https://innovateuk.blog.gov.uk/2018/05/09/place-people-and-purpose-innovation-clusters-driving-growth-in-the-north-of-england/

Place, People and Purpose – Innovation clusters, driving growth in the North of England

Place is prominent in the governments thinking within the new Industrial Strategy. The White Paper highlights the important role that science, research, innovation and skills provision is expected to play in driving productivity and economic growth throughout the regions and nations of the UK.

This sets the bar high for me and my team of regional managers at Innovate UK, and one aspect of that day-job is to understand where those clusters of science and innovation strength are throughout the UK. More importantly, we are also working with local stakeholders and colleagues within government to further our knowledge on how they drive local supply-chains or play a major role in delivering national outcomes.

….but what makes a good innovation cluster? This is more and more on my mind,  especially as I think about the panel debate on the role of innovation and technology that I will join in Manchester, at the FT UK Business Conference - Opportunities for Future Growth in the North on the 24th May. 

The importance of clusters

Strong innovation clusters are cited as positively influencing regional economic performance. At the heart of this is how they foster dense knowledge flows and spill overs from universities to businesses; from businesses to businesses; and in turn feeding back to inform the underpinning science.  They are said to have a strong role in strengthening entrepreneurship and to boost new enterprise formation.

How much do they enhance start-up survival, productivity and employment? There is a lot of good international evidence and this is generally positive.

However, what strikes me the most is that innovation clusters are complex ecosystems, over and above just a science base or industry supply-chain. Therefore, an area can have a critical mass by weight of research activity or businesses but that doesn’t necessarily make it a fully functioning innovation cluster. It needs to be connected and properly joined-up.

So, what of the role of government or civic authorities? Well I am not sure that it’s for government and its agencies to create clusters, but we can help stimulate the business, innovation and institutional environments vital for cluster success. The key role for government is that of enabling – whether in the form of providing direct access to finance where there is market failure or in less direct ways such as the creation of enabling policy frameworks or strategic action plans. Local civic authorities in particular have a very important role in providing local leadership. In my mind, strong leadership is crucial to success.

Creating safe places for people to carry out risky enterprise

….and if all of that sounds straight out of the MBA text-book, well I think there is a much simpler way of thinking about this. As my former colleague Kevin Baughan has said to me on a number of occasions, it’s all about creating safe places for people to carry out risky enterprise! Ultimately it is about the people. For a locality to grow its technology companies and those supply-chains it needs to attract the best talent.

However, innovation is risky and if we want to encourage entrepreneurial spirit we need to think about how we de-risk and make that more attractive for those involved. According to Bloomberg, 8 out of 10 entrepreneurs who start new businesses fail in the first 18 months. Whilst that statistic may sound alarming, the importance of start-ups to the economy is enormous, since the reward of bringing a new idea or technology to the market can revolutionise supply chains, improve productivity and can create new industries. These start-ups have an important economic purpose.

So, picture a young innovator, maybe with a young family and looking to settle and lay down roots for their family.  She or he is much more likely to settle and become a part of that local economy if the locality has a cohort or critical mass of innovative businesses and associated investors. In order that if the venture is not successful, then its relatively easy to start again or seek new employment without having to relocate. We therefore need to develop strong clusters to make a region sticky in order to attract and develop that pool of talent. Given time, success breeds success.

Scale of opportunity

Scale is also important, or should I say the right scale for the opportunity. I think that we have seen a very significant shift in thinking as we free ourselves from regional political boundaries and start to think about the regional coalitions that need to be formed around supply chains or economic geographies. If you want to see good examples of this then look no further than the Science and Innovation Audits (SIAs) that have been commissioned by colleagues in Department for Business, Energy & Industrial Strategy, (BEIS)

With waves 1 and 2 published and wave 3 looking to report later this year, there is a new richness of information and critical thinking on how we can further develop these complex ecosystems.

Innovation fuels the Northern Powerhouse

Turning my thoughts to the North, the idea of a Northern Powerhouse has really captured everyone’s imagination. I am sure that the further development of strong clusters will be vital to the future growth of the Northern economy. To fuel the powerhouse we need strong and innovative businesses.

Two years ago, the Northern Powerhouse independent economic review set out an overview of the North’s prosperity, productivity gaps and described its competitive advantage and sector strengths. For innovation, it describes the North competing on 4 primary capabilities; those of:

  1. Advanced Manufacturing
  2. Energy
  3. Health
  4. Digital

These 4 primes are a very close fit to how we have recently been categorising our core innovation grants to businesses, where Energy sits as a major activity of our Infrastructure group and Digital, for our Emerging and Enabling group.

If you accept that our nationally competed grant funding to a region is a good proxy for weight of innovation activity then comparing this to the capability maps in the independent economic review (not shown), suggest that the Northern Powerhouse has a pretty good understanding of its high-level strengths and critical mass (Figure 1).

Figure 1. Innovate UK’s funding to the Northern Powerhouse – all recipients

In fact, just looking back over the past 8 years, Innovate UK has invested almost £875 million to support innovation in the North of England. Since 2010:

  • almost £300 million has been invested in business-led collaborative research and development projects, enabling companies to work together and to engage with partners from the research base;
  • over £307 million has been invested in centres, such as the Catapults whose role is to transform the UK's innovation capability by providing support and access to cutting-edge facilities, equipment and expertise;
  • almost £50 million has been invested in Knowledge Transfer Partnerships, in which a business partners with a research organisation to bring in new graduate skills to deliver a strategic innovation project designed to improve competitiveness and productivity;
  • over £33 million has been invested in SMEs across the North through the Small Business Research Initiative (SBRI), that enables the development of innovative products and services through the public procurement of research and development.
Figure 2. Innovate UK’s funding to the Northern Powerhouse – grants to SMEs’ 
Figure 3. Innovate UK’s funding to the Northern Powerhouse – grants to large businesses.

Looking at the distribution of Innovate UK's funding for SMEs and when mapped across the North, you can start visualising where those clusters of innovative capability might sit (Figure 2).

As you might expect, concentrations of activity are associated with major urban centres such as Sheffield, Newcastle & Liverpool. It is also possible to see how these clusters of innovation activity align to industrial and research strengths in different areas, such as health & life sciences around Greater Manchester, and manufacturing associated with the process industries in the Tees Valley.  Agri-tech, is also of note for the more rural North Yorkshire.

Figure 4. Innovate UK’s funding to the Northern Powerhouse – academic organisations, Catapults and RTOs.

Clearly, the Northern Powerhouse is too big to treat as a single cluster and those clusters within will span different and varied scales of economic geography depending on the individual sector or technology. It’s going to be really important for the North to understand how these knowledge supply chains work, how businesses engage with the research base within and which businesses anchor and create the pull for that activity. It’s going to take focused leadership to make the total more than the sum of the parts and where to focus investment to best effect. With a world-class industry and research base, I know the North is up to the challenge and my team looks forward to remaining a critical friend.

Come and join the debate in Manchester

Well these are my thoughts but what about yours? Come and join the debate in a few weeks’ time. The FT UK Business Conference - Opportunities for Future Growth in the North event will bring together leading executives from local and global UK business, government and think tanks to explore the opportunities and challenges facing British business throughout the north of England in a post-Brexit environment. This event will highlight successful strategies and obstacles within innovation, talent, trade, growth, technology and all of the key areas of focus involved with maintaining and growing a prosperous business.

I am looking forward to it and I hope to see you there.

Contact

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