Turning bright ideas into pound notes for UK plc

For too long other countries have exploited Britain's talent for research, says the Chancellor. But just how entrepreneurial are our universities? Ben Russell reports on an old problem given a new Labour twist

Britain is known as a nation of boffins. Our ideas are among the best in the world, but too often, the argument goes, we fail to apply those ideas - and to market them. Worse, other countries are making money out of our brains.

The Chancellor, Gordon Brown, certainly believes this analysis, and wants to change it. In his much-applauded Budget last week he called on scientists to come out of the laboratories and turn the research expertise for which Britain is renowned into hard cash. He even gave his initiative a racy Jeremy-Paxman-sounding name: University Challenge. "For too long the great scientific advances of British universities have gone on to become the manufacturing successes of rival countries," the Chancellor moaned.

The great thing is that his initiative was backed with money. Not a huge amount, it has to be said. In fact pounds 50m is peanuts compared with the pounds 829.5m allocated to university research for the next academic year. But it is a start, and it signals the Government's wish to capitalise on Britain's strength as an exporter of design and research.

Of the pounds 50m, pounds 20m is state funding and the rest comes from major research charities, the Wellcome Trust and Gatsby Foundation, as well as money "levered in" by universities. Ministers will be inviting bids from universities during the next academic year. They are appealing to all "entrepreneurial" staff and giving dynamic dons the time and support to "commercialise" their research. So academics with marketable research projects which could be developed for business given the necessary venture capital should not hang back.

The question is whether British universities are up to the challenge posed by Mr Brown.

Higher education in Britain enjoys a reputation for excellent research, but is it able to translate technical breakthroughs to the world of commerce? The answer, according to the universities, is yes.

Vice-chancellors are aware that if they want to secure the extra funding they need to maintain standards, they must have better arguments than simply creating knowledge for knowledge's sake. They are bidding for a pounds 1bn-a-year injection of funds over the next three years - enough to increase the higher education budget by around a quarter - and know that they must sing for their supper.

The vice-chancellors' submission to the Government's comprehensive spending review earlier this month portrays universities as a powerhouse of British business, generating pounds 43.2bn a year for the economy regionally and nationally, and contributing pounds 1.3bn a year to the balance of trade. Figures produced by the Committee of Vice-Chancellors and Principals (CVCP) suggest that every pounds 1m of expenditure by universities generates pounds 2.2m of output across Britain's economy.

Vice-chancellors argue that world-class research and healthy research funding is vital to attract foreign investment to Britain. A funding shortfall, they say, would send investors back overseas.

Universities have already shown themselves willing to take research money from industry and develop links with the world of business. Last year's announcement that the software giant Microsoft was to set up a research base in Cambridge was the highest-profile example yet of vice-chancellors welcoming hi-tech industries which move to their doorsteps.

But collaboration can work on a much smaller scale.

Universities are increasingly anxious to protect and exploit the intellectual property created through research in patents and licensing deals.

They are also developing ideas such as so-called incubator units, where academic researchers work on product developments, either through university- owned enterprises or joint ventures with business.

Vice-chancellors also point to increasingly popular schemes to introduce graduates to small- and medium-sized industries as a way of fostering links between campus academics and industry.

Professor Martin Harris, chairman of the CVCP, says: "The way in which the university sector is working with the private sector has grown tremendously in the last 10 years and I expect that to continue. It's a very important part of the role of universities to develop ideas with business in those areas where it's relevant. But a large multi-faculty university will sustain both pure scientific research for its own sake and the arts and humanities, which are very important for a balanced university."

Research academics warn that companies can be unwilling to invest in pure research because of the potential costs of developing ideas into commercial products. Money tends to flow instead into proven schemes which can easily be developed into commercial products.

It is a problem which Michael Shattock, registrar of Warwick University, divides into "upstream" and "downstream" research. Upstream work is the research aimed at pushing the boundaries of human knowledge. Everything "downstream" is on its way towards becoming commercial reality.

He says: "People might be involved in research which they can see over a period will produce commercial spin-offs, but it might take three years of research even to bring it through to the point where it might be a product. The normal venture-capital company only becomes interested when all of that has been done. What we don't know is whether the Government is going to back upstream research or whether it will just cream off the top."

The business of research is vital for an institution like Warwick, which attracts 60 per cent of its funding on the open market. "The really lively universities have been attracting commercial funding and doing this for some time," says Mr Shattock. "The best businesses know where the best research is. They would not be the best if they didn't. The best researchers know where the best businesses are. A pound note looks the same whether it comes from government, a venture capitalist or a company."

It is not, however, all the same to every researcher. Tom Wilson, assistant general secretary of the Association of University Teachers, laments the loss of funding to pay for the so-called blue sky, or pure, research which is the university's traditional forte. The AUT would like to see pounds 500m pumped into research to redress the balance between Britain and its international competitors.

"Because university funding has been desperately reduced, there are very few academics with the time for blue sky research," he says. "They are all desperately trying to scrape up some money from research councils, Europe or business, and they are very good at it.

"Gordon Brown has applied a boring stereotype that Britain is a nation full of starry-eyed boffins. However, it is a priority for a civilised country to pursue knowledge for knowledge's sake. And it is impossible to forecast what pure research is going to turn out to be tremendously useful in the future."