The impact of the Innovation, Research and Technology Sector on the UK economy

A Report from Oxford Economics

Commissioned by AIRTO

Published November 2014

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The Study Methodology

• The data presented is obtained from:

• Survey responses to Oxford Economics from AIRTO members• Published information from other sector companies and

organisations• Case studies on specific activities within the sector• Other published economic data available to Oxford

Economics

Using standard methodologies and analysis applied by Oxford Economics

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The IRT Sector

56 AIRTO members and 170 selected other businesses

• Public Sector Research Establishments (PSREs)• Research and Technology Organisations (RTOs) including the Catapults• Private Contract Research Organisations (CROs)• Selected university enterprise/technology transfer departments• Selected industry research and development departments• Selected business support organisations

Turnover £6.9Bn pa. Total contribution to UK GVA £32Bn-£36Bn

80% by turnover are members of AIRTO

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Sector network

• Much larger than the Fraunhofer network

• Much wider range of activity

• A network of networks• Employs 57,200 mainly

technical, highly qualified staff – comparable to 20 research intensive universities

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AIRTO members

AFRC Leatherhead Food Research

AHVLA LGC

AMRC with Boeing Lucideon Limited

ARUP Medilink (Yorkshire & Humber) Ltd

AWE MIRA Ltd

Axillium Research MTC

BCIS National Institute of Agricultural Botany

BHR Group National Nuclear Laboratory

BM TRADA National Physical Laboratory

BMT Group Ltd NCC

BRE Group NNFCC

BSRIA Ltd Nuclear AMRC

Campden BRI PA Consulting Group

CIRIA Pera Technology

City University London QinetiQ

Connected Digital Economy Catapult Quotec Ltd

CPI Satellite Applications Catapult

C-Tech Innovation SATRA Technology Centre

Fera SCI

FIRA International Ltd Smith Institute

Fraunhofer UK Research Ltd Thames Innovation Centre

Fripp Design & Research Ltd Thatcham

Halcrow Group Ltd The Scotch Whisky Research Institute

Health & Safety Laboratory Transport Systems Catapult

High Value Manufacturing Catapult TWI Ltd

HR Wallingford Group Ltd University of Greenwich

Institute for Sustainability University of Surrey

ITRI Ltd WMG

AIRTO members in the analysis1

1 AIRTO members as at June 2014 and therefore counted as such in the statistical analysis in this report. Since then (as of 1 October 2014) three other organisations have joined: East Malling Research, the Organic Research Centre and the Science & Technology Facililties Council (STFC). AWE, Halcrow, ITRI, Quotec and SCI are no longer members. AHVLA has changed its name to APHA (Animal & Plant Health Agency).

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AIRTO members - what they doConsul-tancy, 39%

Testing and accreditation, 25%

R&D, 23%

Training, 5%

Technology transfer, 4% Other, 3%

Source: Survey of AIRTO members 2014

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TWI Structural Integrity Case Study

• Life extension of drilling rigs for Sedco Forex (now Transocean).

• Programme for seven rigs reaching theend of their original fatigue design life.

• Involved fatigue improvement techniques and calculation of fatiguelife after repairs and modifications.

• Rigs continue to operate well past original design life, instead of replacingat $200m each.

• Life extension for an additional 20 yearscost 10% of cost of replacement.

• 60% of work carried out by Sedco Forex with 40% specialist TWI support.

Enhancing productivity of capital assets

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Expertise in

• Applied research• Translational research• Innovation• Technology• Demonstration• Commercialisation• Scale up• Testing• Regulation• Compliance• Asset management• Business support

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Driving innovation - reducing riskCumulative

Investment (£)

Source: AIRTOTechnology readiness levelsTechnology readiness levels

TRL3 TRL4 TRL5 TRL6 TRL7 TRL8

AIRTO members’ typical zone of impact

Risk

Universities Industry

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Well qualified work force

75% workforce qualified to degree level12% workforce on postgraduate courses

As employers:73% of AIRTO members offer work experience70% of AIRTO members undertake schools outreach50% of AIRTO members offer internships

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Regional coverage

South East, 30%

London, 18%

South West, 13%

West Mid-lands, 10%

North West, 8%

Yorkshire and the

Humber, 4%

East of Eng-land, 4%

East Mid-lands, 4%

Scotland, 3%

Wales, 3% North East, 2%Northern Ireland, 1%

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Working with LEPs

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Sectoral coverage

0

5

10

15

20

25

30

35

a b c d e f g h i j k l

% of responses weighted by turnover

Source: Survey of AIRTO members 2014

Aerospace & defence aConstruction bOther cProfessional services dEducation eLife Sciences fNuclear gAgri-tech hOil and gas iInformation economy jAutomotive kOffshore wind l

Key

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BRE BREEAM Case Study

• First voluntary assessment method for buildings in the world, launched 1990.

• Encourages developers and customers to go further and faster than requiredby regulation.

• Suite of products now available.• >1 million buildings registered for

assessment.• 250,000 have certified BREEAM assessment ratings.• Method assesses nine criteria: energy, transport, health and wellbeing, water,

materials, waste, pollution, land use and ecology.• Balanced scorecard approach – overall performance can be achieved in a range

of different ways.

Environmental Assessment Methods for Construction Worldwide

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Revenue by source

.EU grants, 6%

UK government grants, 5%

Core UK government funding, 26%

Competitively tendered UK government

contracts, 25%

Of which from SMEs, 9%

Of which from large firms, 25%

Other (Private sector)

34%

Source: Survey of AIRTO members 2014

Non-UK NationalGovernment funding, 4%

Clients SMEs Private Core GovtPLCs/private companies (15) 5% 31% 27%PSREs/universities (10) 8% 30% 38%CLG/non-profit-distributing (31) 20% 53% 5%

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Revenue globally

UK Rest of the EU Rest of the World0

10

20

30

40

50

60

70

80

90 Private or public limited companies

Companies limited by guarantee or non-profit distributing

Universities and public sector organ-isations

% of revenues

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MIRA Case Study• 842 acre MIRA Technology Park in Leicestershire.• 35 major laboratory test facilities and 93km proving ground.• Host to 30 leading global companies, both vehicle original equipment

manufacturers and their supply chain.• Planning consent for further expansion of R&D floor space targeted at

attracting businesses wanting to establish a UK R&D operation.• Anticipate 2,000 jobs will be created, the majority being high value

technology posts.

MIRA Technology Park

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Productivity

Productivity: 45% higher than UK average3% real terms increase since 2006

Private AIRTO members

Non-profit AIRTO members

University/public AIRTO members

0 20,000 40,000 60,000 80,000

Source: Oxford Economics, AIRTO, organisations' annual accounts

0 20 40 60 80

Computerconsultancy activities

IRT sector

Architectural activities

Market research,public opinion polling

Scientific research anddevelopment

Technical testing and analysis

Motion picture, video and TVproduction

000 £ (GVA per employee per year)

Source: ONS, Oxford Economics

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Sector turnover and GVA

£6.9Bn turnover

Supports: £7.6Bn direct & supply chain GVA141,100 jobs£2.9Bn tax receipts

Total impact on UK GVA: £32Bn-£36Bn

(from all sources) 2.3-2.6% of UK total£13.1Bn tax receipts

Non–monetary contributions to society (e.g. to environmental and other policy goals) are on top of this.

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Leverage of government support

Govt core funding Direct & supply chain GVA Plus Spillover GVA Plus Catalytic GVA£0

£5

£10

£15

£20

£25

£30

£35

£40

Series2Series1

£Bn

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AIRTO’s Vision and Ambition to 2025

For the IRT Sector to increase in real terms 4% pa:-

• innovation in UK business/public services, as measured by contribution to GVA

• delivery of ideas and services, as measured by the number of private clients and government public services working with the Sector

• collaborations between business, government, academia and finance, including those involving overseas clients

• capacity to supply specialist skills, facilities and access to finance, including a commensurate increase in privately funded r&d and services

• and to increase the number of scientists and technical staff employed to ~92,000, yielding a productivity increase of ~10%.

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The ‘ask’ of Industry and Government

The Sector (and Industry) need to…

• Set ambitious goals• Champion the value of the sector as a significant UK asset• Capitalise on the academic research base

Government is asked to…

• Invest in the long-term capital infrastructure of the non-for-profit organisations

• Use public procurement to pull through innovation• Invest in building the UK skills-base• Use the knowledge of the sector to help inform national innovation

policy

 

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Summary

• Very large network• Highly productive• Highly qualified workforce• Well aligned with government

and industry priorities• Adapts to changing demand• Very effective at leveraging

government investment• Scope to scale up economic

impact still further

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Further information:

AIRTO LtdNational Physical LaboratoryHampton RoadTeddingtonMiddlesexTW11 0LWTel: +44(0)20 8943 6600Fax: + 44 (0)20 8614 0470e-mail: enquiries@airto.co.ukwww.airto.co.uk

Dr Jane GateDirector of OperationsTel: +44(0)20 8943 6354e-mail: jane.gate@airto.co.uk