The UK has established itself as the leading biotechnology nation in Europe and remains second in the world, after the United States. However, many other countries are investing heavily in an effort to develop their own biotechnology capacity. The UK cannot afford complacency.

The UK's world reputation in biotechnology is based on its long-established reputation for excellence in research in the biosciences in its universities, teaching hospitals and research institutes. However, such research is suffering from long term under-investment which could threaten the UK's continued strength in biotechnology.

Many biotechnology companies have been founded on discoveries made through academic research. If the UK is to take advantage of the commercial applications of its academic research an efficient technology transfer process is required. At the moment that process is less developed here than it is in the USA. Whilst there are institutions where it is done well, and a steady improvement can be expected as expertise spreads, we are concerned at the variable quality. We recommend efforts to improve the technology transfer process nationwide through steps to promote best practice.

Biotechnology companies in the UK are less well funded than their competitors elsewhere. The Government's support for commercial biotechnology is modest - many countries are targeting government funds at the sector. But we are not convinced that this public money will guarantee success. An adequate supply of venture capital is crucial to the continued success of biotechnology. The UK has a well developed venture capital sector but the timescales over which it is prepared to invest are not as long as the biotechnology firms generally require. Biotechnology across the world is evidently suffering from the consequences of a bear market, but there are signs that this will bring about a period of consolidation in the sector which may prove beneficial in the long run.

The positive effects of clusters can be seen in cities such as Cambridge, Boston or Munich. Young companies, in particular, can benefit from the concentration of biotechnology activity in a relatively small area. We are concerned, however, that efforts to create new clusters risk proving expensive failures and that competition between UK regions could potentially damage the UK's biotechnology effort as a whole. We should be primarily concerned to reinforce the success of our most internationally competitive locations.

We have concerns over the shortage of management and intermediate skills in the sector. We recommend that the government, universities, RDAs, and the trade organisations work together to improve provision of training in these areas. Also, there is a shortage of biomanufacturing in the UK. Whilst this is not necessarily a problem at the moment, the development of biomanufacturing in other countries may deprive the UK of the potential additional value associated with this. The links between R&D and manufacturing in biotechnology may provide an opportunity for UK-based manufacturing in areas close to R&D centres.