Despite the UK having a successful university and science sector the government has no coherent strategy to translate that into a commercial success says the Science and Technology Select Committee.
Andrew Miller MP, the chair of the committee, 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.”
The committee’s report (Bridging the valley of death: improving the commercialisation of research) says that UK companies are often forced to look abroad for funding in order to turn ideas into profit. This means a loss of revenue, wealth and jobs for the UK as equity stakes or even whole companies are sold off out of the country before ideas can be developed.
Andrew Miller, Labour MP for Ellesmere Port and Neston, also pointed out that new regulations have restricted the use of pension funds as a ‘source of patient capital’ that safely steered many companies needing finance to get their innovations off the ground through the so called ‘valley of death’.
The committee, which consists of five Conservative MPs, Four Labour MPs, one LibDem and one from Plaid Cymru, also found that existing government schemes are often too bureaucratic and entrepreneurs were often asked by banks to put their family homes up as security for funding.
The report is calling on the government to put in place a financial framework that would give small UK companies the confidence to see their ideas through to profit in the UK rather than feel forced to sell them off abroad.
Dermot Campbell, Managing Partner at Kuber Ventures responded to the report by saying:
“Britain has a fine tradition of producing some of the world’s leading technology companies and yet it is clear that in these austere times, the lack of access to funding has caused a bottleneck that is preventing many companies from growing to their full potential.
“At seed level, technology companies receive some support for development through generous incentives. However, the reality is that these companies encounter considerable challenges at round two of the funding process.
“With options limited to them, technology companies look for alternative investments to help them sustain growth, however, one of the most significant incentives is due to end on 5th April 2013, as the absolute saving of Capital Gains Tax on Seed Enterprise Investment Scheme (SEIS) comes to an end.
“Thankfully, by level three funding, the bottleneck improves and programmes such as the Enterprise Investment Scheme (EIS) are on hand to help support future development. Technology companies currently make up a significantÂ percentage of the small businesses in the UK involved in the scheme and it continues to prove very popular.’
“With the budget approaching, this call to arms by the select committee should play into the wider issue faced by the Government, namely that the lack of commercial funding is stifling the future growth of the economy and should be addressed with both commitment and urgency.
“We would like to see an extension of the Capital Gains Tax exemption into the 2013/14 tax year and extended to second round funding so both investors and small businesses can benefit”.