The Institute is pleased to comment on the specific points raised by the committee:

THE INDUSTRIAL APPLICATION OF GOVERNMENT-FUNDED RESEARCH

  Large industrial companies rarely exploit directly Government-funded research discoveries or the related intellectual property that is created. Valuable and important links do, however, exist between publicly funded research and UK industry. The range of these interactions is large, though some may at first appear to be somewhat subtle. Among the most beneficial links are the skills, the techniques, the instrumentation and the professional networks established by publicly funded researchers, which are taken into industry by individual researchers. Physics and engineering are noteworthy in that the interactions between academic research and industry are especially pervasive.

  Generic technology-underpinning research is a proper strength of the universities, extending the knowledge base in key areas, such as materials behaviour, which are and will continue to be of vital importance to UK industry.

  The linkages of publicly funded research to UK industry vary in extent from one government agency to another. An area of particular concern is the MoD which is found to draw in more nuclear research from the industrial sector than it yields in return.

THE RESPECTIVE ROLES OF GOVERNMENT LABORATORIES AND INDEPENDENT RESEARCH AND TECHNOLOGY ORGANISATIONS

  The Institute notes that Government laboratories benefit from the close co-ordinated efforts of their many scientific and technical groups. As such, a modern laboratory provides the possibility of assembling large experimental facilities of exceptional complexity; the ability of individual researchers to meet formally and informally to cross-fertilise ideas; the possibility that such UK centres of excellence will act as magnets to attract world experts to the UK; and the possibility that these laboratories' high scientific visibility will enthuse the next generation of young scientists. Such large laboratories can benefit from economies of scale over an alternative dis-aggregated structure.

  The role of most Government laboratories and of many independent research and technology organisations has changed in recent years. As research is a long-term endeavour it is still too soon to judge the full consequences of these changes. The changes in strategy have tended to emphasise technology transfer and more rapid returns. It would appear that there is an increasing transfer of technology into the industrial sector; in a free market of ideas these transfers are not necessarily to UK companies.

THE OPERATION OF GOVERNMENT SCHEMES DESIGNED TO PROMOTE COLLABORATION IN, AND INDUSTRIAL APPLICATION OF, RESEARCH

  Even prior to recent Government initiatives the Science Policy Research Unit at Sussex University, in a survey of inter and intra-sectoral collaboration from 1981 to 1991, demonstrated that inter-sectoral collaboration in the natural sciences was strong. They note that university-industry collaboration, as revealed by the published literature, is second only to university-university collaboration, and as such exceeded even university-research council collaboration. Across all sciences SPRU note that university-industry collaboration showed the strongest proportionate increase. Looking in detail at collaboration, SPRU find that physics is the second most collaborative science both in total and in international collaboration. (The most collaborative being "inter-field natural sciences".)

  It is particularly interesting to note SPRU's tracking of the balance between collaborative and non-collaborative science over these years. Both in terms of number and proportion of papers there is a clear trend away from single group work in favour of collaborative endeavour.

  Privatisation reduced the sum of what was previously public sector research. With the possible exception of BT, the major laboratories operated by those industries have either declined substantially or closed. These laboratories contributed substantially to the national knowledge base, often in generic fields of wide relevance to industry. For instance the CEGB was a prime mover in driving forward the science of fracture mechanics. Post privatisation this area of science is not being pursued.

  There appears to be an increasing emphasis on the need for collaborative industrial research to secure European funding. However, European funding is not well suited to producing innovation which can be exploited nationally. There is generally a large overhead in establishing the required industry-industry relationships which must be funded up-front without any indication as to whether costs will be recovered. These factors deter smaller enterprises. Further, the time-scale of decision making is so protracted that companies are reluctant to offer research topics where there is urgency attached to obtaining the results. Shared intellectual property arrangements usually mean that it is sensible for companies to propose only generic topics. Moreover, there is no tax incentive for industrial collaborators to participate in these exercises.

INTELLECTUAL PROPERTY RIGHTS AND PATENTING

  There is a tendency in debates on this topic to over-emphasise the issues surrounding intellectual property rights and patenting. Companies appear to place more faith in know-how and ensuring rapid entry into the market. The Institute believes that the best strategy is for companies to be ahead and to stay ahead of the competition.

THE PROVISION OF FINANCE TO SUPPORT ENTERPRISES INVOLVED IN THE APPLICATION OF RESEARCH AND INNOVATION

  The Institute is pleased to note the comments in the Bank of England's fifth annual report Finance for Small Firms, where it is noted that UK clearing banks are responding well to the challenge of adopting new approaches and developing innovative products to assist in the financing of the technology sector.

  Venture capital, bank lending, business angels and other aspects pivotal in ensuring the success of high-technology start-up companies are still areas that could be improved further. It is important that investors realise that returns on physics related high-technology developments can be more rapid than in other sciences.

  The Institute concurs with others who take the view that scientists and technologists are undervalued when compared with financial specialists. The Institute recognises that products can only be sold in the market at the market price and if extra money is to be allocated to paying scientists and technologists then economies must be made elsewhere. Despite this, the Institute suggests that the UK should in some way reassess this balance between the remuneration of scientists and financiers.

THE ROLE OF THE FORESIGHT PROGRAMME IN FOSTERING NETWORKS AND IDENTIFYING PRIORITIES

  The Institute believes that Foresight was an effective way of fostering networks and of beginning to create a vision of a way forward. However, it is important to realise what processes such as Foresight can and cannot deliver and avoid looking to it to solve too many problems. The Institute does not believe that Foresight can, or should, be the main driver of technological innovation in the UK. Foresight is a consensus exercise and innovation is by its very nature not a consensus process. Rarely are true innovators willing to share their perceptions with others (including a Foresight panel) too early.

  In discussions of the shape of the 1999 Foresight round with Government the Institute urged that particular care be taken to ensure the involvement of smaller firms. The kinds of large companies that have participated have always engaged in strategic, long-term planning; they probably have less need of a national programme. Smaller enterprises often find it difficult to keep abreast of technological developments and opportunities, yet are sometimes ideally placed to respond rapidly to changing markets. The Institute firmly believes that the knowledge generated by Foresight must be continually updated by the views and needs of all interested parties. To be effective it should be made available in an immediately useful form. The creation of a Web-based national resource is one ambitious solution.

 THE ROLE OF THE ENGINEERING AND PHYSICAL SCIENCES RESEARCH COUNCIL IN FOSTERING TECHNOLOGY TRANSFER

  Here, the Institute believes that EPSRC could be more pro-active. The EPSRC could create networks to inform industry of long-term UK research prospects and to create mechanisms to facilitate transfer of both specific ideas and tacit knowledge into industry. These transfers are effectively made when people move from one environment to another. Currently the EPSRC's efforts in the training of post-graduate students and post-doctoral researchers are excellent examples of support for this aim. The EPSRC is weaker, however, in the reverse flow of industrially based researchers into specific university projects and networks. The Institute is concerned that too often university proposals positively supported by industry are rejected on the basis that industry should, if they have that level of interest, finance the work fully.

  The Institute applauds the EPSRC for establishing four "Faraday Partnerships" which emphasise the role of intermediaries in the process of fostering collaboration between British research and industry. However, the Institute notes, with disappointment, that the Department of Trade and Industry did not match the EPSRC's commitment in this regard. The Institute is concerned that the four pilot partnerships, with their differing frameworks, do not represent a sufficiently large ensemble on which to base firmly future policy.

  In conclusion, the Institute would like to emphasise to the committee that Physicists are happiest when working in a world-wide free market of ideas. Physicists are always open to novel concepts and innovative developments. The benefits of physics to the modern world are massive and complex. The Institute would suggest that rather than attempting to assess the importance of UK publicly funded research in the physical sciences on UK industry the more natural and useful issues are:

  The impact of world-physics on UK industry, and

  The impact of UK physics on world-industry.

  The Institute trusts that UK industry will continue to draw upon innovations in the physical sciences and be receptive long into the future. In addition, the Institute trusts that UK physics will be sufficiently healthy to continue to play its profound role in the technological development of our modern world.

  The Institute is a learned society and the professional body for physicists in Great Britain and Ireland, with more than 22,000 members distributed across all sectors of the economy including both higher education and industry. The Institute has approximately 25 affiliated companies including many of the largest high-technology corporations operating in the UK.

  The Institute would be pleased to elaborate on any of these matters at the convenience of the committee.

13 March 1999