As the boss of Britain’s innovation agency, Dr Ian Campbell is no stranger to EU state aid rules. He has been funneling British taxpayers’ cash into early-stage start-ups for years.
It is no small task. By last November, Campbell had helped direct more than £2.2bn of public money in grants and loans across 11,000 projects, trickling down into thousands of companies. Almost all of that support came under Brussels state aid regime.
Those rules are now under fire. Dominic Cummings, the top Downing Street adviser, views European state aid rules as a major sticking point in Brexit talks with the EU and his ambitions to cultivate new UK national tech champions.
The issue surrounds how the rules are devised, preventing loss-making companies from accessing taxpayer support. Remove the regulations, the thinking is, and a wave of fresh cash could be poured into cash hungry start-ups. What this could do, government figures say, is create a plethora of potential future tech leaders.
With Campbell at the mercy of onerous rules blocking investment for years, it may be easy to imagine that he would be among the most fervent proponents for scrapping them after Brexit.
But Campbell says, “from my perspective, I don’t believe state aid rules impinge on [Britain’s tech ambitions]".
“Should we be placing big bets? Absolutely,” says the 48-year-old Scot . “We need to identify those thematic sectors where the UK could be world-leading. And large investments in great ideas, under a very clear set of circumstances so for example using tranche funding, could leverage unicorns in the UK. Almost definitely.”
In his view, though, state aid rules don’t stand in the way of this. There are other, more significant barriers. For example, Campbell says, “many start-ups are created too early on too little IP and therefore can’t attract the type of investment to grow them quickly”.
Abiding by state aid rules can be a “challenge”, he admits, but to date “something like 99pc of companies have been able to navigate the rules and receive funding from Innovate”.
In fact, “sometimes state aid rules can be beneficial, and allow state funding to actually go forwards”. “We shouldn’t think it is all bad.”
This is not to say Campbell does not think there is room for improvement. As the UK carves out a new subsidy regime, there are lessons to be learnt from Brussels. “If we can eliminate the complexity, the need for some kind of state aid regime I think will be clear and will allow us to fund in a more effective and rapid way.”
What’s more, Innovate “has to do some pretty serious financial due diligence at the moment”. “Not that we shouldn’t do that, but that may be transformed by automation”.
Campbell may be thinking about the future of Innovate, but it’s a future he won’t be there to experience first hand. Earlier this year, he announced he would be stepping down from his post as interim chairman.
He is expecting to leave the agency, which is part of UKRI, in November, and move to medical research charity LifeArc which looks to turn research into treatments.
“Ultimately I’m a life scientist. Roles like what I’ve been offered at LifeArc don’t come up every day. I hope I’ve left Innovate in a prosperous state and in a good position for somebody to come and take forward.”
Whoever that is should be someone with a “fresh perspective, because innovation should be novel,” Campbell says. “I would like someone who’s going to transform Innovate.”
His successor will be joining at a busy time for Innovate. The organisation has played a significant role in the Government’s response to Covid-19. In April, £750m of targeted support for small and medium size firms was made available through Innovate UK. For one of its competitions, to find ideas that could help in the crisis, it received 8,600 applications in ten days.
“That’s more applications than we received through the entire financial year 2019/20,” Campbell explains. “It’s been quite a surreal time, this past six months.”
He hopes it will form the standard for how cash should be portioned out in future. “We asked fewer questions, had much lower levels of administrative burden for the applications, and accelerated the payments so the companies could feel the benefit much earlier.”
Even before Covid-19 hit, 2020 was set to bring much change at Innovate UK. Earlier this year, Rishi Sunak announced a new “blue-skies” research agency would be set up, modelled on the US Advanced Research Projects Agency and expected to sit separately to the existing UKRI organisation.
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Campbell has been cautious over how the organisations would mesh. Writing in the Telegraph, he warned against "implicitly jettisoning some of the institutions so recently created".
His view hasn’t changed. “I think the connectivity between those strands works together,” he says. “They need to be synergistic and not competing, so you get maximum value out of the public funding of research. That should really be all of our goals.”
Getting value out of this funding of research is not always an easy task. In the past, Innovate has come in for criticism that many of those companies receiving funding under its grants and loans could not attract private capital, and so should not be receiving taxpayer cash.
Campbell is clear that not everything funded by Innovate will be successful. “I personally would like us to take more risk, and be accused of being overly ambitious with some of the instruments we’re funding.”
Within the next few months, that will no longer be up to Campbell anymore. He may be hoping for a successor who will transform the organisation — but, with major decisions on state aid rules and research agencies on the horizon, it seems change will happen irrespective of whoever takes the helm.
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