Looking to the regions

The story of sci-tech companies in the north over the last 20 years has been one of incredible success – so in a post-brexit world, says Dr Chris Doherty, we need a more joined up approach between north and south…  

Growing a science and technology business to the point where it is valued at over $1 billion is so challenging that mythical animals have come to represent companies achieving this distinctive scale and status: unicorns.

The statistical rarity of such successful ventures is beyond doubt the world over but UK Plc is nonetheless proving itself increasingly capable of giving rise to unicorns in an era where the Government’s Industrial Strategy prioritises nurturing many more sci-tech businesses. What’s pleasing is that the UK regions are part of this story. New clusters are emerging to help foster the companies that can achieve sustainable dynamic growth, building on the country’s intellectual and entrepreneurial capital in places like Manchester, Birmingham, Leeds and other regional cities with major universities.

Sci-tech companies flourishing

The venture capital analytics company, Dealroom.co, recently prepared figures for Tech Nation and the Government’s Digital Economy Council which evidence this and show that sci-tech businesses are flourishing across the country. Manchester, for example, has established itself as a hub for med-tech, digital tech, media and e-commerce. It now has five unicorns to its name. That’s the same number as the significantly larger Amsterdam. Meanwhile, in Yorkshire, Leeds boasts two $1 billion-plus tech companies.

Making more of the economic potential of UK regional cities is one of the hallmarks of regeneration in post-Industrial Britain. Twenty years ago, some of our core cities were struggling, with economies based on declining manufacturing industries that could not compete in the era of globalisation. Today, they are transformed. In the case of Liverpool it’s still remarkable to reflect that there were Cabinet-level discussions in the 1980s about adopting an approach of ‘managed decline’ of a city that remains one of the UK’s busiest ports. Liverpool’s decade-long resurgence since then was initially built around its cultural offering, but the city now looks to the future with a life science strategy based around a new knowledge quarter.

The process of reinvention is continuing and, in our more enlightened times, there is a greater focus on rebalancing the UK economy so that it is not overly-reliant on London and the South East. That’s not about North vs. South; it’s about being competitive and making the most of what the country has to offer. Initiatives such as the Northern Powerhouse and Midlands Engine have science and technology as a key focus. At the same time, through devolution and other key initiatives, the Government has made a more determined effort to unleash potential.

Regional audits

In 2015, the Government announced regional Science and Innovation Audits (SIAs) to catalyse a new approach to regional economic development. Now in its third wave, SIAs are helping galvanise sci-tech related enterprises across the country. Greater Manchester and Cheshire, for example, were in the first wave and the project identified core strengths in health innovation and advanced materials, where there is existing, internationally-recognised excellence. It also pinpointed fast growth opportunities around the future potential of digital, energy and industrial biotechnology, where the region’s assets and capabilities offer real scope for future development. The Midlands Engine region SIA, meanwhile, identified priorities such as medical technologies and pharmaceutical; next generation transport; future food processing; and energy and low carbon.

One of the areas we are looking to explore in the post-Brexit era is whether we can get greater collaboration happening within the UK 

At the core here is a desire to harness knowledge, innovation, skills and infrastructure to drive the local economy, create jobs and raise productivity. The message to central Government continues to be: the UK regions are not looking for hand-outs, they want recognition of what can be achieved by unlocking the potential that clearly already exists.

These initiatives have come forward at a time when the national picture has been broadly positive. The Government’s Office for Life Sciences, for instance, has a wealth of metrics that detail UK performance compared to a range of comparator countries. In 2017, the UK received the highest level of life science foreign direct investment projects in Europe, the highest in the past seven years and only second to the United States. The UK also continues to attract significant private equity investment, with over €750 million invested in 67 UK projects in 2016.

What about Brexit?

How the UK’s pending exit of the European Union will affect the progress is much discussed – but not always with due reference to the other forces impacting the business environment. The 2008 banking crisis was an economic earthquake, the most powerful since the Great Depression of the 1930s, with aftershocks that continue to this day. Through it all the entrepreneurs and companies that created novel IP and got it to market prospered, despite everything else going on.

It is also worthy of note that for many economists, Brexit pales in significance compared to the notion of a pending trade war between the USA and China.

What does it all mean? No nation is immune from changing market conditions and trade upheavals, but the paramount importance of innovation never diminishes.

What no one expects to change is the global demand for healthcare solutions, which can seem insatiable. In the same vein, the rise of digital tech is routinely described in terms of being a fourth industrial revolution. In the case of the former, the UK is a world leader and the ever-evolving life sciences sector presents significant trading opportunities across the globe. In the case of the latter, tech is expanding 2.6 times faster than the rest of the UK economy, according to Tech Nation’s 2018 report. The digital tech sector is worth nearly £184 billion to UK economy, up from £170 billion in 2016.

One of the areas we are looking to explore in the post-Brexit era is whether we can get greater collaboration happening within the UK – a more joined up approach between North and South, and greater awareness in Westminster of the economic potential in the regions. The UK is a small country, with distances between the respective sci-tech clusters insignificant compared to, say, the USA or China. The last thing we need to do is underplay what’s on offer outside the traditional golden triangle of Oxford, Cambridge and London.

Alderley Park

Underpinning the growth of the regions is a new focus on relationship between ‘place’ and innovation. Alderley Park, the life science campus in Cheshire, exemplifies this trend. It is now part of Bruntwood SciTech, a 50-50 joint venture that was launched in October 2018 between Bruntwood and one of Europe’s top investors, Legal and General Capital. The deal saw the two partners invest £360 million of capital, property and intellectual assets into the new venture, with a business plan supporting the creation of over 20,000 high-value jobs in the regions over the next ten years.

The deal represented the largest investment made in science and technology property assets in Europe in 2018. Bruntwood SciTech’s portfolio includes more than 500 science and technology businesses, ranging from digital start-ups to global life sciences companies. It is centred around flagship assets and development projects in the North and Midlands and includes Alderley Park.

Alderley Park was already the subject of a £160 million development vision, following its acquisition by Bruntwood in 2014. It is now home to 65 SMEs and 150 start-ups and is further focussed on forming, growing and scaling life science sector businesses. The programme of investment and expansion at the site has established an ecosystem that includes high specification labs, offices, scientific services and a programme of specialist business support. Alderley Park has two venture funds on site, one of which, the £42 million Greater Manchester and Cheshire Life Science Fund, has already invested in 25 businesses across pharmaceuticals, biotech, diagnostics, CROs and medical devices.

Alderley Park also serves as the headquarters of the Medicines Discovery Catapult, which is focussed on bringing new proven therapies to patients faster and more cost-effectively, and the AMR Centre, a leader in the UK’s response to the global health crisis posed by antibiotic resistance.

A supportive ecosystem

The model here is about making sure we have genuinely world-class facilities for sci-tech businesses at every stage of the cycle, from start-up to large corporate, but crucially making sure they are operating in a supportive ecosystem. The chances of any IP-based businesses succeeding are massively enhanced if it’s operating in an environment where you have the right elements – appropriate facilities, access to talent, funding and advice. By bringing these elements together in clusters in regional cities we have seen how it can have a transformative effect.

The government’s life science strategy looks beyond unicorns to a day where the UK can boast four life science businesses, each worth £20 billion. If that target seems fanciful, there are parallels with drug discovery where it is accepted that you need a pipeline of promising drug candidates to increase the chances of creating a medicine that you can take market. So UK needs a continuous flow of start-ups and SMEs before it can give rise to something that could scale to be, say, another Genentech.

In our view it’s often easier to do that business incubation piece in the North and Midlands, where the right facilities and access to talent exist. Unicorns have to start somewhere and that place is a nurturing, instructive, and supportive environment for entrepreneurs during the critical stages of starting up a new business. The objective is decreasing the chance that a start-up will fail, and shortening both the time and reducing the cost of establishing and growing a business.

Author:

Dr Chris Doherty is Managing Director at Alderley Park