The Industrial Strategy And Support For Disruptive Innovation

01/03/2017 15:52

The government has a tricky challenge ahead with their new Industrial Strategy. The Prime Minister recently said, "The modern industrial strategy will back Britain for the long term: creating the conditions where successful businesses can emerge and grow, and backing them to invest in the long-term future of our country." On the one hand, they will be reluctant to pick individual winners in case they get it wrong; on the other hand, they don't want to risk yet another instance of UK world-leading research being commercialised elsewhere. This would be politically embarrassing and economically disastrous. So how should the government best approach this? Fusion energy, previously just in the domain of government funded research, but now attracting private investment in technology development - provides an ideal microcosm of the wider technology industry, offering insight that can answer this tricky question.

Part of the answer to the government's conundrum is to build on existing clusters of expertise. That way, even if one new venture fails there will be others amongst them that succeed. In fact, economic and technological clusters work better than that as members of the cluster each feed into the others' success. The clusters become low-risk places to undertake high-risk technology development that may well be impossible elsewhere. In fusion we have a substantial cluster of activity around the world-leading research centre at Culham Laboratory, just south of Oxford.

This combination of lower risk for individual ventures and better recycling of technological and entrepreneurial talent (in the event of a single company failure) makes clusters an ideal target for government support. High-tech clusters have the additional benefit of very high added value and huge economic benefit to the host country.

The other part of the answer is to build on initiatives that have worked well in the past - initiatives like SMART Awards, R&D tax credits and the Enterprise Investment Scheme. All these mechanisms allow government, with the backing of private investors, to support promising companies. The tax breaks favour local investment and enable companies to expand locally, creating high value jobs and wealth.

For the future, the government should consider enhancements to R&D tax credits for companies and should do away with the arbitrary limits on the Enterprise Investment Scheme for R&D intensive businesses. For example, R&D intensive businesses are currently allowed to raise only £5m per year under the Enterprise Investment Scheme and the "lifetime" total they can receive is limited to £20m. This unnecessarily limits growth of the very companies most likely to be at the forefront of major new sectors of economic activity. If the UK wants to have some big winners for future economic prosperity, then it would be best to do away with petty rules that favour small wins over big wins, incremental innovation over disruptive innovation.

Coming back to fusion energy, the UK has a world-leading position at the moment that we must do our utmost not to relinquish. The government-funded Culham Centre for Fusion Energy hosts the world's premier tokamak, JET, a European collaborative experiment that holds the world record for fusion power produced. It is also home to MAST, the UK flagship tokamak experiment, felt by many to offer an innovative and faster route to fusion power. The history of fusion research at Culham means that the surrounding area is home to many talented fusion scientists and engineers. Industry has grown up around the research centre to spin-out technologies and supply equipment and services to the research activity.

Tokamak Energy and other private companies are now pushing ahead to bring fusion technology closer to commercialisation - tackling the engineering challenges rather than delving too deeply into the physics. Tokamak Energy has a bold plan to develop fusion energy quickly in compact tokamak devices similar to MAST. This is scientifically close to the mainstream but utilises new engineering materials such as high temperature superconductors to make vital improvements. Tokamak Energy is actually building on the UK's strong fusion position in two vitally important clusters of technology: fusion research and superconducting magnets.

A bold plan such as this requires investment in R&D - far more than £5m per year and £20m in total. With insufficient government support, capital from overseas becomes much more attractive, if not the only option. This can so easily lead to exciting companies moving out of the UK.

So, will we miss our big chance with fusion energy? The government's commitment to growing new industry is heartening, but will it be enough to nurture high-risk-high-gain world changing technologies such as fusion? The government doesn't need to pick individual winners itself, but it should be willing to support winners selected by private investors. The result could be UK commercialisation of the future's most important energy technology; the alternative could be another sorry tale of UK world-leading research being commercialised elsewhere.