Lord Sainsbury: How we are encouraging entrepreneurs

Competitive advantage comes not from doing what other countries do well but from what we can do better than them, and in this country one of the things we do outstandingly well is scientific discovery.

With 1 per cent of the world's population, we do 6 per cent of the world's science, produce 8 per cent of the world's scientific papers and receive 9 per cent of the world's citations. And in some industries that depend on "elite science" for their success, we are very good at turning our science base into commercial products. Of the 20 best-selling drugs in the world last year, five were invented in the UK.

In recent years there has been a very significant change in the attitude of universities to the exploitation of their ideas. Ten years ago there were very few spin-off companies from universities, and universities were not very interested in exploiting their intellectual property. But that is changing rapidly. I am leading a Department of Trade and Industry team looking at biotechnology clusters, and over the next three months we will be visiting clusters in Cambridge, Oxford, Surrey and Dundee. We are now the leading biotechnology country in Europe, although we are a considerable distance behind the US.

There are also a lot of IT spin-off companies, a really outstanding example of which is Surrey Satellite Technology, a wholly-owned University of Surrey company that this week in Kazakhstan achieved the first-ever commercial satellite launch from an SS18, once the world's most powerful intercontinental ballistic missile. Formed in 1985 SSTL has designed and built 14 microsatellites for civil and military applications for international commercial customers. A further three are due for launch before the end of this year, for Malaysia, the US Air Force and France. And last month SSTL signed a $17 million deal to build the platforms for a constellation of six microsatellites for the US.

Much is taking place, but a great deal more needs to be done. To speed up the exploitation of our science and engineering base, the government wants to see universities as partners of business, developing people to work in and with business, spinning out firms to commercialise research and collaborating with business on research and problem-solving.

But this does not mean diverting money from fundamental research to applied research. On the contrary, our first priority is to maintain the excellence of our science base. US universities that are well known for having spun off lots of companies, such as the Massachusetts Institute of Technology, Stanford or Berkeley, are also great basic research institutions. MIT's alumni have created some 4,000 firms, employing 1.1 million people and with sales of $232 billion, but it is also a great centre for scientific discovery.

The first thing we did as a government was to put, together with the Wellcome Foundation, an extra Pounds 1.4 billion into the science and engineering base, as part of the comprehensive spending review. We also took important steps to improve the flow of scientific and engineering ideas into industry. The most significant is University Challenge. The very early stages of turning research outcomes into marketable products, processes and services is a critical and difficult phase, and the University Challenge Fund is targeted at providing support at that point.

The fund was set up in July 1998 and in March Pounds 45 million was awarded to15 university-based consortia. There is now extra money for a second round.

I have also launched the Science Enterprise Challenge, a Pounds 25 million competition, to establish up to eight centres of enterprise in UK universities. The centres will be world-class establishments for fostering the commercialisation of research and new ideas, for scientific entrepreneurialism and for incorporating the teaching of enterprise into science and engineering curricula. We have received 28 stage-one bids that involve 55 HE institutions.

The ability to sense opportunities and take risks, to pursue an idea tenaciously despite overwhelming difficulties, and to persuade people that they should back what seems a maverick idea are not skills that can be taught in the classroom. But anyone who wants to set up a new high-tech business would be well advised to learn how to write a corporate plan, the basics of corporate finance, how to read a balance sheet, and to know something about intellectual property rights.

A third initiative is the creation of the Higher Education "Reach Out" Fund to reward and incentivise universities for interacting with business. It affords freedom to institutions to come forward with innovative proposals for establishing links with business.

We also plan to increase the number of Teaching Company Scheme programmes running at any one time to more than 1,000. The TCS has been shown to be highly successful in facilitating the transfer of technology and knowledge between the science and engineering base and business, and has also been highly successful in helping to forge lasting partnerships.

A national network of Faraday Partnerships will also bring a sharper focus to the commercialisation of research and the sharing of ideas in particular areas of technology. The aim is to encourage university researchers, independent research organisations and firms of all sizes to work together to exploit our science base.

Finally, the government wants to create a broadly based entrepreneurial culture, in which more people of all ages and backgrounds want to start their own businesses.

To encourage a new generation of entrepreneurs, the government is: n Creating a new Enterprise Fund to support the financing of small businesses with growth potential - including a scheme in which six major financial institutions will provide new venture capital

* Improving the help given to start-ups by providing a new high-quality advice service targeting 10,000 growth start-ups a year in England

* Reviewing arrangements for business rescues and reassessing the relative rights of creditors in insolvencies, including the costs and benefits of any changes to the Crown's preferential status

* Considering whether our bankruptcy and insolvency laws need to be changed to ensure that they support enterprise, including whether any of the restrictions on bankrupts could be eased.