UK’s Knowledge Transfer Network on how Coronavirus might hit the funding landscape - Part 2

Profile picture for user cmiddleton By Chris Middleton May 1, 2020
Summary:
The second part of a conversation with Jon Kingsbury, Strategic Development Director of the Knowledge Transfer Network. What are the investment challenges of the crisis?

Image of a pile of one pound coins for funding
(Image by PublicDomainPictures from Pixabay )

While the UK has been criticised for its handling of the healthcare and societal aspects of the coronavirus - with a mortality rate twice that of the US, relative to population size - the government has at least won plaudits for its financial remedies. A Universal Basic Income might have been simpler and fairer, but few would argue that Whitehall hasn't taken steps to tide many businesses and individuals over the lockdown and beyond.

As explored in part one of this interview, innovation and new funding streams will be critical in tackling the pandemic and building towards recovery. As the networking organisation for Innovate UK, the Knowledge Transfer Network (KTN) has a big role to play in mobilising innovators and investors, opening up new opportunities.

But it's not about doling out government cash. At least, that's the view of KTN's Director of Strategic Development, Jon Kingsbury; it's about mobilising private finance to invest in new technologies. So how difficult might that be, if UK GDP contracts by over one-third and there is a flight to safety among startups' potential backers? He says:

Anecdotally, we have seen private investment in innovation retract over the last three months. And that does potentially have an impact, especially for startups. The UK has a fantastic, vibrant startup community, so it's a risk.

But public investment in innovation is really designed to stimulate private investment, because there's no way that public investment, that public grant funding for innovation, could possibly take care of all the R&D that happens in UK companies.

We are certainly seeing private investors become very cautious. To remedy that, we are trying to use public money to re-energise private investment.

For example, the British Business Bank's Future Fund [see part one] goes to companies that have had a certain amount of private or equity investment. In order to get some public grant funding, private investors have to come in and provide a bit more private investment. So it's an attempt, really, to encourage private investors. It's a sizeable amount of money from the government, but it's really designed to stimulate other investment.

When we talk about investment, we need to understand that it isn't spread evenly across the UK. Helping to re-energise investment means not only in London, the Southeast, or Cambridge, but also more widely. If you're a digital startup in Sheffield, for example, then the crisis is hitting you just as badly as anywhere. That's part of the government's ‘levelling up' agenda.

The 5G challenge

According to Kingsbury, one of the first signs of the need for Innovate UK and KTN to step in and assist innovators through the crisis came with 5G. Was this related to the UK's big four fledgling networks being snared in political controversy over the role of Huawei? Or conspiracy theorists linking 5G with health problems - including (absurdly) the virus itself? Not according to Kingsbury.

We're in a consortium, a network called UK 5G. Providers were thinking very early on in the crisis about connectivity. So when it was appreciated that the UK would be going into lockdown, we were considering key factors such as people working from home, or living in rural areas, in terms of connectivity and capacity.

Those conversations were happening before the lockdown. That's just one example of us talking to business about how to improve conditions for people. We've worked with government departments, such as DCMS, on 5G connectivity and applications. But primarily we've been responding to requests via Innovate UK.

There was a funding call launched by DCMS for R&D. We're waiting for that to be finalised. But we have been active in this field. Sometimes we bring the supply side of the technology - device manufacturers and mobile network operators - together with vertical sectors. We do lots of matchmaking around that.

Stimulating solutions

But the bigger picture for KTN is thinking about how all types of innovation could help stimulate recovery. Part of this will come from a critical examination of the environmental and sustainability impacts of life in the pre-corona world, which may now have been permanently transformed. He explains:

I don't think we're going to go back to the old ways of before COVID-19, so increased innovation is the way forward to stimulate new ways of working and create growth in the economy.

We will be looking at new ways to stimulate recovery. These might be in applications such as community support services, education, culture, entertainment, finance, services, food manufacturing processes, healthcare, retail, social care, transport, and well being. KTN has networks and communities across all of these areas.

Most people have been looking at digital transformation, at how to accelerate their businesses online. And they've been looking at the environment. I don't have a crystal ball, but one thing people are picking up on now is how business can be kinder to the environment. That might well mean more local supply chains, not international ones, and planning for greater resilience in their supply chains - in case this happens again.

People are questioning whether they have to travel to the same extent in order to do their work. And we are certainly thinking about new ways to connect with people.

R&D spending

Since last year, a stated aim of the government has been to raise the nation's R&D spending from 1.6% to 2.4% of GDP by 2027, in line with the Industrial Strategy. That may be hard to achieve in the post-Corona world, with sectors such as retail, events, travel, and leisure buckling from global restrictions, and others hit by tumbling spending and confidence. GDP itself is likely to collapse, so percentage spending increases may turn out to be reductions in real money terms.

There have been some unnecessary brakes on the UK's ambitions, too: automation levels have long been poor compared with our major competitors, while broadband speeds are among the slowest in Europe and the developed world.

Arguably, these and other areas would have benefited from much higher central government investment, rather than waiting for private finance to become less conservative and risk averse. Had the UK gone further and more quickly towards fixing these problems, might the UK be better placed to recover?

Kingsbury says:

I think there's a balance. At the moment, for example, there is an emerging need to pick crops. Summertime is coming, and yes technology like robotics could be playing a much bigger role if we had accelerated that. And there are related challenges with connectivity - which brings us back to 5G, of course. You need that to be there to do automation properly, with the right fundamental, enabling technologies.

One of the things we need to think about is investment in stimulus, in areas where we don't just focus on one element of innovation, such as robotics, but also on thinking about it as part of a wider system. That will be super important coming out. Without those enabling technologies, without connectivity, without the right infrastructure, it will be very difficult.

If we'd been having this conversation a year ago, we'd have been talking about the impact of Brexit on agriculture, rather than the Coronavirus' impact. It's always a balance between investment - the right type of investment - versus adoption, productivity, and application, isn't it, when you invest in the invention and the rest of the application.

At times of crisis one really needs connectivity.

My take

Wise words, and a good description of KTN itself.

But while the organisation sees its main role as stimulating private investment more than channeling central government funding, this may have been part of the problem in recent years (pre crisis), as much as the solution.

Arguably, the advantages of having a bold Industrial Strategy are undermined if central investment is piecemeal and underpowered. After all, why would a conservative investment community believe in robotics, AI, and other technologies, if the UK only opens its purse strings in a crisis?

Disclosure - Chris Middleton wrote two reports for Innovate UK, on the back of Expert Missions to the US in 2018 and 2019.

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