Innovation nation

For years, the UK has enjoyed pole position in the chemical sector, and today it still accounts for the lion's share of the UK's domestic output and manufacturing exports.

According to the UK Chemical Industries Association (CIA), the chemical industry in the UK employs 230 000 highly skilled people, and accounts for 2% of Gross Domestic Product and 10% of manufacturing industry's gross value added. Food and drink alone — one of the biggest process sectors — account for more than £66billion of business a year.

By any standard, these figures are impressive. But it's important to recognise that these figures only show what has been achieved in the past. Continued success in the future will depend on a completely different set of numbers — the amount of money that the industry is spending on researching and developing new products and processes.

OECD figures show the UK chemicals sector (excluding pharmaceuticals) is spending much less on R&D than the rest of the world — 5.6% of gross value added compared to 7.3% for Europe and 8.0% for the US.

Increased investment in R&D and greater innovation are not optional extras for our chemicals industry, which is facing rising costs for feedstocks and the commoditisation of speciality chemicals.

The EU's sustainable environment initiative, commonly referred to as REACH (Registration, Evaluation and Authorisation of Chemicals) poses further challenges but also many opportunities to innovate as we search for safer alternatives to some harmful chemicals.In light of these developments, any company that fails to innovate will stagnate and over time will start to deteriorate.

Asian competition

Trade liberalisation and a rapid fall in communication and transport costs mean that the UK has increasingly to compete against countries with significantly lower labour costs and reasonably well-educated labour forces. In China, for instance, wages are less than 5% of those in the UK, while hourly rates in Korea are just over half of UK levels, but the proportion of graduates are almost identical.

At the same time, technology and scientific understanding are changing our world faster than ever before. These new developments and innovations are producing many opportunities for entrepreneurial businesses to gain a competitive advantage, as even a cursory glance through Process Engineering demonstrates.

Readers may recall the Edinburgh distillery that saved thousands of pounds by upgrading its boiler control systems; or the biscuit manufacturer in the North East that used the latest 'machine vision' technology to improve its quality control and put an end to broken and misshapen biscuits.

Innovation can even help to turn some of the challenges facing us into real opportunities. I've already referred to the EU's REACH initiative and its impact. Another example is the introduction of the EU Landfill Directive in 2004, which presented real problems for the UK's aluminium producers, who were facing spiralling costs for disposing of furnace waste.

One UK company, JBM International, has pioneered an innovative, aluminium-refining process that they developed with the help of DTI's Collaborative Research and Development funding. Their process dramatically reduces the amount of waste sent to landfill, and is also helping aluminium producers to be more competitive by increasing yields and reducing overall costs.

The UK metals industry is a major contributor to the economy, with metal forming and finishing accounting for about £8 billion a year in sales. But innovation is still the only way that the necessary competitive edge can be maintained in the medium to long term.

In Government, we are committed to laying the foundations for innovation through a comprehensive programme of initiatives. We recently appointed expert business people to a board that will drive forward our technology strategy to foster innovation in business. They will identify and back key technologies UK industry can commercially take advantage of.

The board will ensure that investment decisions are based on real and measurable outcomes, rewarding successful performance and setting early milestones for achievement. It is backed by real money: £320 million over three years through the DTI Technology Programme, as well as co-funding from the Research Councils, other government departments and the Regional Development Agencies.

Green technology and chemical leadership

We've also launched the Crystal Faraday Partnership in green chemical technology and established the Chemicals and Innovation Growth Team, whose report led to the formation of the Chemistry Leadership Council (CLC) to implement its main recommendations. This has now, in the main, been completed and the results can be seen here.  The CLC is now moving into its second phase of work and will horizon scan and develop strategies for the chemicals and chemistry-using industries over the next 15 to 20 years.

This work will complement the longer term strategy and investment of the DTI's Innovation Report and the Government's 10 year Science & Innovation Investment Framework. This framework will help to secure a strong UK science base in our research institutes and universities, and ease the transition of ideas from the laboratory to the marketplace.

We are making a huge investment in our science base. By 2007/8 the science budget will be £3.3 billion compared to £1.3 billion in 1997/98. Funding for research is growing at an average annual rate of 5.8 per cent in real terms over the current spending review period.

To capitalise on this, we must ensure a close relationship between universities and industry.
There has been a major cultural change in our universities over recent years, enabling businesses, academic and research organisations to get together to tap into and develop new technologies. We're also seeing more specialists being matched with businesses needing certain skills to implement new technologies.

Our Knowledge Transfer Networks and Knowledge Transfer Partnerships have been instrumental in moving this forward. And Collaborative Research and Development grants are providing funding for collaborative R&D projects between business, universities and other potential collaborators. One recent project brought together scientists at the University of Leicester with three major industrial partners and joint venture company Scionix to develop an environmentally-friendly way of electroplating metals using ionic liquids.

Electroplating has been around for years, and is one of the most important and widely applied coating processes. Industry likes the corrosion-resistant properties of electroplated chromium — but the traditional process, involving toxic mineral acids, is environmentally hazardous and unsustainable.

The new process involving ionic liquids is more energy efficient and far less toxic. The UK market for this product alone is expected to be worth more than £1.3 billion in 2005, and globally it could be worth as much as $25 billion a year.

We are also directly helping smaller businesses through our Grants for Investigating an Innovative Idea (via reimbursed consultancy to help businesses get advice on the steps needed to implement their ideas), and Grants for Research and Development, which helps businesses carry out R&D that could lead to technologically innovative products or processes.

More details about these products are available through the Business Link network and the DTI website.

The chemical sector currently spends £550 million a year on R&D, which is a good start. But much more needs to be done to reinvigorate our chemicals industry and encourage the development of new products. Innovation is a risky business, but failing to innovate is riskier still.

My vision is that the UK should be a key hub in the global knowledge economy. I also believe that if UK companies put innovation at the centre of their corporate strategies, we can ensure that the UK continues to benefit, grow and prosper from a chemicals sector that is world class.

Lord David Sainsbury is Under-Secretary of State for Science and Innovation in the Department of Trade and Industry.

On the Web:

Business Link

UK Chemical Industries Association