As a new initiative launches to invest in innovation and bridge the gap between academia and commerce, Computer Weekly looks at what the UK can learn from Australian city Melbourne, which points to success being driven by a simpler and more generous tax relief system.
This week sees the launch of the Big Innovation Centre, an initiative that aims to help make the UK a global innovation hub through coordinating the efforts of different sectors of the UK economy.
The Work Foundation, which has launched the new body, said in a statement: "The Big Innovation Centre brings together a range of companies, trusts, universities and public bodies to create a practical and dynamic hub, with the vision and ambition of building a world-class innovation and investment ecosystem by 2025."
The Big Innovation Centre's focus on bringing universities and business closer will be welcomed by the IT sector, but the UK tax regime could be the sharpest tool in increasing innovation if the city of Melbourne is taken as an example.
Tax credits boost business
KPMG recently researched 95 cities in 10 countries to establish which is the best place for research and development. Australia was found to be the best country to carry out R&D, with Melbourne the best city in the world.
Melbourne has risen to the top from fifth place in KPMG's 2008 report. David Gelb, senior partner for R&D at KPMG Australia, said Melbourne's fast improvement is the result of a new tax law which gives start-ups 45% of their investments back even before they are paying tax.
"Melbourne's improvement was the result of the new tax credit," he said.
Melbourne accounts for 25% of Australia's total IT revenue, with 8,500 IT companies and 140,000 IT professionals, according to Australian government figures.
Gelb said Melbourne's success is the result of the Victoria State government's understanding of the importance of IT to the economy and its ability to create a tax policy that drives innovation.
As well as giving back 45 cents in every dollar spent by start-ups that have a turnover of less than A$20m, it has simplified the process of applying for credits. Jim Purdie, director of R&D tax relief at KPMG UK, said the best UK start-ups can get is 12% back before they pay tax and 26% if they are paying tax.
Gelb said that both the UK and Australia have similar tax rules, but it is more straightforward to apply for and receive the benefits in Australia.
He said there are two organisations that deal with applications in Melbourne, compared with just one in the UK, which makes the process slow and often unfair in the UK. In Melbourne, an organisation known as Aus Industry, which understands the innovations, works with the tax office. In contrast, HMRC handles it all in the UK.
Shared resource for businesses and universities
More interaction between universities and industry will be a welcome step in the right direction. Last month, IT services firm Logica called for the government to set up a central register of the intellectual property (IP) of universities to help good ideas make it into commercial environments. At a roundtable discussing UK innovation, Logica UK CEO Craig Boundy said the company would write to government to suggest the creation of a resource that could be shared between businesses and universities.
"We need an effective knowledge-sharing platform. It is currently far too difficult for organisations to access university research," said Boundy. "We are calling on government to establish a register that allows universities to share IP."
Anthony Finkelstein, dean of engineering sciences at University College London (UCL), said at the same event that work is needed to improve communication between academia and commercial organisations.
In regard to the latest initiative he said: "The establishment of the Big Innovation Centre is, of course, very much welcomed. The area of innovation badly needs evidence-based policy proposals. It is particularly prone to myths and misunderstandings. One important challenge, however, is the plethora of different bodies, initiatives, projects, funding schemes and, dare I say it, centres claiming to support the innovation process. The success of the Big Innovation Centre will be the extent to which it acts to pull together thinking in this area rather than simply adding another voice to a rather discordant choir."