Internal Market,Industry,Entrepreneurshipand SMEs

Digital Transformation Monitor

United Kingdom:HVM Catapult

January 2017

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United Kingdom:

HVM Catapult

© Derwiki/Pixabay.com

Source: Digital Transformation Monitor

Fact box for UK’s Catapultpolicy initiative

Policy Lever(s)Financially backed by the state, bottom-up, industry led approach and combiningseveral technology infrastructure centres

Funding ModelFunded to equal terms by public, business and joint public-private funding; share ofcommercial income 40% in 2015/2016 financial year

Business, industry and research organisations

Impact & Focus AreasEnabling innovation, commercialization and focused across multiple industrial sectorsand 27 key technology areas

Key driversDefinition of agenda among centres, drive towards a more balanced economy andstrong industry demand

Key barriersMaintaining the balanced funding model as commercial income has been significantlyabove plan levels

Results achievedValue of innovation work represented 123% of the target; Every €1 of public fundinggenerated €17

Budget€164 million invested by UK Government over 2012 – 2018 period; for 2015/16: €79.7million commercial income were obtained against €61.3 million public funding;collaborative R&D was at €62 million

Uniqueness factorHands-on approach by offering industrial scale technology and expertise to de-riskinnovation through 7 technology centres

Value-added for policy-makersRigorous monitoring and evaluation methodology with defined targets and regularassessments; responsiveness of government by scaling up funds progressively

Implementation strategyInitial review requested by government; Investments and activity set out in HVMStrategy (5-year plan) and informed by national strategy and industrial demand

Expected ImpactImprove the competitiveness of UK businesses by providing novel and effectivetechnology solutions across the manufacturing sector

Target audience(s)

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Source: Digital Transformation Monitor

Policy levers for UK’s Catapult

United Kingdom: HVM Catapult

Manufacturing as agrowth engine

The High Value ManufacturingCatapult (HVMC) is the UK’s nationalinitiative to increase thecompetitiveness and value added ofits manufacturing industry. As thefirst and largest of eleven nationalcatapults under the programme, theHVMC is composed of seventechnology centres. Through thecentres UK businesses have access toindustrial scale technology toaccelerate and de-risk new conceptsto commercial reality.

Set up in 2011 as a public-privatepartnership, the HVMC is overseenby Innovate UK. A total of over €164million is invested by thegovernment over the period of 2012– 2018 to stimulate manufacturing,reduce the risk of innovation for newand established manufacturingbusinesses and attract internationalbusiness.

As a remarkable strength, thegovernment has been responsive tothe needs of the HVMC by scaling upfunds progressively. Recognising theimportance and unique challengesposed, additional ring fenced fundinghas been allocated to help increaseSME engagement from 1500 per yearin 2013 to 2250 by 2020.

A catalyst for futuregrowth

Catapult was established in line witha wider agenda of the UKgovernment to reinforce innovationsupport for industry. In 2010, theHauser Report¹ noted that despitebeing one of the leaders in researchthe UK had not sufficientlycapitalised on translating researchresults into business.

The report called for the need tocreate Technology and InnovationCentres – today called catapults - toenable industry to exploit new andemerging technologies by providingbusiness-focused capability. Today,eleven national catapults areestablished, each focusing on an areaor technology with real potential togenerate growth in strategic globalmarkets.

Manufacturing generates half of UKexports and accounts for threequarters of business R&D.² As aresult, the HVMC was the firstcatapult to be set up under theprogramme. The aim of the 2012-2018 programme is to providebusiness with the cutting-edgeequipment and the skilled resourcesneeded to commercialise theirworld-class technologies.

This helps businesses to combine thebest manufacturing innovations andto create globally competitiveproducts, processes and services.

Aiming at making UKmanufacturing moresustainable

As a catalyst for the future growthand success of UK manufacturing,the main mission of the HVMC is tohelp business accelerate and de-risknew concepts to commercial realityand make UK HVM more sustainable.Further objectives include: (1)innovation support improving thecompetitiveness of manufacturing;(2) make innovation support formanufacturing reach new sectorsand new markets, (3) specificinnovation support for SMEs and (4)help develop next generationtechnologies with the potential totransform UK manufacturing.³

Driven by industry,backed by the state

Due to sharing funds equally amongthree different sources -government, commercial industrialresearch and collaborative R&D - theprogramme applies a balancedfunding model. The initiative ismainly infrastructure andtechnology focused but iscomplemented with provision forskills development and training insome areas. The approach andinvestment priorities are driven by amultitude of actors includingindustry, research and government –encouraging innovation in thoseareas that are relevant to industry.

“HVMC (…) makes a real difference bybacking the revival of manufacturingin our country.”–David Cameron, Former PrimeMinister

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United Kingdom: Smart Industry

Backbone funding fromthe state

In line with the 1/3 funding model,HVMC centres aim to receive statefunding to the value of around onethird of its overall income. Corepublic funding is aimed to supportinvestments in capabilities, know-how, expertise and skills as well aslong-term capital assets.

For the financial year of 2015/2016€61.3 million of public funding wentto the HVMC centres making up 30%of the total budget. In addition, thefunding model foresees that onethird of the budget is sourced fromcollaborative R&D projects fundedjointly by the public and privatesector, won competitively from UKand EU calls. HVMC’s balancedfunding model contributesconsiderably to the sustainability ofthe initiative.

Private financing as asustainable factor

With a share of 39% of the total€203 million budget in 2015/2016,HVMC’s commercial income issignificant. Obtained to large extentsthrough competitive R&D contracts,the programme applies a strategicapproach to ensure investmentsfrom the private sector. In a nutshell,this approach includes five principalmethods:

1) Retention and development ofindustrial scale, state of the artequipment and facilities forapplied R&D and innovationrelevant to industry;

2) strategic engagement andmanagement of seniorrelationships with key industrialpartners;

3) marketing and communicationsincl. success stories to key targetareas across industry and viastakeholder 3rd parties such asknowledge transfer networks;

4) client business developmentteams; and

5) communication andimplementation of dedicatedsupport schemes such as SMEengagement.

Initial public investments ofapproximately €119 million haveachieved an impressive leveragingeffect. The HVMC’s Economic ImpactReport stated that €1 publicinvestment generated net benefitsworth of €17.

Main initiatives:Developing, extendingand cooperating

With a particular emphasis ondeveloping capabilities to meetindustry needs, extending nationaloutreach and collaboration withuniversities, the HVMC cross-centrecollaborative approach is centred onthree actions:

(1) Developing large scale projects(LSP) to transform majormanufacturing markets andsupply chains;

(2) developing cross centrecapability and competence;

(3) and creating collaborativerelationships with universities.

Next to assisting in thecommercialisation of research, theuse of advanced equipment andmachinery at the centres is essential.Visiting businesses and/orresearchers have access to a widerange of facilities and cutting edgetechnologies as well as to extensivein-house staff support.

The emphasis is put on workingcollaboratively across projects,programmes, and contracts; yet,specific support is also given for aparticular sector, sub-sector ortechnology.

Each HVMC centre has specificstrengths and areas of specialisationin support of strengthening themanufacturing sector. The centres’capabilities span from basic rawmaterials to high integrity productassembly processes. Together theyhave capacities to provide companieswith access to premium facilities andskills to scale-up and prove-out HVMprocesses. Throughout its activities,the centres support processes andsystems that are better, faster,cheaper, greener, lower carbon andsafer.

Target audience -business and academia

The programme targets companiesseeking to investigate innovativetechnologies or scale up newproducts and processes. Eligiblebeneficiaries include manufacturingsector businesses - SMEs or largecompanies - and researchorganisations including private andpublic organisations.

The industries focused inparticularly, but not exclusively, areaerospace, automotive, chemicals,nuclear, pharmaceuticals andelectronics.

Source: Digital Transformation Monitor

HVMC income by source with in-kind contributions (2015-2016) (€,000) ⁴

0 € 50 € 100 €150 €200 €250 €

Private

Public Private CollaborativeR&D

Public-Non-Catapult

Public-Catapult

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United Kingdom: Smart Industry

Concepts and focusareas - transformationalchange

HVMC is about enabling innovationand commercialisation in themanufacturing sector through thedifferent HVMC centres, ultimately toincrease competitiveness, increaseproductivity and to deliver economicgrowth. Supporting the existingportfolio of case studies and positiveindustrial testimony, work to bettercapture and articulate the currentand potential economic and financialimpacts of the HVMC’s work is acurrent area of focus.

An initial impact evaluation exercisehas been conducted and now, byworking with Innovate UK andindustrial stakeholders, the HVMC iscurrently undertaking a moreextensive impact evaluation exercisewhich once implemented, will betterenable HVMC to:

i) understand the current andlikely future economic impactthrough providing innovationsupport for UK manufacturing;and

ii) inform the design of futuresupporting interventions andactivities.

The evaluations will furtherarticulate the economic benefits ofthe HVMC in terms of its work toprovide:

i. support to industry;ii. strategic leadership in

manufacturing;iii. people and competence

development.

Driving the value ofmanufacturing

One of the main benefits of theHVMC being a network of 7 centreslies in their ability to collaborate –collectively and bi-laterally. Thiscollaboration is supported throughthe Catapult’s cross-centre forums.

In these forums, representativesfrom all the centres collaborate toidentify technology challenges andopportunities that can be addressedby leveraging the combinedcapability of the HVMC centres. Inaddition, there is a dedicated budgetto support cross centre technologyprojects.

After the financial crisis, the socialrecognition to revive the UK’smanufacturing base in order tocreate wealth and balance the UKeconomy became an enablingcondition of the initiative. Next topublic support, industry’s demandand backing played a vital role indriving the initiative forward. Thegovernment acted on this andlaunched the HVMC.

Translating innovationinto success

In 2010 the government appointed areview of the innovationinfrastructure status and knowledgeeconomy in the UK. The review gavetwo recommendations: The first wasto counteract the lack ofinfrastructure and technologies inthe UK hindering the scaling up oftechnology and innovation. Thesecond recommendation was tocreate a network of TechnologyInnovation Centres (TIC), i.e.Catapult.⁵

High value manufacturing wasselected as a Catapult because ofglobal market potential and the UK’scompetitive advantage in the sector.The HVM Catapult was created as aregistered company owned by acollaboration of 5 universities and 2private companies.

From the government side,Innovative UK, with its role as theUK’s innovation agency, is theresponsible entity funding HVMCthrough grants, operatingcompetitive calls for collaborativeR&D grants in high valuemanufacturing. Innovate UK alsoprovides policy guidance bydeveloping the nationalmanufacturing and materialsstrategy.

© asharkyu/Shutterstock.com

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United Kingdom: Smart Industry

Results and funding -overachieving theobjectives

Since the launch of the HVMC in2011, the HVMC has exceeded itstargets in all respects: Between 2013and 2015 the value of innovationwork represented 123% of theoriginal target, indicating thatdemand for services and support iswell in excess of initial expectations.In this period, every €1 of corepublic funding has generated netbenefits worth of €17.⁷

Estimates of the combined turnoverof all companies currently engagedwith the HVM Catapult amount to€197.4 billion and 692,000employees globally. The feedbackfrom engaged businesses andresearch organisations isoverwhelmingly positive.

Apart from assigning highorganisational impact to the HVMC,collaborations between the HVMCcentres and businesses are judged todirectly contribute to enhancingnational manufacturingcompetencies. Additional corebenefits comprise novelmanufacturing processes, adaptingexisting business models toaccommodate diversification andlarger scale manufacture and theapplication of existing processes andtechniques.

For the near future, the HVMCatapult could generate anadditional £6.1bn in 2016-2020. Onecritical area where the HVMC aims tofocus in the next five years is SMEengagement – where their target isto increase SME engagement from1500 per year in 2013 to 2250 by2020.

Behind seven worldclass centres

At operational level, HVMC’s missionis to combine the strength of sevenworld-class centres of industrialinnovation with a view to catalysesustainable growth, accelerate newconcepts to commercial reality andsecure the future of manufacturing.

Next to the review requested by thegovernment, the HVMC has grownon the basis of two further strategicpolicy reports: a report establishing22 manufacturing success areas inthe UK and the HVM Strategy fromInnovate UK, a 5 year plan oninvestments and activity informedby national strategy and industrialdemand. ⁶

The first implementation step was acall for proposals launched by thegovernment to select the HVMCatapult partnership. In a nutshell,the process behind theimplementation process comprisedscoping the work, creatingcompetition, launching calls forproposals; reviewing proposals;awarding proposals andimplementing the programme.

Overcoming barriers

An early challenge was the ability tomaintain the balanced fundingmodel as the commercial incomegenerated by the centres was well inexcess of the forecast. Further, thecentres rapidly reached full capacityand could not service all incomingrequests. Increased Governmentfunding has now addressed this.Another key challenge is SMEengagement.

The HVMC has an excellent record ofworking with SMEs with over 1500engagements per year. However,effective engagement is resourceintensive and SMEs often do nothave the capacity to engage as fullyas they might. Thus, it is importantthat SME engagement is tailored tosuit the needs of smallmanufacturing businesses. Inresponse to this challenge, adedicated SME engagementprogramme – HVM REACH - wasestablished.

Source: Digital Transformation Monitor

SWOT Matrix for UK’s Catapult

Opportunities

• Significant opportunities toextend into new marketsincluding construction and toexploit digital technologies toimprove productivity andcapability

Threats

• Maintaining the balanced fundingmodel which is important toensure that the right balance isachieved between encouragingrisk taking, enabling collabo-ration and stimulating innovationin areas that are relevant and ofbenefit to industry

Strength

• Applied support to companiesand research organisations forscaling up technologies

• Significant commercial incomeand solid monitoring andevaluation system

Weaknesses

• Industrial demand has at timesexceeded available capacity

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1 Hauser, H. (2010) The Current andFuture Role of Technology andInnovation Centres in the UK

² Technology Strategy Board (2012) HighValue Manufacturing Strategy 2012 to2015

³ Warwick Economics & Development(2015) High Value ManufacturingCatapult - Pathways to Impact4 ibid.5 Hauser, H. (2010) The Current andFuture Role of Technology andInnovation Centres in the UK

⁶https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/505246/CO307_Mapping_UK_Accessible.pdf

⁷ Warwick Economics & Development(2015) High Value ManufacturingCatapult - Pathways to Impact

References

United Kingdom: Smart Industry

Industrial scalabletechnology

The catapult principle is not uniqueto the UK but the provision ofindustrially scalable technologyrelevant for industry makes theinitiative stand out. What industryneeds at real scale is replicated in anindustrial scale technologyinfrastructure provided by HVMC.This approach is in line withdemands from industry, which hasbeen very positive about theprogramme.

From failure to success

A primary lesson learned from thepolicy emphasises the value of “late-phase” innovation for economicgrowth. This is where industrialscale technology can serve as asuccess factor. The employment ofaround 2000 workers by the centrescomposed of engineers and scientistsgives the initiative a real criticalmass to develop a community ofexperts in the UK.

Finally, the balanced funding modeldecreased the risk of the operationto make a long term commitment toimprove innovation.

© totojang1977/Shutterstock.com

About the Digital Transformation MonitorThe Digital Transformation Monitor aims to foster the knowledge base on the state of play and evolution of digital transformation inEurope. The site provides a monitoring mechanism to examine key trends in digital transformation. It offers a unique insight intostatistics and initiatives to support digital transformation, as well as reports on key industrial and technological opportunities,challenges and policy initiatives related to digital transformation.

Web page: https://ec.europa.eu/growth/tools-databases/dem/

This report was prepared for the European Commission, Directorate-General Internal Market, Industry, Entrepreneurship and SMEs;Directorate F: Innovation and Advanced Manufacturing; Unit F/3 KETs, Digital Manufacturing and Interoperability by the consortiumcomposed of PwC, CARSA, IDATE and ESN, under the contract Digital Entrepreneurship Monitor (EASME/COSME/2014/004)

Authors: Demetrius Klitou, Johannes Conrads & Morten Rasmussen, CARSA and Laurent Probst & Bertrand Pedersen, PwC

DISCLAIMER – The information and views set out in this publication are those of the author(s) and should not be considered as theofficial opinions or statements of the European Commission. The Commission does not guarantee the accuracy of the data included inthis publication. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use whichmight be made of the information contained in this publication. © 2017 – European Union. All rights reserved.