Culture shock

If industry and the wider economy are to prosper in the next century, the UK must develop an entrepreneurial business culture in which the role of engineers and technologists in creating wealth is recognised and rewarded. This was one of the key messages distilled by former British Energy chief executive Dr Robert Hawley from a […]

If industry and the wider economy are to prosper in the next century, the UK must develop an entrepreneurial business culture in which the role of engineers and technologists in creating wealth is recognised and rewarded.

This was one of the key messages distilled by former British Energy chief executive Dr Robert Hawley from a series of lectures entitled ‘R&D for Industry: Into the next Millennium’, staged by the Royal Academy of Engineering over the last 18 months.

The seminars, with speakers from industry, the City and research organisations, challenged conventional perceptions such as the idea that a certain percentage of turnover can be prescribed as the ‘right’ expenditure on research and development, or that the City failed to understand the long-term financing requirements of high-tech firms (News, 30 October).

City speakers, such as Carol Galley from Merrill Lynch Mercury Asset Management, argued that the City will take a long-term view of R&D if chief executives can explain how it fits into a coherent strategy.

Chief executives should accept and act on this. But the creation of what Hawley describes as ‘an entrepreneurial business culture based on a value-added, knowledge-based economy’ goes to the roots of society and to the heart of the argument about the status of engineers.

It is, suggests Hawley, a fundamental difference between the UK and economies such as the US, which have a history of being more successful at exploiting R&D. ‘We’ve got great brains and great ability, but there is great jealousy when people become successful. We’ve got to change that, and recognise that an entrepreneurial, high-tech, knowledge-based economy is the key to creating wealth,’ he says.

This is not about giving fat cats free rein, but creating a climate that recognises the link between innovation, R&D and economic success. Greater rewards for scientists, engineers and technologists would follow.

It is right that leaders of entrepreneurial firms become rich, and that their staff are rewarded with valuable share options, says Hawley. ‘Industry is not dark satanic mills any more. We must get across the message that industry wants high-calibre people and looks after them.’

Students often see engineering as ‘too hard’ and prefer the arts or commerce. ‘We need the rewards for engineering to be commensurate with the effort that goes in,’ he says.

Industry and academia must also co-operate more closely to create innovative products through cutting-edge research. ‘Universities are anxious about funding cuts. They are looking for funding from industry to make up for this.’ But there is no reason why industry-funded research should not be ‘leading edge’.

Hawley predicts the development of two types of university research-oriented centres of excellence, collaborating with industry, and those concentrating on teaching.

Industry needs to be more aware of what universities do, something that the new RAEng research fellowship programme could encourage. The UK must generate its own new technology as there is an obvious danger in relying too closely on inward investment. Paradoxically, Hawley points out, a strong science base will lure more inward investment.

Tax reforms are also needed to help small, cash-strapped companies. A high-tech start-up company has to rent buildings and lease equipment. It could offset such costs against tax on profits but it won’t be making a profit. So the property company it rents premises from should be allowed to pass on its tax credits to the fledgling firm, argues Hawley.

Similarly, transfers of cash from a successful firm to a start-up should be exempt from tax.

Sweeping changes will be needed to bring about the culture Hawley envisages. But he believes the Government has listened to business, and action was expected in the pre-Budget statement this week.

The abolition of advanced corporation tax is under way and an extra £1.1bn was found for science in the Comprehensive Spending Review. Ministers, including Peter Mandelson, have been looking to the success of Silicon Valley.

The Treasury and the DTI have even been working together on developing a more entrepreneur-friendly tax regime.

Hawley denies accusations of being an apologist for the Government. ‘They’re doing what they said they would,’ he points out.

He recognises the scale of the attitude change required. ‘It comes down to the country the Government and everybody recognising the importance of engineering in wealth creation. If you don’t create wealth you can’t share it out.’