The Government does not have a coherent strategy to support the commercialisation of technological innovation in the UK, MPs have warned.

According to evidence taken by the Commons Science and Technology Committee, there is no coherent innovation policy and the Government does not have adequate mechanisms in place to leverage academic research into economic benefits. As a result, UK technology companies and entrepreneurs are effectively being forced to seek private equity investment.

Seeking private equity investment drives small companies into the arms of larger overseas companies before they can develop into the medium sized enterprises that would produce jobs in the UK, the Committee warned.

Committee Chair Andrew Miller MP, said:

“The UK’s university and science sector is a global success, but the challenge for Government is how that world class academic research can be translated into commercial activity.

“Whilst we are encouraged by the work of the Technology Strategy Board (TSB) and the Catapults, British entrepreneurs are being badly let down by a lack of access to financial support and a system that often forces them to sell out to private equity investors or larger foreign companies to get ideas off the ground.”

The Committee said finance is a major obstacle to the commercialisation of technology in the UK, citing regulation to de-risk pension funds as inadvertently closing off a patient source of capital for firms that need time to develop technologies.

Government grant funding is often highly bureaucratic to apply for and only enough to “get an idea off the ground”, the Committee said.  And despite Government schemes to encourage bank lending to business, the Committee heard that banks were often requiring entrepreneurs to provide family homes as security to obtain these loans.

Andrew Miller MP, added:

“Equity investments have a place, but too many companies are forced into over-reliance on this route because other types of funding are unavailable.

“Pension funds used to be a source of patient capital for firms that needed time to bridge the so-called ‘valley of death’ and get new technologies to market, but regulation has changed the way they operate and restricted this sort of finance.

“The Government needs to look at how it can provide the infrastructure to support innovation by ensuring small technology firms have access to finance, facilities and advice.

“The new business development bank could help in this area and the Government should seek to develop the market in technology equities and ensure that the market has access to information that may change the perception of the relative risk of these equities.”

The Committee is calling for a coherent strategy across the whole of UK industry to provide UK business with confidence in where they might expect Government support for the medium and long term—whether through fiscal policies or R&D focus.

The report calls on the Government to change the financial framework to incentivise more smaller companies to grow further independently, rather than sell out. It also says that Ministers needs to make choices in terms of which sectors to prioritise when assisting R&D investment.

This news brings up the interesting case of the water sector, where governments in other countries such as Israel and Canada have a far more hands-on approach to R&D in the sector than the UK has. In Israel, the national water company Mekorot gives start-up companies technological analysis and support services, test sites and funding in order to get promising projects off the ground.

In Ontario, Canada, the WaterTAP (Technology Acceleration Project) was established by the Ontario government to help small companies reach the next level in their development. Most importantly, WaterTAP helps striving water technology companies find opportunities to test and validate their products and technologies with pilot programs administered by local Ontario water utilities.

The debate about water innovation in the UK is nothing new, but so far little government support has emerged. Are small UK water technologies at risk of losing out to overseas companies in winning business in the water industry?