Steph Morris, YU Associate Consultant
Updated: Source Advisors, the UK R&D tax credits and innovation specialists have officially rebranded from GovGrant as of 1st February 2024.
A new report on spin-outs sets out a vision for a future in which universities are central to thriving spin-out ecosystems, working with partners to deliver local economic benefits. What can universities do to make that future a reality?
The Final Report of the Independent Review of Spin-out Companies provides a positive endorsement of the role that universities play in connecting and convening local stakeholders. The report describes a desired end state where universities in the UK partner with their local spin-out ecosystem to prioritise the rapid creation of spin-outs on market competitive terms.
On the face of it, Yorkshire & the Humber has many of the attributes of a successful spin-out ecosystem. Yorkshire is home to a wide range of leading R&D assets, such as the Advanced Manufacturing Research Centre (AMRC) and the Advanced Wellbeing Research Centre in Sheffield, 3MBIC in Huddersfield, Nexus in Leeds, AURA Innovation Centre in the Humber, the Biorenewables Development Centre in York, and the Wolfson Centre for Applied Health Research in Bradford. Programmes, including MIT REAP in Leeds City Region and MIT REAP UK in Sheffield City Region, have also shed light upon the value of innovation-led entrepreneurial growth. The University of Sheffield has recently adopted a ‘founder focused’ commercialisation journey, and a case study on their approach is presented as an example of best practice in the report of the Spin-outs Review.
According to the latest HE-BCI statistics, universities in Yorkshire generated £44.4 million in income from Intellectual Property (IP) in 2021/22. This places the region third out of all twelve UK regions and devolved nations in terms of university income from intellectual property. Spin-outs and start-ups from universities in Yorkshire make a positive contribution to the regional economy, generating £160 million in turnover and securing £23 million in external investment in 2021/22. Spin-outs that retain some university ownership in Yorkshire perform well compared to national counterparts, with these firms having higher average turnover per firm and employing higher numbers of people compared to spin-outs in most other parts of the UK. The region benefits from a well-established commercialisation ecosystem, with a wide range of specialist skills and effective systems for collaboration and knowledge sharing. Yorkshire Universities operates a tried and tested mechanism for HE institutions to share best practice, collaborate and achieve economies of scale in commercialisation, opening up dialogue between research intensive organisations, applied universities and small, specialist institutions. This diversity is a strength for the region, bringing together a range of research and enterprise specialisms alongside a highly-skilled professional services workforce.
In terms of funding, Northern Gritstone, the investment business focused on university spin-outs and IP-rich businesses in the North of England, has already announced investments in 15 companies across advanced materials, health technology and AI, as part of deals that have contributed nearly £100m in funding. In October, Northern Gritstone announced a final close of £312m anchored by investments from local authority pension funds, alongside additional investments from Mayoral Combined Authorities in Greater Manchester, West Yorkshire and South Yorkshire.
So, the picture looks pretty good for spin-outs in Yorkshire, then? Well, not quite. Despite the region’s considerable commercialisation strengths and successes, there is a major disparity in access to finance between spin-outs in Yorkshire, and those elsewhere in the UK. Yorkshire ranks 11th of the twelve regions and devolved nations in the UK for the overall value of external investment received by spin-outs, and 10th for the average value of external investment per spin-out. According to the University Spin-out Report 2021, Healthcare and IT are the sectors that receive the highest values of capital investment in spin-outs in the UK. However, despite regional research and commercialisation specialisms in the healthcare and IT sectors, investment is not reaching spin-outs in Yorkshire at a representative level. HE-BCI data points to a systemic issue regarding access to finance for spin-outs in the North of England as a whole, with the North West and North East similarly lagging alongside Yorkshire at the tail end of the investment rankings.
The solution to the problem is not just about increasing investment. The Independent Review of Spin-outs found evidence of investors encouraging companies to move from their founding location, with the greatest number of relocating spin-outs moving to the ‘Golden Triangle’ of London, Oxford or Cambridge. So not only are spin-outs in Yorkshire under-invested, those that do receive investment are at risk of being drawn away from the region as they scale and grow, further exacerbating the split between North and South.
The real issue is that spin-out ecosystems in the North are under-developed. The Independent Review of Spin-outs has acknowledged that emerging spin-out ecosystems beyond the Golden Triangle have not yet matured to the point where IP, talent, capital, and support services are truly self-reinforcing. Addressing these complex issues requires coordinated action across a range of stakeholders from HE, local and regional government, the private sector, and the investment community. And this can only be achieved with the buy-in of all parties and the long-term commitment of funds and resources to strengthen the ecosystem. However, in the absence of devolved budgets for research & innovation, many regions lack the resources to develop and deliver autonomous strategies for the growth of their spin-out and enterprise ecosystems.
What can be done to address regional inequalities in spin-out ecosystems? One simple, but effective, answer is: to collaborate. Recent examples of collaborations both within regions (such as the Technology Transfer Office collaboration between the Universities of Manchester and Salford) and between regions (such as the innovation partnership between Manchester and Cambridge) demonstrate that HE and policy leaders recognise the value of acting collectively. Ecosystems are built on connections, and universities are uniquely positioned to convene partners across all sectors to ensure that spin-outs can access the talent, professional support and finance that they need to thrive. This approach, with its emphasis on brokering and leading partnerships is at the heart of Yorkshire Universities’ Strategy and underpins all of the work we do to champion aspiration and opportunity across the region.
