Engineering Biology (Science and Technology Committee Report)

Baroness Bowles of Berkhamsted Excerpts

Monday 28th April 2025 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I welcome the committee report. It is a case study in how it is not enough to lead in an area of technology—that is easily lost without a joined-up strategy and harnessing the role of procurement. This is elaborated in chapter 2, with quotes from Dame Angela McLean that

“a purchase is worth 10 times a grant”,

and from the noble Lord, Lord Willetts, that it is easier to sell products to overseas Governments than to the UK Government because of UK procurement rules. It is still very hard for smaller companies to be considered at procurement stage, despite the new rules. The system, including the resource demands, remains against them.

Worse than that are the extensive pre-procurement phases of innovation grants. Designed to draw in innovative companies, they then have the lifeblood sucked out of their intellectual property, removing their competitive edge for any procurement stage or commercial exploitation, forced to hand it to competitors or incumbents. I drew this to the attention of the House in the science and technology and economy debate on 31 October 2024, and I have to tell the Minister that, despite his endeavours, if anything, it has got worse.

The point and principle at issue is that many, if not most, pre-procurement phase terms of reference and/or contracts and full procurement contracts require the purchaser—that is the government department, quango, commercial catapult or Innovate sponsor—to be granted a free, worldwide, perpetual, irrevocable licence, with full sublicensing rights to anybody, to the intellectual property, including any necessary background technology. This is then made available to others at the procurement stage or later renewal of contracts.

Anyone who knows anything about intellectual property will understand this undermines the innovative company’s position, not just in later tendering to government but for wider commercial exploitation. Competitors have free licences without having invested in research, and it undermines the ability to attract investors and scale business. The Chartered Institute of Patent Attorneys is very concerned about this issue and has set up a committee to gather evidence. As the key relevant professional body, I suggest the committee looks to CIPA for expert evidence going forward.

Meanwhile, let me give a couple of examples. Recently, a department wrote a threatening letter to a growth company that had submitted a procurement bid in which it referenced its existing patents to illustrate its state of development. Among other things, the letter stated that, by having patents, it was behaving anti-competitively and demanded that the patents be surrendered—note the belief that patents are anti-competitive, despite all the rhetoric we have about innovation, growth and export. Even among key officials at the Cabinet Office, IP is not fully understood.

Another SME had signed up for an Innovate grant in collaboration with a catapult. During later due diligence for a large-scale licensing deal with a multinational company, it discovered problematic IP terms. These terms created a serious impediment to the deal being completed and favoured Innovate and the catapult. It took persistent follow-ups with the senior management of Innovate UK and the catapult organisation before they agreed, in writing, to remove the IP obligations. That SME was lucky. More stories, many around the MRC, end in refusal to change terms—but that bar should not be there in the first place.

It also highlights how young, unadvised companies do not see the danger, especially when hidden behind headline statements offering the grant declaring that you keep your own IP. Undermined IP has no value, even though you keep it. These clauses are also generic, whereas in law what is right for commissioned copyright is wrong for patentable inventions.

Technology cannot scale without intellectual property. Investors will not invest unless you can demonstrate competitive advantages, and our government-sponsored system of IP destruction must change dramatically to get growth, scale-up and value out of grants and the line of sight mentioned in paragraph 106 just referenced by the noble Lord, Lord Willetts.

--- Later in debate ---

[The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)]

My Lords, I start with three disadvantages: I cannot read in the dark; I am a doctor, so I cannot read my own handwriting; and I have had quoted back to me in various guises many of the things I have written over the past seven years, so I had better make sure that some of them happen.

I thank noble Lords for raising a number of important and extremely well-informed points today. Thanks must go to the noble Baroness, Lady Brown, for leading this inquiry and report and for starting us off with her insightful contribution and a few questions that I will answer as I go through. Several noble Lords have said in different ways that we cannot afford not to do this. That is a key and correct point. I thank all the members of the Science and Technology Committee for bringing Don’t Fail to Scale into the world. I reassure the noble Viscount, Lord Stansgate, and the noble Lord, Lord Mair, that reports are indeed useful. This is useful; it is exactly what we need at a time when we are thinking about allocation in a spending review.

The comparison made in the report—that, just as AI is rewriting the “software” of our world, engineering biology is rewriting the “hardware”—is a useful one but, of course, the ability to redesign the software code of life is one of the key advances that has unlocked the ability to engineer biology. As the noble Baronesses, Lady Neuberger, Lady Bennett and Lady Freeman, said, in order to do that, we must proceed appropriately and with public acceptance.

The 1,000 or so engineering biology companies that we have in the UK are showing how we can harness this power. They are perfecting the alternative proteins that will strengthen our food supply and help us reach net zero. They are converting factory waste into low-carbon fuel for cars, planes and even RAF unmanned aircraft, as C3 Biotech is doing in Manchester. They are designing lab-grown red blood cells that have been genetically manipulated to treat disorders steadily for 120 days at a time, rather than using a daily dose of pills. They are engineering cells to last for years by replacing missing proteins to correct genetic deficiencies in what, to all intents and purposes, look like cures—something that has not been possible with medicines in the past.

The UK remains a global leader in engineering biology. We rank fourth in the world for the impact of our research in the sector. Last year, UK biotech—it is perhaps a proxy for some parts of engineering biology—raised £3.7 billion, more than double the year before. The news that Professor Jason Chin—who, if anyone, will be the person to make the engineering equivalent of unobtainium—will head up a team of 300 world-class researchers at Oxford’s Generative Biology Institute is a vote of confidence in the UK’s prominence in this area.

However, if we are to hold on to this position, we must act—and urgently. We have heard many good points from across the Committee on why and how we should do this. I will respond to as many of them as I can—if I do not respond to any points, I will follow up afterwards—but let me first make a few points on how the Government are helping engineering biology companies to scale in the UK. We need to give the sector the strategic focus that it deserves and needs. I cannot say much about the outcomes of the industrial strategy or the spending review; however, in line with the timelines set by the Treasury, we will set out those plans, and noble Lords can expect to see the industrial strategy shortly.

What I can say is that this is the first time that a sector—the digital and technologies sector—will have its own dedicated, 10-year plan. This plan offers significant opportunities for growth across UK science and technology and will include engineering biology specifically; I assure the noble Baroness, Lady Brown, that there is a specific section and clear focus on engineering biology. The Secretary of State highlighted the critical role of engineering biology as a key technology for future growth in his speech at techUK on 10 March; this is important because techUK is often thought of an organisation for digital tech only, but it is not.

Supporting the engineering biology sector means having the right funding, regulatory framework, infrastructure, government procurement and skills. I will set out what we are doing on some of those. Before I do so, I should add that we have an engineering biology advisory board, with experts from academia and industry, which, just last month, actively discussed the role of a national champion, including what that might look like and how it could lead to coherence across the sector; indeed, it invited people from other sectors that have had national champions to discuss what that might turn into.

I assure the noble Lord, Lord Borwick, and the noble Baroness, Lady Willis, that there is join-up across government here. Part of the role of DSIT is a horizontal one across government. It is not a purely vertical department; as a horizontal department, it has to make sure that these things are joined up. One of those areas of join-up occurs around biomass strategy, on which there is an active piece of work going on at the moment; that is particularly for engineering biology and is linked to the Circular Economy Taskforce. I hope that the noble Lord, Lord Lucas, and the noble Baroness, Lady Young, are reassured that that is being looked at.

Last year, UKRI announced £100 million of funding for six engineering biology hubs across the country and 22 awards for two-year R&D projects. These hubs are working on priority applications from developing vaccines to preventing plastic pollution. ARIA has also announced more than £60 million of funding to develop the next generation of synthetic crops, which aim to remove CO₂, improve food security and deliver medicines. New research programmes from ARIA are looking at engineering biology from pandemic preparedness right the way through to ocean biomanufacturing.

Short-termism, which has been raised by many speakers, has long held back R&D in sectors such as these where projects are likely to take many years to go live, let alone see outcomes. That is why the Government have committed to 10-year funding for key R&D activities where this certainty will make the most difference. Further details on this will come with the spending review. I am unable to give exact amounts—anyone in this Room will know that you cannot give exact amounts before a spending review—but I hope noble Lords hear my commitment to this area. I am sure that the noble Viscount, Lord Camrose, will understand that you do not pre-empt spending reviews by announcing the outcomes.

The report we are debating speaks clearly about the late-stage funding gap. The interesting thing about the valley of death is that it moves; this one has moved from the very beginning to somewhat later in the process. As several noble Lords, including the noble Lords, Lord Mair and Lord Drayson, have said, the funding for this needs to be sustainable, allow scaling and have a UK base. We cannot afford for these companies to move overseas.

We absolutely get the need for a joined-up pipeline across all the areas we have talked about to help companies scale. I will list some of the actions taken, but I recognise that much more needs to be done.

The National Wealth Fund has deep pockets of £27.8 billion. Its new strategic direction, steered by the Chancellor, allows it to invest in technologies such as engineering biology. That is important, because that was not initially the focus. In private financing, the Mansion House compact, which has been discussed, could see us unlock £80 billion from pension funds, but, as of 2024, Mansion House signatories held only around 0.36% of their assets in unlisted equities against a target of 5% agreed in 2023. This needs to be driven faster, which is why the Pensions Minister is reviewing pensions investment, the outcomes of which will be shared shortly. Many noble Lords have observed, and I agree, that there is an opportunity here that is about not just science and technology companies but better pension returns. We will continue to encourage the rapid implementation of the Mansion House compact, and I assure noble Lords that DSIT is very involved in those discussion.

Government is doing better at being a customer via the new Procurement Act,as well as a champion procuring from UK engineering biology companies. For example, the Ministry of Defence supported C3 Biotech to establish its pilot facility in Stockport to produce aviation fuels from industrial waste. The new defence innovation unit will have a percentage of its spend on procurement of UK technologies.

I want to deal with the important question of IP. I am very well aware of its importance, but I want to correct an impression that might have been given. It is not the case that grants from UKRI have their IP taken. It is the case that for a very small subset, which is departmental contracts, it has been necessary to put in a clause on IP that is to do with the Subsidy Control Act. I am actively looking at this to see what can be done, but it is a very small percentage. The vast majority of UKRI grants—all grants, actually—and Innovate grants do not have that IP claim.

We are making sure that the UK has the right skills in the sector by looking at both building homegrown skills and the right approach to attracting talent from overseas. We rightly had questions on training from the noble Baroness, Lady Willis, among others. Last year, the UK announced £10 million for a new centre for doctoral training for engineering biology; and, in January this year, UKRI opened a call for new doctoral focal award centres, worth £17 million. Indeed, it has put £16 million towards another important area that was raised—that of research technical professionals. These are the people who actually run the equipment and who have been ignored in the science system for a long period, much to the detriment of being able to run large bits of kit. There is more to be done, but having PhDs funded shows a very clear direction of travel. As the noble Lord, Lord Tarassenko, made clear, the overlap in other areas, including AI, is rather important.

We have four of the top 10 universities in the world. Being open to international talent is clearly a part of what makes our academic base, as well as our industrial base, so strong. Our funding offer is competitive, with prestigious fellowships and professorships from UKRI and the national academies, and we will do more. I assure noble Lords that they will shortly hear more about what we are doing specifically to try to make sure that we have an attractive inward route for people from around the world. This includes what the noble Baroness, Lady Northover, asked me about in her comments.

Our continued partnership with Horizon Europe provides a route for European researchers to work with us. It is very important that we are back in that system. Fast-track visas for global talent, high-potential individuals and skilled workers give scientists opportunities to pursue paths to engineering biology opportunities in the UK. The Chancellor has been clear that she wants easier routes for scientists and technicians to come to the UK, and I continue to advocate for that. In the words of my noble friend Lord Berkeley, we need more scientists. There is no doubt about that. We have never been and will never be self-sufficient in this area—and nor should we be, because this change of people from other countries is an important part of the scientific process.

Engineering biology needs a regulatory environment that can foster innovation and boost public confidence; without that, we cannot fully realise the benefits of what we have discussed. This issue was raised by a number of speakers. It is an urgent point to get right, which is why we established the Regulatory Innovation Office; I am very pleased that the noble Lord, Lord Willetts, is now leading it. We have a clear plan to push ahead fast with some changes. Noble Lords will have already seen some of the changes outlined by the noble Lord, including the sandbox for the Food Standards Agency, the work to have precision fermentation foods looked at by that agency, and new legislation on genetic technology for plants: the precision breeding Act, which is being discussed at the moment.

I turn to the point made by the noble Baroness, Lady Neuberger. We can unlock the benefits of engineering biology only if the public want to use it and accept it. This will come only by building trust. The Government have been gauging public opinion, with two reports from UKRI and Sciencewise on applications in health and food, and a DSIT survey on public understanding last year. A group funded by UKRI, the Cellular Agriculture Manufacturing Hub, is looking at that space specifically. I commend to noble Lords the report from the Government Office for Science published in only the past couple of weeks, which—the noble Lord, Lord Freyberg, will be extremely pleased to hear—speaks directly to engineering biology in fashion, among other areas. Using the insights that we are getting, we will consider how best to continue to structure public engagement for regulated technologies so that we build awareness and the potential is understood.

Engineering biology needs specialist infrastructure, such as biofoundries and large-scale fermentation facilities. We must maintain what we have and build new scale-up infrastructure for SMEs. We have funded the Cell and Gene Therapy Catapult to deliver a state-of-the-art manufacturing innovation centre for advanced therapies at Braintree, and the Centre for Process Innovation receives government funding to develop and retain engineering capabilities, including sustainable food production, in its novel foods facility. However—this is important—affordability is an issue. The CPI is now undertaking a study of 50:50 match funding in Greater Manchester in order to make it more accessible for engineering biology SMEs to access its facility. We know that affordable cost of access is a key requirement, which is why we are trialling this cost-sharing scheme. Incidentally, it is true that there are five biofoundries in the network that was referred to, but there are more than 11 in total across the UK. The variable access to them is an issue.

There is no one-size-fits-all approach. The wrong infrastructure solutions would come at a great cost to the taxpayer and would not be beneficial. There is no point in having facilities that lie idle or that are not at the cutting edge. We will continue to push to get them in the right place and get them accessible at the right cost.

Several of the speakers, particularly the noble Baronesses, Lady Freeman, Lady Young and Lady Bennett, asked about safety and responsible use. The Responsible Innovation Advisory Panel has been set up precisely to look at these issues. It has looked at gene synthesis and has issued guidance, and it will consider what else needs to be done there. It has looked at gain-of-function research, mirror life and gene drive, and will continue to do so. These issues are important, as are those of lab safety and security, which are being looked at by the Cabinet Office.

When it comes to the fundamental science and talent in engineering biology in this country, we are doing well. Our task now, as the report so clearly says, is to create a landscape of the right skills, infrastructure and interventions in finance, regulation and procurement, among other areas, and to partner across Whitehall to bring this science to life in applications that will affect pretty much every department.

The Government are taking the actions that will be required. We do not need more reviews now; we need action on what we have. This report has been an incredibly important part of that, so I again thank all the speakers today for their very insightful contributions.

[Baroness Bowles of Berkhamsted (LD)]

Before the Minister sits down, if an innovative company is looking to get some assistance in developing a product to market, it will go to the departments. The departments work with these small businesses on these pre-procurement issues. Innovate UK has these clauses in its contracts—I can show them to the Minister online, if we have to go to that extreme.

There is probably a difference from what universities have nowadays, which might offer pure research grants. However, as soon as a company gets anywhere near to seeking procurement—the thing that will open the door to being able to sell into the private sector and to build its reputation for export—the IP is undermined, including the background IP. I am sure that I can provide people who will sit with the Minister’s staff and show them the links.

[Lord Vallance of Balham (Lab)]

I want to be absolutely clear: that is not the case for grants, whether they are for companies or academics; this applies only for a subset of contract research. I am looking at that to see what can be done, but it is a very small minority. I would not like noble Lords to go away thinking that it applies to companies overall—it does not if it is a grant.

Science and Technology: Economy

Baroness Bowles of Berkhamsted Excerpts

Thursday 31st October 2024 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, it gives me pleasure to commence the winding-up speeches on this debate. I congratulate the noble Viscount, Lord Stansgate, on bringing it to us and the noble Baroness, Lady Freeman, on an excellent maiden speech.

We have had a great debate, showing how important science and technology are today and the far greater economic contribution they could make, as the noble Lord, Lord St John of Bletso, said. My noble friend Lady Northover pointed out that it is all about interconnections. I was expecting to congratulate the noble Viscount, Lord Hanworth, on reminding us of the importance of mathematics in all these scientific projects and so forth, which I do agree with. I am sure that the Minister will not be surprised that I look forward to the Procurement Act and that it will be one of the topics I will speak about. If there is not a supportive environment for the procurement of new innovation for small enterprises, we will lose out, in AI and elsewhere, just as we did to the US super-corporations on internet technology when once we were ahead.

For 30 years, my career was in scientific research on semiconductors and then as a patent attorney. I was working with companies that were highly successful and some which struggled to make a breakthrough, despite great innovations. It is that which drove me into politics, where I have now spent 18 years looking at finance and the economy, including in industry. I come back to the same point: lack of procurement is preventing scale-up and better commercialisation of our technical innovation. It prevents a greater contribution to the economy, in particular for exports, and it prevents us closing the productivity gap.

I will focus on three linked things that are blocking innovative companies and scale-up: the treatment of start-up and growth companies, under which competitive tendering for round after round of piecemeal grants and loans sets them up for failure; the closed shop of government procurement, tied up with frameworks that ask discriminatory questions and favour incumbents; and the fact that the Government have become a systematic expropriator of early-stage intellectual property, killing instead of growing innovative companies.

Why is it that we have a trail of breadcrumb grants via our innovation agencies—including catapults, Innovate UK and small business research initiatives—with each grant expensively competed for at every stage in time consumption, but never leading to public procurement? In many instances where a lot of public money is spent on procurement, this is closing the door on making that expenditure bring multiple returns.

As various think tanks have highlighted, first public procurement is the ticket that enables growth companies to create exports—far better for our economy than those businesses relocating to the US or selling out equity in their innovation to other countries. That pattern has even hit Rolls-Royce and its small modular reactors, losing 20% equity to other countries.

In the US, they use a programme, From Innovation to Procurement. More entrants start than finish, but there is procurement at the end, which launches commercialisation. It is still competitive to enter, but the succeeding companies can progressively get on with the real job, instead of spending half their time applying for the next grant.

In our system, there is no promise of procurement: indeed, little chance, because of the procurement frameworks and the incumbency factor. An innovative growth company cannot positively answer the questions about previous alpha and beta delivery in the way incumbents can, so it falls at the first hurdle. How are innovators and emerging technology companies expected to grow to export level with that approach? Additionally, the incumbents essentially have a procurement fast track and get asked to support innovation programmes, which then allows them to learn from and ultimately undermine new market entrants.

Returning to the grant process, if you look at the contract clauses for the breadcrumb grants, for just a £50,000 early-stage development or proof of concept, there are clauses requiring the recipient of the grant to give to the relevant government body and its partners free, perpetual, irrevocable and royalty-free licences, together with the right for the Government to grant sublicences to anyone to use all the information, data, results and conclusions arising from the project. In other words, all the IP generated is as good as lost to competitors.

I know some people think those clauses just mean reading and benefiting from the reports, but it is far more. It is licensing use and licensing performing the invention. It is undermining patents and IP and allowing the Government to license competitors at the procurement stage. I have shared the clauses with the Chartered Institute of Patent Attorneys and it concludes the same as me.

It is so unfair, on many levels. The breadcrumb grant has never been a commercial rate for the work performed and, due to the UK’s own, rather short-sighted, Subsidy Control Act, never covers the full cost. Why should a measly £50k that forces high-tech entrepreneurs to work for free or below minimum wage rates—I can provide figures that prove that—entitle use and sublicensing rights of IP that could be worth £1 million or more were they not undermined by such a clause and that may have been the bedrock of success for the innovative company had it not been expropriated to competitors.

Yes, real innovation can happen in a matter of months. But, like a jeux sans frontières competition, innovative companies face repeated grant application hurdles. In a game of chance, does your presentation fit a set of part-time assessors’ preferences, complete with marking down smaller businesses for factors such as not having the top and most costly accounting or risk-tracking software? I have seen it all.

Solving this is not rocket science. First, use a staged programme system, with end-stage procurement like in the US. Secondly, stop poaching early-stage IP to put in the hands of competitors and incumbents. There are fair licensing provisions that can cover large bills and contracts and prevent vendor lock-in. Thirdly, maybe look at treating innovative company IP and intangible assets as collateral for loans alongside grants. Fourthly, give those IP assets an export market opportunity weighting in assessments, instead of eliminating applicants out of fear of lock-in. Fifthly, recognise that value for money assessment must incorporate risk for growth, and that sometimes ends in failure.

Every project cannot be run like this, but even a relatively few smaller ones would make a big difference. If we do not make public procurement truly open to growth companies, great economic opportunities for getting more bang for your procurement buck are being missed. While I celebrate with other noble Lords the strength of science and technology in the country, I hope that the Minister can find ways that penetrate into procurement in the big spending departments to bring about the economic transformation that is there for the taking to bring money back to the Treasury.

King’s Speech (4th Day)

Baroness Bowles of Berkhamsted Excerpts

Monday 22nd July 2024 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interests in the register, in particular as a director of the London Stock Exchange. Like other noble Lords, I welcome the new Ministers to their place. I also welcome the gracious Speech and will participate on several Bills, but now, I want to mention some extras.

First, will the Government bring forward the consultation on a UK captive insurance regime that was in preparation before the election? Captives fit well with City expertise, and we could service the UK market and attract international business.

Secondly, will the Government fix the glitch in cost disclosure presentation that has ravaged the listed investment company sector? Lost investment, largely for real assets such as infrastructure and renewable energy, is now at £30 billion and counting. The noble Lord, Lord Livermore, was supportive in the last Parliament, including of the Bill of the noble Baroness, Lady Altmann, which would have dealt with the issue.

This Session, I have got the draw to introduce a PMB. It will be based on the hugely supported joint industry response to the relevant statutory instrument consultation. The focus is on recognising the role of markets in setting the value of these listed investments and of going concern status in the making of FCA rules and legislative interpretation. Will the Minister meet me to discuss these solutions and how to end the disaster that is hitting a third of the FTSE 250?

Thirdly, do the Ministers appreciate the need to change public procurement methods to meet the Chancellor’s plans for growth, especially for growth companies that could multiply their earnings and British prosperity through export? Presently, the procurement process can retard rather than help growth, which I will explain. Very little government or local authority procurement is from small or growth companies, and even when capable of building revenue, they are pushed into further innovation grants rather than accelerated to commercialisation.

Risk aversion is prevalent in both public and private procurement, with default to incumbents and big business. The old saying of “nobody is sacked for buying IBM” is now for buying Google, Amazon, Microsoft or CrowdStrike. It could have been so different for Graphcore and Darktrace if that were not the case, and now their wealth generation is lost to the UK.

On the public side, system integrators—consultants —do the procurement that used to be in the Civil Service. In addition to risk aversion, the system integrator model also destroys its intellectual property, or ends with system integrator ownership, stripping new companies of their basis for growth and export opportunities.

In future, AI will play a big part in public sectors, including transport and infrastructure, where government or local authorities are the only procurers. There are innovative, homegrown companies that could scale and export solutions, including to the US, but with present systems, it is unlikely they will be procured or stepped up to sustainable commercialisation.

Interested US entities say to those companies, “Show me your first UK deployment and then I’ll buy in”, but UK procurement does not happen, so the technology goes up for sale, or the company relocates to the US to get deployed and stays for stock market listing. The US attraction is about procurement as much as it is about investment.

Regulators have the same “big guys” bias: happy smiles if you use the US giants, wrinkled brow and big due diligence demands if you try smaller or newer. Maybe after CloudStrike, the systemic risk will be recognised, not to mention the competitive distortion.

Procurement failing to support growth is a systemic issue needing a co-ordinated response across departments. Will Ministers therefore meet with me and interested parties such as the ScaleUp Institute to examine the evidence and possible remedies?