposals under consideration, which are in the following sectors: agrifood; connected health; sustainable energy; advanced materials; and cloud computing.

1222. The availability of risk capital for innovating businesses was also raised at a previous session. Invest NI's access to capital strategy provides for a suite of equity funds that will provide a continuum of funding from £50,000 through to £2 million, all targeted at SMEs. The establishment of the funds is at various stages, and the total investment in them by Invest NI will be over £100 million. In addition to the financial support for businesses, we also provide a cadre of 16 specialist advisers, offering a wide range of advice, guidance and support in the area of innovation, on such matters as technical issues; product development; intellectual property; lean; design; and collaborative R&D. We work closely with businesses to make them aware of the support available and, if necessary, help them to complete application forms. The Northern Ireland business information portal also provides businesses with a valuable source of self-serve advice and guidance across a range of business areas. The site has over 52,000 visits monthly across a wide range of subject areas.

1223. Other issues raised in evidence have reinforced the need for greater connectivity in the local innovation arena and beyond. For our part, support programmes such as the proof of concept programme and the knowledge transfer partnership programme are targeted at connecting and facilitating a knowledge exchange between the research and the business base for commercial return.

1224. The innovation vouchers scheme has also provided a valuable mechanism to provide businesses with a first step in building a culture of knowledge transfer between the research base and small businesses. We also provide hands-on support for businesses and universities to access EU and national funds for R&D. One example is the Enterprise Europe Network, which I referred to in the briefing, so will not cover again.

1225. I am also aware of the growing interest stimulated by Barosso in the capacity of Northern Ireland to increase its drawdown of EU funding for R&D. In support of enhanced drawdown of framework funds, Invest NI has appointed two NI-based collaborative executives, who have been in post since late 2009. As well as responding to queries from Invest NI client companies, the wider business community, universities and other public bodies such as the PSNI, the team proactively targets companies currently in receipt of Invest NI funding for industrial R&D. Those clients would be expected to be the best and most capable of succeeding in applications for framework funds.

1226. More recently, Invest NI's collaborative R&D team, which Joanne heads up, introduced a mentoring scheme that seeks to provide funding to enable applicants to contract hands-on advice from framework programme (FP) 7 experts to overcome the costs and experience issue in developing suitably robust project applications.

1227. Invest NI advises Northern Ireland businesses on applications to the Technology Strategy Board's (TSB) collaborative R&D competition. The collaborative R&D team also hosts TSB events, which directly target NI businesses. The team has also increased awareness of Northern Ireland's capabilities by attending network events with the TSB, the UK-wide Enterprise Europe Network and the UK FP7 national contact points. Most recently, Invest NI was represented on the Department for Business, Innovation and Skills' Horizon 2020 steering group, with a view to ensuring that the views of Northern Ireland are considered in the development of the UK's proposals for the implementation of the Horizon 2020 programme.

1228. In April 2010, the focus of Invest NI on the framework programme was strengthened by the addition of an executive based in Brussels: Farha Brahmi. That executive has been developing relationships and relations with key individuals in EU institutions in order to support Northern Ireland R&D stakeholders and influence EU R&D policies, and is providing a valuable link for Invest NI into the Commission and its policies.

1229. That is a summary of the range of things that we do; we would be happy to take any questions.

1230. The Chairperson: Thank you very much for that comprehensive summary. How would you assess R&D in Northern Ireland at this moment in time? Is it good, bad or middling? Where would you put it?

1231. Ms Keery: If you were to look at the recent figures that I referred to and the growth, it is burgeoning. The difficulty is that there is a focus on R&D activity in too small a number of companies. Large companies account for the majority of spend and activity. That is not to say that that is a bad thing. In a review we did recently of R&D undertaken by large companies, it is clear that they are producing well in excess of the average rate of productivity gains as a result of that R&D. They are also paying well in excess of the median salaries for the people doing the R&D. So, there is a lot to be gained from the R&D activity that has been undertaken by large firms. However, we would seek to widen its focus.

1232. The Chairperson: That is a frank assessment. You are saying that research and development is concentrated too narrowly but productively within a range of companies that would, I suppose, be Barnett-compliant. In other words, if you take the Barnett report and were measuring them against what you want to achieve in Barnett, it is in those types of companies that you are getting higher-value jobs and a higher income level for workers.

1233. Ms Keery: Yes, and also very strong spillovers. There is evidence that they are becoming increasingly engaged, on a collaborative basis, with other businesses, so there is that potential as well.

1234. The Chairperson: The Committee is constantly saying that there should be opportunities for small and medium-sized enterprises (SMEs) to be involved in R&D. I am not so certain that that can be achieved, because I think that our businesses are too small for that. However, could they benefit from the application of some of the research and development and innovation? I would have thought that bigger businesses must attract smaller businesses, through procurement, supply and so on?

1235. Ms Keery: There is very strong evidence to suggest that a number of spillovers derive from large companies doing R&D and, as you said, those are in the supply chain and where collaboration and knowledge transfer takes place. Maybe I could take you back: R&D is still very much interpreted as involving white coats and labs. If you were to look at the range of activities that are happening in our business base, very strong seeds of innovation and R&D are taking place in the wider business base. About 78% of our support goes to what you would term SMEs, where there are a range of activities and some very exciting —

1236. The Chairperson: What do you mean when you say 70% of support?

1237. Ms Keery: The number of offers that we put out.

1238. The Chairperson: But not in R&D?

1239. Ms Keery: Yes, in R&D.

1240. The Chairperson: In R&D, 70% —

1241. Ms Keery: Yes; the number of offers. Now, not in value: 78% of the offers that we make are to SMEs.

1242. The Chairperson: So that is in terms of the overall quantum of offers being made, but the value of those would be disproportionately less.

1243. Ms Keery: That would be around 30% of the total amount going out. That is to be expected; they are doing smaller projects so it is a smaller amount.

1244. The Chairperson: Yes. You said that R&D is growing and you would not be satisfied with the present level of R&D, although it has improved to 1·2% of GVA. What is the aim of the Department — sorry, it is not the Department, but is an agency of the Department — what is the agency's aim for the percentage of R&D spend and over what period?

1245. Ms Keery: Until 2015, we have said that the target will remain at 1·2% of GVA. The reason for that is that GVA has been falling. Therefore, keeping it at that level is still providing us with a challenge.

1246. The Chairperson: So you are really standing still?

1247. Ms Keery: We are not, because —

1248. The Chairperson: You are holding your own.

1249. Ms Keery: We are holding our own, because GVA is falling. It is projected to stabilise around 2015, but that is within the context of the corporate plan. We have said that we will be doing well to stabilise around 1·2%.

1250. The Chairperson: I have a couple of other points. The Committee has been talking about R&D for quite some time, and there is a sense that there should be an organisation with overall responsibility for driving R&D. What would you say to that?

1251. Ms Keery: In driving R&D, it is very important that some central organisation has an overview of what is happening across the R&D arena.

1252. The Chairperson: Can I just stop you there? You accept that, but do you think that it should be inside or outside Invest Northern Ireland?

1253. Ms Keery: With regard to having an overview, I think that it would be difficult within Invest NI, because you have to have somebody who has a cross-cutting remit.

1254. The Chairperson: Yes, true.

1255. Ms Keery: Two things are back on the table as part of the economic strategy: the consideration of appointing a chief scientific officer — Northern Ireland is probably one of the few regions not to have such a post; and the suggestion that we should have an innovation council. In the past, Invest NI looked at VINNOVA in Sweden as a model for an innovation council. The strength of that council is that it is not within government but is aligned to it. It is at the heart of working alongside government.

1256. The Chairperson: Is that the Swedish model?

1257. Ms Keery: Yes. That positioning enables it to have a cross-government remit and a much stronger influence on government, because it is not perceived to come from any one perspective. We would, as we have in the past, value the appointment of a chief scientific officer as somebody who can lobby strongly on behalf of the research that needs to be done to maximise the strengths of the Northern Ireland research base, of which there are many. Such an officer could also identify where we should prioritise our research activities, and that is difficult to do unless you come from an overview position.

1258. The Chairperson: That is interesting. Do you have anything to add to that, Dr Coyle?

1259. Dr Joanne Coyle (Invest NI): We should look at other regions, such as the South of Ireland, which has policy direction from Forfás. It also has Science Foundation Ireland, but Enterprise Ireland tends to provide grant support to businesses directly for R&D and similar programmes. That is important, because you have a team of account managers and client executives who talk to businesses and understand their needs. R&D is a business need, but there can be different timescales. It may be that a business needs more skills and job support, with R&D planned for the short or long term, so you need an agency like Invest NI talking to business directly all the time to understand when the time will be right for the R&D project to be progressed. Invest NI will ask when the business is looking to raise its game with innovation, to lead it into exports. So, it is part of the cycle, in that we bring in companies through the foreign direct investment (FDI) route, and part of our encouragement to them is our package of support for R&D.

1260. Mr Agnew: You mentioned the level and importance of funding from Europe for R&D. We have the problem that, in the European context, some of our SMEs are micro-businesses and few businesses in Northern Ireland would be considered anything other than a small business. The more I hear about this, the more I think that there are two possible ways to go. It may be both rather than one or the other, I do not know, but we either try to get Europe to take account of the Northern Ireland context, or we try to get Northern Ireland businesses to understand the European context and collaborate, so that they can operate within that context and benefit from it. What direction are we taking? Are we doing both? What successes are we having?

1261. Dr Coyle: You are right: there can be many approaches to this. On one hand, we need Northern Ireland's businesses and stakeholders to understand how Europe works. Europe puts forward funding for projects to meet the aims of Europe and to benefit its citizens; it is not just to benefit a particular region. We need to understand what Europe's priority areas are. If we view Europe's guidance to be aligned with Northern Ireland, we need to get on board with its programmes. However, we also need to let Europe know about our particular situation, and we fed that back strongly when Europe launched its consultative Green Paper on Horizon 2020. As well as being heavily represented through the UK's Department for Business, Innovation and Skills, Northern Ireland put in its own paper directly from DETI, emphasising the micro-business economy here. That is recognised in Europe, and the need for simplification of the processes is recognised. It is simplification for the benefit of the participants rather than simplification for the benefit of the European Commission. We felt very strongly about that.

1262. We view the consultation on the Green Paper as a success from the European perspective, because the proposals for Horizon 2020 have something for everyone. In particular, there is an emphasis on innovation, and one of the pillars is about leadership and innovation. That will certainly bring more businesses in. The target set in FP7 of 15% participation by SMEs was to encourage that, and progress on that is monitored every six months. It has sat roughly at that level, and we have had feedback from our MEPs that the European Commissioner with responsibility for R&D is continually being told by MEPs that even 15% is too low and that we need more participation from SMEs and to take into account the needs of small businesses.

1263. That having been said, it would be irresponsible, from our point of view, to encourage microbusinesses into European projects when they are not ready, and that is why Invest NI has other schemes that might be more suitable for them in building their capability and capacity. We look at our view of an innovation escalator as an appropriate way of working with companies to build up their capabilities.

1264. A lot will come out of Horizon 2020, and we are keeping our ear to the ground. We are involved in a number of BIS working groups that are looking at the rules of participation. One issue that has been raised is the overhead rates, and that is being heavily debated. We are also working closely with our counterparts in the South of Ireland, because SMEs there have participated heavily in the programme, and there is a lot that we can learn from them.

1265. There are many approaches that we need to take. One of the things that I always emphasise is the need to get involved in networks. Northern Ireland, especially through our contact in Brussels, has been much more active in networks. Invest NI hosts the Enterprise Europe Network in Northern Ireland, and Northern Ireland has always performed very well in that network. In evaluations of the old IRC, we were one of the top performing regions in bringing in —

1266. Mr Agnew: What was the IRC?

1267. Dr Coyle: It was the Innovation Relay Centre. It was combined with the Business Relay Centre to form the Enterprise Europe Network. That has continued to be the case through the technology transfer agreements that we promote, and that is a very strong network that we are a very strong performer in. Similarly, that is the case with the European Regions Research and Innovation Network (ERRIN), which is a European-wide network. Farha Brahmi sits on the management board of that now and has some influence in directing our activities. One of the key activities has been in developing and getting involved in European innovation platforms (EIPs), which we see as a key way to be more active in Horizon 2020. We are working with our Connected Health colleagues on the active and healthy ageing platform, and we are preparing for green week in May and getting involved in an agriculture EIP as well. We are laying the foundations to be ready for Horizon 2020.

1268. Mr Dunne: Thank you very much, ladies, for the very informative presentation that you have made to us. We are impressed with your enthusiasm so far. We have had quite a few of these sessions and taken quite a lot of evidence. You have been talking about the reluctance of SMEs to get involved in drawing down funding through framework programme 7. Can firms go to you to look for funding rather than going down the European route, which is complex and difficult? We get that a bit from some organisations, which put the onus onto us. They say that Invest is not doing enough and is reluctant to take the risk. Is there a process? Obviously you have some sort of system in place whereby firms or organisations have to prove how they are going to manage risk before you will take the risk with funding.

1269. Ms Keery: I will start off on that, and maybe Joanne can pick up on the European funding aspect. As Joanne has mentioned, there are horses for courses, and European funding is not suitable for everybody. One of the key things that Invest NI strives to do is build the sophistication of businesses to undertake R&D. We have a range of schemes for the small businesses that actually introduce those businesses to R&D for the first time. We have a target of 500 businesses that are new to R&D, and we hand-hold those businesses in the initial stages.

1270. One of the key schemes that we operate is the innovation voucher scheme, which is a very small amount of money that is, very simply, given to businesses that potentially have a business need so that that business need can be met through research. That business need can be anything. I referred to R&D in a bucket, as such, but we deal with everything. I will give you an example. At the moment, we are working with a small business that is making ice cream. It wants to put bubblegum in the ice cream — it sounds disgusting, I know — so we are working with it to see what kind of coating could be put on the bubblegum so that it would not melt. It is a very simple idea, but it is very important for that business. We are trying to start with very small steps to get businesses to engage in product development and then to move up the innovation escalator.

1271. You referred to risk. The risk associated with supporting R&D products has always been an issue. Part of that issue is because the outcomes of R&D are not known. In many instances they are speculative. One of the things that we are very clear about is that an R&D project that does not finish or complete is not a failure. It can be a success, because part of the R&D process is to test concepts to see whether they work or not. If, at the end of the process, you find out that it is not a viable proposition and it does not proceed, that is actually a success. That does not necessarily sit easily with allocating public moneys, so we do have to make some sort of risk assessment as to whether a project will be successful. In the past we have struggled, because, in general, the outcomes of R&D are unknown. In providing a value-for-money statement we are now much more sophisticated in that we have a new economic efficiency model that allows us to quantify the outcomes of R&D much more comprehensively and attach some sort of figure or quantifiable return to R&D outcomes. Previously, we were unable to do that. That gives us almost a scoring mechanism that enables us to say whether one R&D project would, possibly, provide better value for money. We are still involved in supporting high-risk projects; that is why we support R&D. It is about managing and minimising that risk.

1272. Mr Dunne: Is there a lot that a firm or organisation has to do to justify getting the money initially? Are there a lot of hoops to go through to get it?

1273. Ms Keery: Recently, we introduced the Boosting Business through R&D scheme. We tried to streamline the application form. We have brought it down, as far as possible, to a tick-box process. I have to be honest; we still require information on the finances, the market opportunity and the costs of the input that will be needed to make the R&D project work. We will always require that. That is what enables us to assess whether the R&D project will provide value for public moneys.

1274. Dr Coyle: That is why we give companies assistance to develop their project plans. SMEs, in particular, can have some funding to help them. Our innovation advisors talk them through the process and help them to fill out the application form. We recognise that it is a challenge for them and we look at ways to try to help them through that process.

1275. FP7 is difficult for SMEs to get involved in, due to the long lead-in times. You are asking SMEs to start committing to a project which is not even officially launched, because you need to get them involved to find the partners before the launch. Often, we have heard anecdotally that if you wait until the call is announced, it is too late to be involved, because you have only six months to write your application. It takes many hours to prepare the application. There are sections that they need to ensure are covered well, and, as I said, they have to get into their heads that we are thinking of this in terms of a project that will appeal to Europe; it has to have an impact and benefit for European citizens and not just for themselves. That can be difficult.

1276. The challenge of collaboration can be difficult. When my team goes to talk to companies, the biggest thing it can do is listen to their needs. Often, we have a referral from a client executive who feels that the company might be ready to do a collaborative project. Similarly, they might have approached us after an event at which we have been promoting the opportunities that are there. My team members will go out and talk to them, one to one, and listen to the company's needs. Then they will look at the range of collaborative solutions that exist. FP7 is just one of a range of schemes. We might encourage them to look at the Technology Strategy Board, because it runs Eurostars, which is a European project. It does not need three transnational partners; it needs only two. That might be a better way in. It also gives a quicker answer on whether you have been successful, and you can get started. There are attractive rates of support there as well.

1277. Similarly, we are trying to encourage more North/South co-operation, because we have another member state on our doorstep. Why not develop collaborative relationships there that can be built on, and progress to FP7, or Horizon 2020 as it would be, in the future? We would encourage them to look at the likes of the Innova programme.

1278. Knowledge transfer partnerships (KTPs) are excellent. They get companies involved in collaborating with the research base to start with. We will look at companies that are active in that space and then take them to the next stage. Again, it is about looking at the idea of an escalator and seeing whether those companies are ready and whether they should be attempting to go to FP7, given the risks involved. As you have seen from the evidence, the average success rate is 20%.

1279. We have also been able to show, through our statistics, that there have been 132 successful participations in Northern Ireland, many of which are from the academic base. What you do not see behind that is that there have been 848 applications seeking funding of £301 million. They have, therefore, sought a considerable amount from Europe, but they have reached only £36 million. That shows that there is a willingness there but some are failing. That is why we looked at the idea of mentoring support.

1280. I want to clear up some issues. We have always provided project definition assistance to companies that participate in FP7. The mentoring scheme was introduced specifically to look at the needs of our research base, because we expected it to participate at a higher level, and we could see areas in which it was failing. We thought that it could benefit from mentors. The industrial base has always been able to avail itself of that support.

1281. Mr Dunne: I have one other point. We talked earlier about the white-coat perception of R&D. Could more be done to try to broaden the outreach to a lot of firms and organisations that are involved in the service industry, providing IT and so on? I think that we have a perception that R&D applies more to people or firms involved in manufacturing. It is a lot more than that.

1282. Ms Keery: It is.

1283. Mr Dunne: I think we need to spread that message.

1284. Ms Keery: To spread the overall message, we have gone out with calls. We have gone out with only two calls under the Boosting Business campaign, and we have received 153 enquiries. Over £1 million of support has gone out under that campaign. Through that, we are getting a number of services. I accept that a number of service companies with potential may have ruled themselves out of applying for R&D. We support a lot of service companies to engage in process innovation. The majority of the companies coming through in our design programme are in the service area. They are looking to avail themselves of design to upgrade the branding and overall aesthetics of their business. I accept that there is still that perception. However, we are trying to address that through our case studies, marketing and the message that we are putting out. We provide support for R&D in the service sector as well.

1285. Ms J McCann: You are very welcome. I enjoyed your presentation. I want to ask a couple of questions on collaborative working, particularly among small and medium-sized businesses. You said that it is not just about European funding. However, a huge amount of European funding is available. As budgets get tighter here, we need to look at ways in which we can draw down more money. I do not think that we are doing enough to draw that money down. You mentioned businesses working more collaboratively with those in Europe and particularly with those in the South of Ireland. Do you think that organisations such as Invest work closely enough with the other investment organisations, for instance, in the South of Ireland, to promote that collaborative thinking? R&D is not just about small and medium-sized businesses; it is about developing the knowledge base and skills so that there is a skilled workforce that will attract foreign direct investment (FDI). I know that colleges are not in Invest's remit, if you like. However, sometimes, colleges do not even work that closely together. Do you see that as a barrier to the development of smaller businesses in particular and the knowledge base and skills, when we seek to attract investment to Ireland in order to create jobs for people?

1286. Dr Coyle: Your point about available funding from Europe is well made. Certainly, the Barroso task force has been set up to try not only to get more money but to get the right money out of Europe. The fact that it has actually set the percentage of extra drawdown that it wants certainly shows its intentions. Certainly, bringing all of the Departments together is a key part of that.

1287. I take on board your point about working with the South. I sit on a group that is led by InterTradeIreland. We work with the Department of Jobs, Enterprise and Innovation in Ireland, DETI and other Departments in Northern Ireland to look at the opportunity from FP7, specifically on R&D funding that is available and how we can work together. In 2011, one of the group's outcomes was the conference that we held in the Stormont Hotel in June. More than 200 participants from both the North and South of Ireland came to hear about the opportunities that exist. That was a great opportunity. We hope to hold another event like that on 7 June 2012, when commissioner Máire Geoghegan-Quinn will speak. Therefore, we are looking at ways of working together.

1288. As regards our own organisation's being, perhaps, more proactive and innovative, we have, for the first time, been involved in Regions of Knowledge applications. Our remit was that we could work with other regions but that we should work more closely with the South of Ireland. Our target was to submit two applications to Regions of Knowledge. We have submitted three. One thing that I will say about a Regions of Knowledge application is that it is not about funding from Europe for research; it is about looking at the landscape, finding out who the key players are in the area and preparing for the future. One of our project areas is biogas. That is a great opportunity, which also relates to energy objectives and the soaring costs of energy. It looks at alternatives that will benefit the whole of Ireland. Therefore, we have come together to look at that opportunity collectively.

1289. In another area that we looked at, we worked closely with the Institute of Electronics, Communications and Information Technology (ECIT). We were involved in a project to look at security — cybersecurity in particular. Again, that is another key challenge that we all face. So much is done through the internet and the Web that there is a need for cybersecurity, particularly in money transactions.

1290. The other area, which, you will be pleased to hear, deals with our strengths, is the Clinical Translational Research and Innovation Centre (C-TRIC). An application came in for a North/South project that also deals with other regions. Again, that sets the way forward for a Connected Health approach. Therefore, we are looking at areas where we have complementary strengths. Looking at the breakdown of funding that each region receives from FP7, our strengths are aligned. We are similarly strong in ICT and health. It shows an area that we can work on. Our colleagues in InterTradeIreland — about which you will hear more later — are working in that area, and we work closely with them to make sure that all the links are made. You made a key point that there is a need for greater co-operation and collaboration. We have those stepping stones in place.

1291. Mrs Overend: Thank you for your presentation. I have just a couple of questions. How closely do you work with other Departments, such as the Department for Employment and Learning (DEL) and the Department of Agriculture and Rural Development (DARD), to see where there are opportunities or a need to change the way that you promote further R&D? On a separate issue, we have been primarily thinking about small organisations. Many larger organisations that we looked at are doing research, but we found that there are problems with the time frame of research and development. Funding may be available for a certain length of time but their research will take longer. Have you met those sorts of obstacles as well?

1292. Ms Keery: We work closely with other Departments. Certainly, we work with DEL on the whole skills agenda and on making sure that sufficient skills are in place for the projects that we support, particularly from the FDI perspective. That is particularly true of R&D projects as well as wider projects. We also work quite closely with DEL on the Barroso agenda to bring more European money into Northern Ireland. We work closely with DARD on the innovation and R&D agenda. In fact, one of my heads of department leads the food innovation steering group, which is responsible for looking at R&D opportunities and combining R&D strengths in the food sector. We also work closely with the Department of Health, which has a strong R&D agenda. We have signed a memorandum of understanding with the Department to identify potential R&D opportunities in the area of chronic disease. So, we work closely with other Departments to try to maximise R&D synergy in those key areas.

1293. What was your second question?

1294. Mrs Overend: Sorry, I should not have given you both at the same time. It was about the time frame of research and development and the fact that funding was for only a certain budgetary period. Is that a challenge?

1295. Ms Keery: Yes. I read Almac's evidence, which basically said that longer time frames were needed. There are two issues around that. I have said that, by their very nature, the outcomes of R&D are generally unknown. We tend to work in three-year time frames. Even within those, it is difficult to predict outcomes. Push that any further and you are into high-level speculation. So, it is very difficult to identify what you will be funding or supporting. The other, practical side is that, as a Department, we work in three-year Budget cycles. Funding for anything beyond that is not guaranteed. Longer-term funding is where we see potentially more scope for VCs to become involved and for businesses that need long-term guarantees to look towards venture capital —

1296. Mrs Overend: Sorry, VCs?

1297. Ms Keery: Venture capitalists.

1298. Mrs Overend: Yes, OK.

1299. Ms Keery: From our point of view, as a Department, three years would be about the most appropriate timescale that we can live with.

1300. Dr Coyle: European projects do not tend to be much longer than that three-year time frame, because it is recognised that you cannot predict outcomes beyond that. Potentially, one of the improvements with Horizon 2020 would be taking forward activities funded through the ideas programme, under which the European Research Council has funding that goes directly to academics who are world class in their fields, and they will be funded to continue to do blue-sky research. The idea is that that research can then be moved forward with further project support. So, you are giving support at key parts because you will get more value added at key parts. In the likes of the pharmaceutical industry, what can happen is that a certain amount of development work will take you to a phase of approach, and you will have the value of that. The company can then choose to in-license further research to complement that work or out-license the results of that research to somebody else to take further. There is a long time frame for pharmaceutical research in particular, but there are certain ways in which you can cope with that.

1301. The Chairperson: Just to widen out what you were saying, Mrs Overend, we do have a problem, do we not, if you are saying that three years is about the length of time that we can be supportive because we cannot go beyond a Budget cycle? That does raise difficulties and that inflexibility, particularly for a business such as a pharmaceutical firm, is not very helpful. There must be some way to get around that. That company talked of maybe six years to produce a product. You cannot really just say, "Well, I will give you three years' funding, and then you can do what you like after that." I understand your point. It is a very reasonable point, but there has to be flexibility and a more imaginative administrative approach to exceptional research periods, such as for pharmaceutical research. It is not good enough just to say, "Well, there it is, that's it."

1302. Ms Keery: And we do not. However, those are the practicalities. We tend to work with the likes of Almac, and we have put over £10 million of research money into Almac. I think it has operated very effectively, so we are working closely with the likes of Almac to support its R&D programmes.

1303. It is about how we set the milestones and what we are trying to achieve with the funding, then reviewing those milestones as we go along and putting in further support. It is incremental support from our point of view, but the time frame would not be as long as they potentially would like at the outset.

1304. The Chairperson: As we are talking about Almac and the link-up it has with Queen's University, it put quite a bit of effort into that and so did Queen's, and it seems to be a very good model of how you can progress at a very high level and in co-operation with an academic institution in research and development. Have you learned any lessons from that? Is there scope for further development such as that?

1305. Ms Keery: Yes.

1306. The Chairperson: Or is that just a one-off collaboration?

1307. Ms Keery: No. That model is very familiar to us.

1308. The Chairperson: Right.

1309. Ms Keery: That used to be the model that would have operated through a previous scheme called Start. There are other examples, such as the work we have been doing on the composite side, which is very much about promoting and funding a collaboration between the research base and business. So, it is a model that is very familiar to us, and one that we would like to emulate. It is something that we agree has proven very successful.

1310. The Chairperson: There seems to be some lack of knowledge among companies about tax credits, their extent, availability and how to get them. Do you go to companies or have any facility for companies coming to you and saying, "We think we could get tax credits for x, y and z. Will you help and advise us in relation to that?" Is there any facility such as that in Invest Northern Ireland?

1311. Ms Keery: We provide information. We have produced a booklet with HM Revenue and Customs (HMRC) to advise companies. There was a misperception that you could not get grants or support for R&D from Invest NI or tax credits. So we have advised companies on that.

1312. The Chairperson: So businesses can get support from Invest NI, and they can get tax credits as well?

1313. Ms Keery: Yes; we have advised them on that front. However, we advise companies to go to their accountants to get detailed guidance on financial regulations and Financial Services Authority guidelines. We have done calculations that will allow companies to decide whether it is cost-effective for them to go down the tax credits route or whether it is more effective to come to us, because there is a break-even point where it is more effective for them to go for tax credits.

1314. The Chairperson: So are you saying that that facility is available? If I had a company and I came to you and said that I thought that I could get tax credit for this or that, could you advise me?

1315. Ms Keery: We would advise companies as to whether that was the case, and we would also provide them with either a source of expertise or direct them back to their financial advisers.

1316. The Chairperson: Obviously, you cannot micromanage their tax returns. Do you know what percentage of companies are availing themselves of R&D tax credits, or are you not privy to that information?

1317. Ms Keery: It was there in the dim and distant past, but it has gone. It is low, but it is increasing.

1318. The Chairperson: If it is low, what does that indicate? Does it indicate that companies are not involving themselves in research and development or, alternatively, that they do not realise that they can get tax credits for research and development?

1319. Ms Keery: I think that it would be the latter.

1320. The Chairperson: Or is it that they do not realise that they are actually doing research and development?

1321. Ms Keery: It would be a combination of those. When we look at the survey of companies that say that they are doing R&D, the numbers are extremely low. About 400 say that they are doing R&D. We know that that is not the case. However, companies still equate R&D with white coats and labs. Therefore, they exclude themselves from going for R&D tax credits because they do not think that they are eligible. From that point of view, there is an awareness issue; it is important to make it clear to businesses that it is highly likely that they are doing work that would qualify for R&D tax credits.

1322. Dr Coyle: Until 1 April this year, companies had to show that they were spending at a rate of at least £10,000 per annum on R&D to be able to claim the tax credits. That has now been removed. That was an indication from HMRC that it did not want to disadvantage anybody, particularly the small businesses, and to show that tax credits are also an option. I emphasis this key point: people in businesses who are doing R&D are not necessarily closely connected with their financial directors, for example. When we evaluated our own schemes and asked about their awareness of R&D tax credits, the people in the labs might not have been aware of it but their financial accountants were. It is a process of understanding what R&D they are doing that can be put towards the scheme. Again, our advice is that, in order to understand the actual calculations that are involved and the amount that they might be able to draw down, they should speak to their accountants and HMRC. We have a good relationship with HMRC; its representatives have come to Invest NI to update us on the changes that are happening. The situation has evolved over the years to try to encourage greater participation.

1323. The Chairperson: Do you get that information out to companies?

1324. Dr Coyle: We have the booklet that we produced in association with HMRC.

1325. The Chairperson: It is right and proper to produce a booklet, and I am sure that it is a very helpful booklet. However, should you not be a bit more proactive and go out and tell companies that they could get tax credits and advise them to look into it more closely? You could tell them that you can give them a little bit of advice on it but that you cannot give them detailed advice on their tax returns or things like that. Should you not be a little more proactive?

1326. Dr Coyle: I believe that we are. Our innovation advisers advise companies, and the feedback that we have sometimes got from companies is that they may prefer to take the tax credits route rather than go through the appraisal process.

1327. The Chairperson: When was the role of innovation adviser established?

1328. Ms Keery: Around 2009.

1329. The Chairperson: How do you think they are working out?

1330. Ms Keery: Extremely well. We have 16 in total across the group, and three working specifically in R&D, in three specific sectors. They are proactive, so they are out there actually knocking doors to try to get more companies to understand that they are doing R&D and there is potential for R&D support. They are also hand-holding businesses to take them through what we acknowledge can be an onerous step for them to actually apply for funding. As a resource, particularly for the smaller businesses, they have worked extremely well.

1331. The Chairperson: Thank you for that. It would be helpful if you could send us a copy of Invest Northern Ireland's organisational structure for its R&D arm. I just want to let you know that, during our research, we had a very positive response to what Invest Northern Ireland has been doing. I do not think there are any further questions. Thank you very much for coming along, it was very helpful. If there are any further questions, we will write to you.

29 March 2012

Members present for all or part of the proceedings:

Mr Alban Maginness (Chairperson)
Mr Steven Agnew
Mr Gordon Dunne
Mr Paul Frew
Ms Jennifer McCann
Mrs Sandra Overend

Witnesses:

Mr Aidan Gough
Dr Simon Grattan
Mr Liam Nellis

 

InterTradeIreland

1332. The Chairperson: Briefing the Committee today are Mr Liam Nellis, the chief executive of InterTradeIreland; Mr Aidan Gough, the strategy policy director; and Dr Simon Grattan, the EU programme co-ordinator. I welcome you all to the meeting. Would you like to make an opening statement, Mr Nellis?

1333. Mr Liam Nellis (InterTradeIreland): Thank you, Chairman, I will indeed. Thank you for the invitation to present evidence to the Committee here today; I am delighted to be here. It is an important piece of work that you are doing, in a very important area. You have already introduced my colleagues, so I will not do it again. I intend to make a brief opening statement, and then Aidan will follow up with the detail and the technical points.

1334. From our point of view, now, more than ever, innovation matters to business and to growth, and the promotion of innovation and development of innovation capability is at the very top of InterTradeIreland's agenda. The central theme of our activity is cross-border co-operation, and all of our activities in that space facilitate greater connectivity across both jurisdictions. You may find it interesting that over 70% of InterTradeIreland's programme budget is spent helping to build innovative capacity in different ways and to build the capacity of small and medium-sized enterprises (SMEs) to be innovative. That reflects the importance that we attach to that area. Through our programmes and support we are helping companies to spark innovation. That goes right across the spectrum, from the very cutting-edge, high-level, pharma-type companies, through to manufacturing, and even down to mushroom farms. We are touching all companies, from the SME to the big guy. Our programmes support all aspects of innovation. We have programmes that involve technology transfer into collaboration, equity financing, best practice and advice on innovative capability. This portfolio, which we have developed over the past number of years, has seen a shift in the focus from project-based interventions that focus on R&D and technology to interventions that will embed capabilities in companies to make innovation a fundamental business process.

1335. Existing programmes that we have been operating, such as the Fusion technology transfer programme and our Innova collaborative R&D programme, are very successfully demonstrating the benefits of a collaborative approach in the innovation ecosystem. Collaboration is key. To date, the business value that has been realised by the companies that are participating in our Fusion programme, for example, is £148 million, while £35·8 million has been realised from the Innova programme. Raising finance is very important in this area, as you discussed during Invest NI's presentation. It is a significant issue linked to innovation and includes factors such as timing and the length of a scheme. InterTradeIreland has been very active in this space, almost from the day that we started. We fund several all-island business angel networks, and we provide free advice to companies.

1336. We also run an all-island Business Seedcorn competition. Each year, we get over 200 companies presenting business plans with innovative ideas, running through various levels of competition across all parts of the island, culminating in an all-island final. The winner can get €100,000 to invest in innovation and R&D, and that has been extremely successful. We track the companies that are involved in that seedcorn competition, and have done that over the past eight or nine years. We have found that the companies that reach the regional finals and the overall final have attracted way over €120 million already. Those are companies that would normally find it very difficult to attract private investment. We help to raise the visibility of those companies for potential private investment and to make the companies more confident when they meet potential investors, so that they are capable of delivering the pitch in the right shape and the right form to secure the money. A lot of very important work is going on in that area.

1337. However, leveraging the benefits of connections and collaborations is very dependent on a firm's ability to manage them. Some companies are just not capable of doing some of that stuff from the outset and need help and support, so a recent addition to our portfolio on innovation has been the innovation challenge programme. That programme aims to embed a capability in companies to successfully create markets and launch new products and services with minimal time, money and risk. It is a pilot programme, and, although it is still in the early stages, there has been a significant level of demand. We are working on that programme with our colleagues in Invest NI and Enterprise Ireland. The returns on InterTradeIreland programmes confirm our view that innovation is not solely a technological or research and development process but is a value-creating business-growth model in its own right. I will hand over to Aidan, who will continue on the more technical side.

1338. Mr Aidan Gough (InterTradeIreland): It will be more technical, and, hopefully, not boring. I am sure that you will stop me if it is. I will say a few words on the model or system that structures our strategic intent in this important area for economic development. We see innovation as a collective, interactive and very open process that involves many different players and resources, of which R&D is only one, albeit a very important one. As a result, we do not think that R&D can be considered in isolation but rather as an integral part of a wider ecosystem, as it is termed. This system includes public research organisations, banks, venture capitalists, business angels, financial services organisations, national and regional innovation and development agencies, policymakers, regulators and various intermediary bodies. Government have a role to play in setting the wider framework conditions for the system. At the centre of the system, in our view, is the enterprise — the firm. Getting the interactive system right, from our point of view, is about ensuring that firms can readily connect to the resources that are needed to engage in innovation and, critically, that they have the capabilities to manage those interactions. It is about connectivity and capability for the firm.

1339. We are currently under the auspices of a steering group, along with various agencies and bodies from across the island. We are undertaking a study to determine the characteristics of the wider innovation system across Northern Ireland and Ireland and, crucially, to put enterprise and the firm at the centre. So far, the research has tried to map the systems in Northern Ireland and Ireland. It is benchmarking them against international comparators. We have surveyed 1,000 enterprises across the island to seek their views on how it is performing.

1340. I have some of the key preliminary findings that have emerged from the research. There is a very comprehensive support structure within the system, which is primarily driven by the various agencies such as Invest Northern Ireland. There is a greater difficulty for small companies to access that system and the supports. That is due, primarily, to a narrower range of managerial and technical capabilities in the companies.

1341. Internationally, there also appears to be low levels of venture capital, but, on the other hand, based on international comparators, there are high levels of third-level educated people in the workforce. There are low levels of SMEs innovating through collaborative networks. We have found that SMEs that are innovating are doing so without leveraging external resources. They are almost doing it alone or through their own supply chain, primarily. In general, therefore, SMEs are not practising open innovation and, where they do so, it is confined, by and large, to their own supply chain. For many SMEs, innovation does not necessarily involve research and development. We did a survey through our business monitor, which found that well over 60% of businesses say that they have been involved in an innovative project or process over the past year. That is way above the number of businesses that say they are R&D active. Innovation is a much wider concept than R&D.

1342. Another finding to emerge from the work to date is that the role of intermediary bodies is poorly understood and utilised in the system. Those bodies, or boundary spanners, which is the technical name, help connect businesses to the various resources that they need. A good example of that is the Northern Ireland Science Park Connect initiative.

1343. Given our legislative remit, the ecosystem that is envisaged by InterTradeIreland is necessarily cross-border. By being cross-border, we see that it introduces more diversity and opens up complementary resources and competencies to firms in each jurisdiction. By putting enterprise at its centre, we are trying to ensure that the resources, be they technical, financial or otherwise, are readily available and accessible to companies, regardless of which jurisdiction they are located in. That will ensure that creative ideas are commercialised more effectively and more efficiently.

1344. It is very important that we view innovation as a strategic, value-creating, business-growth process. It is not an ad hoc technical project; it is a business-growth process. Innovation leads to business growth. As Liam said, all of our innovation programmes are trying to help improve the enterprise's capability to connect to the resources that they need. Liam mentioned such initiatives as Fusion, which connects a company to a research institution on a cross-border basis. It also connects a company to technical expertise through the graduate who works on it. Innova connects businesses to businesses, and Equity Network connects businesses to finance. The new challenge programme is primarily focusing on small businesses that want to innovate but do not necessarily have the capability to manage an innovation process, to embed innovation within their company or to make innovation the foundation for their growth strategy. We know from our survey that companies that innovate grow much more quickly than companies that do not.

1345. Improving connectivity within the system and developing firms' capability to connect with it can also help increase participation in international R&D programmes. In that regard, we have been particularly active in putting in place schemes to improve North/South collaborative participation in the framework programmes and, looking to the future, the Horizon 2020 programme. We also provide the secretariat for the US-Ireland research and development programme. Details of those initiatives are in the paper we submitted, and we are willing to answer any questions on them.

1346. The Chairperson: Thank you very much, Mr Gough. Any applicant to framework programme (FP) 7 has to have at least two states to provide the basis for that application, and a third partner in another state in the union. That puts InterTradeIreland at the head of the game, in partnering companies from both sides of the border. How successful do you think you have been in doing that? The level of success in FP7 has not been that good. Horizon 2020 may be much better. It will be less bureaucratic, one would hope, and wider areas of interest might be available. How do you measure that? What is your assessment of it?

1347. Mr Nellis: Our specific involvement as a broker in this game has been in place only since about autumn of last year. We did not have a specific programme until then, and we brought in Dr Simon Grattan to help and support that.

1348. The Chairperson: Why was that, Mr Nellis?

1349. Mr Nellis: We did not specifically have a programme with the stated objective to encourage greater partnership North/South to attract European funding. We brokered collaborations, but we never had a programme with that specific target. Various experiences were coming through from the earlier framework programmes, and Máire Geoghegan-Quinn became European Commissioner for Research, Innovation and Science and came to speak to the Ministers at the North/South Ministerial Council in sectoral format. One of the things that came out of that meeting was that the ability to attract this money was not universal; it was quite cumbersome and overly bureaucratic. One of her goals was to try to reduce that bureaucracy. I hope that that will flow through from the new Horizon programme. At that meeting, we were tasked by Ministers from North and South to develop a specific programme to enable that to happen, and that is what we have been doing. Through that, as Carol Keery said earlier, we have now developed an all-island group. All the key players are there to go after this funding. We are providing a number of supports to companies and institutions to help secure that funding, because it takes time and money. Those are not necessarily in abundance for the people applying. They looked upon it as too hard to do. They felt that when you got into the system, it was so bureaucratic that the game was not worth the candle. We have to change those perceptions, and that is what we are doing now.

1350. The Chairperson: I want to get back to this point. I am not being critical of InterTradeIreland in this, but FP7 started in 2007, so surely we are playing catch-up in relation to FP7. I do not think that that is good enough. Both governments should have said, "We have a body, InterTradeIreland, which is in pole position to do the sort of work that we want in relation to framework programme 7." It seems a pity that there has been this time lag in realising the potential of InterTradeIreland in relation to applying for European funding. Is that a fair comment?

1351. Mr Nellis: The comment is fair. We are not saying that there was not anything happening; there were things happening.

1352. The Chairperson: I understand that.

1353. Mr Nellis: Our analysis of the work carried out in the framework programmes overall showed that a collaboration with two of the partners from North and South had a better chance of getting through the very difficult process than if they were not two partners from the island of Ireland. The success rate for such applications was marginally higher.

1354. You can look at the size of that pot and think it is massive, but the whole of Europe is going after it. Realistically, even with the wind behind us and our best game, it will still be difficult for companies from the island of Ireland to secure it. However, maybe we were slow to pick up on it.

1355. The Chairperson: There is no point in us hoking through the ashes of the past. What do you think about Horizon 2020? Can we do better? We know the potential is there and it is convenient that we have companies on both sides of the border willing to collaborate. Can we improve with Horizon 2020?

1356. Mr Gough: The statistics that we presented to the North/South Ministerial Council showed that North/South collaborative applications had a higher success rate, so there is good reason to go after them. We are also building on a level of success. There have been over 553 collaborative applicants under EU FP7. So, we are building on a fairly substantial base.

1357. Maybe it was slow to gather momentum because, for a number of years, particularly in the South, there was a massive investment into research and development and the structures supporting research and development. They were very much focused on developing and getting their structures right. Now that they are right and they are happy with that, there is time to collaborate. There is also a much greater focus on FP7 in Northern Ireland, so the time is now right.

1358. Is there scope to improve? As Liam said, we have doing this for about a year, with the appointment of Simon, and have been very specifically getting involved in the nitty-gritty of increasing the number of North/South applications. The first success is the cross-border all-island steering group that we got together, with all the relevant Departments and agencies sitting on that and sharing knowledge and best practice. A lot of positives are coming out from that because the South, as a national member state, has the full national contact network, so it has ready access to what is pertinent within the EU FP7, and knows what calls are coming up and when, and how to access them. That sharing of knowledge has been very important.

1359. The group has also helped us to develop initiatives, the first of which was the conference at which we had over 200 delegates. We are revisiting that in June when we will, hopefully, have Máire Geoghegan-Quinn and the Ministers from North and South addressing that. It will be hosted by Minister Foster. We set a target at the conference last year. We are focusing very much on calls that are coming up. FP7 comes out in tranches of various calls. Last year there was a call for regions of knowledge. The steering group set itself a target of making sure that two very good North/South applications went in. In fact, we got three in. We are developing that model, and the next conference will focus on calls coming up, the next of which is on research for the benefit of SMEs. Therefore, we will set targets to get North/South collaborative applications in response to that call.

1360. We have also, through the steering group, set up a number of initiatives to bring researchers together and SMEs together, so that we have as series of events that focus on FP7. It is not rocket science. Recently, we had an event that focused on cancer research, and that brought together the leading cancer researchers in academia and industry from Northern Ireland and Ireland. We have other events coming up on the environment and health that will bring key researchers from both academia and industry together to focus on the calls that are coming up and facilitating them to go ahead and develop the applications. In the past year, we have implemented a host of other simple, straightforward, practical initiatives. The demand for them has been high. Would you agree, Simon? Therefore, we expect to be able to increase the number of North/South applications both in the latter stages of FP7 and, going forward, for Horizon 2020.

1361. Ms J McCann: Thank you for your presentation. You are very welcome. I will not go into too much detail. On page 4 of your paper, you mention the EU framework programme. You say that the funding moving into Horizon 2020 actually gives you a good opportunity to analyse and put structures in place now. Throughout this inquiry, there has been talk of a one-stop shop, if you like, where businesses could go to access information and, then, be signposted onwards. Particularly given your role and the collaborative way in which you work North and South, do you think that InterTradeIreland, for instance, would be a good place to locate that one-stop shop, because you have a North/South and all-island view as opposed to a view that focuses on just the North or the South?

1362. Mr Nellis: I think that that is already happening to a certain extent following the call from the two Ministers at the meeting of the North/South Ministerial Council in Armagh last year, when Máire Geoghegan-Quinn presented. One of the action points that came out of that meeting was that we would dedicate a resource to do just that. Simon is that resource. He has been working very closely, as Invest NI said today, with them and with all of the players, North and South, to, at least, get a focused, consistent approach across all of the agencies, which is a good start.

1363. Mr Gough: We have actually launched an FP7 support website, which offers useful information on all of the supports that are available in Northern Ireland and Ireland. We are also developing what we call an EU noticeboard, which will bring forward those who are developing projects. Therefore, if I am in a particular area, and I intend to make an application to a particular call, I would post on that website what I am doing and that I am looking for partners in such-and-such an area.

1364. Dr Simon Grattan (InterTradeIreland): Through the website, we signpost not only local supports, but key European websites — as you say, one-stop shops — and anywhere where there is relevant information or places where people can register as evaluators or register their organisations so that they can be part of the system, if you like, and get the codes and things that they need to actually participate. We have a solid list. We explain what those websites are and how to access them. Therefore, we have already housed a lot of that information on the website as well as information on other supports that we have.

1365. Ms J McCann: I have another very quick question. You said that, in the past, the collaborative way of pushing that out, for want of a better word, did not work well. Do you, therefore, envisage that it will work better now, and there will be a more effective approach to drawing down money and dealing with that?

1366. Mr Nellis: It was not that it did not work well: nobody was focusing on it. People were focused on many other things. As Aidan said, in Ireland, the main focus was on Science Foundation Ireland and the massive amount of money that was coming in to the Exchequer. They did not really need to go chasing European money. Now, times are tight in both jurisdictions. Now people are looking at that money and saying, "We can get more of that." That is why people are so focused now; the opportunity is there.

1367. Dr Grattan: Critical to that is the information and being aware of who they can partner. We are able to facilitate that for them. Anybody we meet and talk to is more than happy to work with a partner in the North or the South. They are delighted to do so. However, it is about being aware of who is in their space or who, perhaps, is not in their space but with whom they need to collaborate on a particular aspect. That is where, again, through our supporters, we are able to pinpoint those.

1368. Mr Dunne: I welcome the panel once again. It is good to see you. A lot of the issues have been fairly well covered. You will have heard our session earlier with Invest NI. Are you still satisfied that there is a clear distinction between what you are doing in your two organisations and that there is no risk of duplication in R&D? Is that fairly clear?

1369. Mr Nellis: The niche that we have in R&D innovation is that every programme we operate has a North/South dimension. The Innova programme involves a company North and a company South, and the Fusion programme has a university, North or South, working with a company in the other jurisdiction. Everything has that North/South dimension. Neither Invest NI in the North nor Enterprise Ireland in the South has that North/South focus. That is where we make the difference and where we avoid duplication.

1370. We work on all of our programmes with Invest NI and Enterprise Ireland. We have them on our steering groups to make sure that duplication does not happen, because we are very alive to that perception. It is something that both Ministers, but particularly Minister Foster, have been very strong on, certainly in all the meetings that we have had with her at the North/South Ministerial Council and in the presentations she had given to our board. The chair and I have met her on a number of occasions and she is always stressing that. It is something that were are very conscious of.

1371. Mr Dunne: You mentioned some programmes there: the Minister referred to the success of the Fusion programme in the Assembly this week. She made reference to, I think, Fivemiletown Creamery and how its involvement with a graduate on the programme was successful. You mentioned the seed corn business competition earlier. That is an all-island initiative.

1372. Mr Nellis: Yes, it is. We run that ourselves.

1373. Mr Dunne: Has that been successful?

1374. Mr Nellis: It has been very successful from a number of points of view: first, in raising awareness and getting greater participation in innovation, and, secondly in raising the visibility of potential high-growth companies to investors outside. It is modelled on a potential high-growth company that is going to make a pitch to a group of venture capitalists (VCs). That is a very difficult thing to do for a company that is focused on day-to-day activity. Someone from the company gets a few minutes in front of a VC and quite often says the wrong thing or focuses on the wrong thing and completely loses it. You only get one chance to make a first impression. That programme is about bringing companies in through business plans at the start, and, through the various stages of the competition, it will give them support, advice, training, development, mentoring and masterclasses to up their game, so when they get through to the final pitch at the —

1375. Mr Dunne: They get training, then?

1376. Mr Nellis: What we find is that the companies, even the ones that do not secure a cash prize in the competition, come back and say that the discipline that it brought to their company was invaluable. It is much more than a competition.

1377. Mr Dunne: Good. The other interesting point was about the survey of 1,000 businesses that you referred to in your evidence. It showed that 72% of the firms did not have a formal process for managing new developments or improving the business. That is an area that needs to be moved. That is quite a shocking figure, really, is it not?

1378. Mr Gough: It is, and it has led to our developing the innovation Challenge programme that we are piloting. The Challenge programme is about giving companies the capability to manage an innovation process and base their growth trajectory on innovation. The other finding that makes that one even scarier is the fact that innovative companies are the ones most likely to grow.

1379. Mr Dunne: That is the problem; if they are not looking outwards, they are looking inwards. If you do not keep moving forward, or if you stop, you are effectively going backwards. That is disappointing.

1380. The other factor, after that, talks about their importance. The firms felt that the importance was with staff, customers and suppliers. That is good. I think that we all appreciate those principles. Certainly, in the equality system, those are the sorts of principles that you work to.

1381. Mr Nellis: Absolutely.

1382. Mr Dunne: But they are insular, and that is disappointing. People need to really think outside the box, and more and more needs to be done to broaden that.

1383. Mr Nellis: One of the things that we measure and one of our key performance indicators is first-time innovators. A lot of companies have no history of R&D, have maybe never employed a graduate or have never had anybody with any kind of formal education coming through, other than those with a trade or an apprenticeship. So, what we are really trying to do is to get those companies engaged for the first time in a serious innovative programme with an institution. Quite a lot of them are scared of universities.

1384. Mr Dunne: They would be.

1385. Mr Nellis: The key point of the Fusion programme is to have that engagement in the first place. What we find is that, when companies experience for the first time how a university or a graduate can help them to help develop a programme, they retain the graduates — the retention rate on that programme is over 70% — and they then go on to develop other programmes and approaches to innovation. The key is to have that engagement in the first place.

1386. I want to explain one of the beauties of the Challenge pilot programme that Aidan is talking about. At the start, we invited 100 companies to come along. After a couple of meetings, we let the companies self-select the 10 that we were really going to concentrate on during the pilot to increase their capability. The 10 companies that came through the process were really hungry to do it by the time they got through it, and so their chances of succeeding were much greater. You can get any number of companies to come into a room, but, unless you get people who are prepared to put in the effort, you are not going to go.

1387. Mr Dunne: I think that we covered the issue of framework 7 fairly well. The evidence we have is that firms are clearly reluctant to get involved because of the heaviness of it.

1388. Mr Nellis: Complexity.

1389. Mr Dunne: Yes. They are also reluctant to get involved because of the issue with getting partners throughout Europe and so on. You have appointed a new officer to help out with that. Is it the intention to keep that post and carry it through to Fusion 2020 and so on?

1390. Mr Nellis: Horizon 2020. Absolutely.

1391. Mr Dunne: Is that the intention?

1392. Mr Nellis: It is a permanent post, as far as we are concerned.

1393. Mr Dunne: OK. Will that work across the island?

1394. Mr Gough: Yes. As I said, as part of the conference we are organising in June, we are issuing a call for research for the benefit of SMEs. So, we will set targets to try to get SMEs and, in particular, SME trade associations involved in writing applications to that call.

1395. Mr Dunne: I do not see InterTradeIreland being promoted heavily in the greater Belfast area. I think that we talked about that before. Is there something that you need to do there? Do you tend to work more in the border areas?

1396. Mr Nellis: No. In the past few years, one of the key areas that we have focused on is greater relevance and greater outreach across the island, hitting every part. We organise events in areas where we feel there is not great penetration of understanding about what we do. Our experience is that Belfast and Dublin companies are well aware of what we do. We have been going into areas in the south-east of Ireland and the north-east of Northern Ireland. We have gone to Ballymena, Cookstown and places like that. Those are the areas in which we generally perc