Will the new Government secure growth for university spinouts beyond the Golden Triangle?

From the publication of an independent report into the sector, to the new Labour Government’s plans for longer-term funding, change may be on the horizon for the UK’s university spinout sector. We explore whether this will help to spread investment and opportunity more evenly for spinouts outside the South East.

During his first King’s Speech on behalf of the new Labour Government, King Charles III reiterated the party’s manifesto pledges to deliver economic stability across all regions of the UK.

“Securing economic growth will be a fundamental mission,” the King said in the House of Commons on Wednesday 17 July. “My Government will seek a new partnership with both business and working people and help the country move on from the recent cost of living challenges by prioritising wealth creation for all communities.”

The emphasis on wealth creation and opportunity “in all nations and regions” may well be welcome to the UK’s university spinout sector, where investment and resource has traditionally centred on the South East, particularly the ‘Golden Triangle’ of Oxford, Cambridge, and London.

According to Beauhurst’s Spotlight on Spinouts 2023, only the University of Oxford, the University of Cambridge, and Imperial College London have each created more than 100 spinouts between 2011 and January 2023, with 205, 145, and 108 spinouts originating from these institutions respectively.

This disparity is also mirrored in the levels of funding and investment, with the Independent Review of University Spin-Out Companies highlighting that spinouts from universities in the South-East, London, and the East of England raised 74.5% of spinout investment in 2021/22, compared to just 10% in regions across England, Wales, and Northern Ireland combined.

“Part of this South-East bias can be explained by the distribution of research universities and funding across the UK,” the report says. “However, the distribution of investment is more unequal than research funding, with stakeholders outside the South-East reporting difficulties in reaching investors.”

Useful recommendations or one-size-fits-all?

Clearly, there is a significant amount of untapped potential in the UK’s spinout sector. This is a shame, given that many spinouts become successful vehicles for commercialising highly innovative research and development in the UK.

The UK’s university spinout sector as a whole is also one of the world’s most successful, coming second only to the US in terms of spinout investment. Imagine what could be achieved if universities and research institutions outside of the Golden Triangle were given the same level of investment and professional support as their peers in the South-East.

Several reports have been published, both by the Government and by industry professionals, in an effort to remedy this disparity.

The aforementioned Independent Review, for example, provides 11 recommendations for how the sector can build greater resilience and more consistent streams of funding, without relying on a select group of providers based solely in London. It also identifies case studies of how this is being achieved, drawing on success stories from across the UK, the US, and Europe.

Following on the footsteps of this report came the USIT Guides. Developed by TenU, a group of university technology transfer offices in the UK and the US, their aim has been to help universities and venture capitalists better understand how to navigate and negotiate key technical details of spinout formation, particularly equity share, intellectual property, and licensing.

In both instances, our view has been that reception of these publications has been lukewarm at best, with many technology transfer professionals based outside of the South-East commenting that neither the report nor the guides provide guidance, advice or support that are wholly applicable to the often-complex requirements of less mature regional spinout ecosystems.

What Labour did next

Spinouts based outside of the South-East have two pressing requirements: access to long-term funding, and access to professional support and expertise.

Whether Labour plans to provide both has yet to be mentioned explicitly, but it is heartening to see the party pledging the creation of ten-year budgets for public research and development organisations in aerospace, artificial intelligence (AI), automotive, defence, energy, and life sciences. This will undoubtedly be welcome, considering that R&D in these sectors is often complex, extensive, and cash-intensive, even before the commercialisation process begins.

A more efficient funding structure that prioritises neglected regions would also support spinouts in scaling-up within the locations in which they are based, without needing to relocate to more established clusters or ecosystems. Over the long-term, this will benefit the wider economy, potentially creating more jobs and opening the doors to great investment from both the public and private sector.

While we wait for Labour to elucidate its plans through the creation of Parliamentary Bills, it is important that university spinouts can still access the support they need, whether that is through seed funding, or guidance on licensing and commercialisation.

Ideally, cash-strapped university technology transfer offices will be able to get the funding and assistance they need through one or two specialist providers, rather than navigating a complex and over-crowded landscape of professional, financial, and legal services.

Regardless of where spinouts are on their road to commercialisation, high quality advice – secured as early as possible – can make all the difference to whether a university’s research makes it to market. Hopefully, as the new Government finds its feet, spinout ecosystems across the UK will start to feel the benefits of a more equitable distribution of funding and opportunity, taking the UK’s spinout sector from second-best in the world to top of the class.