Richard Lambert, the new director general of the UK’s leading employers’ organisation, the Confederation of British Industry (CBI), talks to Nick Flaherty about the role of the government and business in innovation.
Richard Lambert was editor of the Financial Times newspaper until 2001, and from June 2003 he was one of the nine members of the Monetary Policy Committee of the Bank of England, which sets the interest rate for sterling, the currency of the United Kingdom. In March 2006 he was appointed Director-General Designate of the Confederation of British Industry and he assumed the role of Director General of the Confederation of British Industry in July.
After studying at Oxford, Richard joined the Financial Times in 1966, as trainee companies reporter and joined the Lex investment column, becoming its editor in 1976. Three years later he was appointed financial editor. In 1982 he became New York bureau chief to broaden his international experience. After a year he returned to the UK as deputy editor and in 1991 he took over the editorship.
Nick Flaherty: The UK has the strongest cluster of chip design companies in Europe. Is there a role for government in supporting and stimulating clusters of excellence, and if so, how far should government go, or is it up to the market to see which clusters survive?
Richard Lambert: I think where clusters have been established then there is a role public finance to support the technology, but it has to be driven by brains and demand, and there is a good strong cluster in the southwest region.
NF: Is it important for the UK to have a strong electronics design industry? Should we leave silicon chip design to the clusters in Silicon Valley, San Diego and now Bangalore?
RL: I get very worried when I hear companies shifting stuff to Bangalore as I think it is important that we have design and intellectual property and the value added stuff that we have. But we can’t make it happen by saying you can’t export design to Bangalore or China, and we shouldn’t try to prevent people shifting value to India. What we have to do is boost training and education and help to build bridges with universities. We have good universities in the UK and the important thing is that the intellectual property is being developed and sustained and cherished in the region.
If you look around at the spin-offs in electronic games around Liverpool, and the Cambridge phenomenon now has its own momentum, I am quite bullish. We have good universities and the important thing is that the intellectual property is being developed and sustained and cherished in the region and in the country.”
NF: Financing is vital for startups looking to compete in global markets - in your opinion do the venture capital providers contribute enough money for innovation in the UK, or could they do more.
RL : I think finance is also an important issue. In my view venture capital is focussed on the later, less risky stage but the problems are with funding the proof of concept and development stage, providing the management and the leadership. I go all over the country and see university spin outs with brilliant ideas but with people who don't know how to lead. We have things to learn about early stage finance.
There is a good network of angel investors and very good funding from the City through things like IP2IPO for university research in return for a share in the intellectual property.
NF: In the CBI’s opinion, is it important to have a UK VC community for the silicon design market or are US VCs more experienced, more efficient, more aggressive and therefore more competitive at providing capital?
RL: There is an innovation stage driving it, but I think we could do with more of this. I think public funding should apply to areas where there has been a market failure, and this is one. The CBI is very enthusiastic about the new Technology Strategy Board (see below). This is about being able to identify the areas for public funding and a shared focus on significant, demand-led business.
NF: The Foresight panel was meant to do this 10 years ago by identifying winners to back, but had little impact. How do we avoid a repeat of Foresight?
RL: We don’t back winners. We ask business to identify areas such as energy and you essentially play a venture capital role and back it on a scale that makes a difference.
The CBI has called for a new approach to innovation in the UK and the creation of the equivalent of the US Advanced Research Projects Agency (ARPA) to make the most of the UK’s £150bn spending on procurement each year.
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Help or hindrance?
A survey of business leaders by the CBI and research group Qinetiq showed that the vast majority of companies believe that current government procurement practices actually hinder innovation, rather than help.
“Collectively it’s really bad picture on the way things are going with government procurement,” said Tim Bradshaw, director of innovation at the CBI, speaking to a seminar at Airbus Industries in Bristol. “We need to develop clever solutions for the UKJ that can work with government departments and identify what they need, and new rules in European procurement allows us to do that.”
The new agency would build on the Technology Strategy Board, which currently has £90m a year to invest in new innovative projects. This was launched with six areas of focus back in April, including a focus on electronics and photonics.
This could be boosted to £600m a year with money from the Ministry of Defence and from other research budgets. “That’s the equivalent of the EPSRC research council funding, and if we could do that we will be in a good position for the future,” said Bradshaw.
The case for a UK version of ARPA is the lead recommendation in a new report from the CBI, ‘Innovation and public procurement – a new approach to stimulating innovation’. Other proposals include introducing innovation incentives in public procurement, procurement on the basis of value rather than lowest cost bid, and taking a rational approach to intellectual property rights so that companies, rather than the government, keep more of the IP value from their innovation.
