Research and Innovation

POSITIONS | EUROPEAN POLICY | BREXIT

Research and Innovation Challenges of Brexit

22 October 2018 Core Recommendations 23. Oktober 2017 ▪ Research Community & Research Cooperation Ensure continued research collaboration with the EU, access to EU funding streams and facilitated investment flows between the UK and the EU27. UK research grant applications should be streamlined post-Brexit.

▪ Innovation Funding & Research Clusters: Grant the UK “associate member” status for Horizon 2020 and its successor programme Horizon Europe (HEU) – analogue to Switzerland and Israel – in order to maintain high quality R&D and allow research consortia to continue.

The best available solution for the UK in terms of continuing cooperation in R&D and innovation with the EU27 would be a “Norwegian scenario”. Anything less would considerably impair the long-standing cooperation between research institutions and universities. This should include maintaining the access and contribution of the UK to the EU Joint Technology Initiative (JTI) and Innovative Medicines Initiative (IMI). In addition, Brexit threatens to significantly impede the provision of financing to German firms by British investors. The exit negotiations should therefore work to ensure that investment by British investors into German companies remains barrier-free.

▪ Mobility and exchange of researchers: An agreement on migration between the UK and the EU27 should facilitate the mobility of students, researchers and highly skilled workers. The system should be needs-based, straightforward, swift and provide certainty of outcome.

▪ Unitary Patent System, post Brexit patent harmonisation - Support the introduction of the Unitary Patent System and keep UK as a member - Encourage the UK to stay in the current European Patent System based on the European Patent Convention - The establishment of the European Unified Patent Court (UPC) for the settlement of disputes relating to European patents should not be held up by the exit negotiations. The UPC is essential for the creation and functioning of the EU patent.

▪ Export control / dual use: The UK and the EU authorities should adapt their export control processes and resources as rapidly as possible in order to maintain a functioning exchange of substances for research and development purposes and uphold the close collaboration between EU and UK researchers.

Christian Rudelt | Digitalisation and Innovation | www.bdi.eu

Research and Innovation

BDI Task Force Brexit The BDI is committed to supporting the Brexit negotiation teams with in-depth expertise in a number of areas of economic policy. In summer 2017, the BDI set up a Brexit task force together with its member organisations, company representatives and partners including the Association of German Banks (BdB), the German Insurance Association (GDV), the Federation of German Wholesale, Foreign Trade and Services (BGA), the Confederation of German Employers’ Associations (BDA) and the Association of German Chambers of Commerce and Industry (DIHK).

The BDI Task Force Brexit has established ten project teams to address specific policy areas: (1) Trade in Goods, (2) Transportation and Logistics, (3) Data and ICT, (4) Taxation, (5) Legal consequences of Brexit in core areas of business law, (6) Energy and Climate Policy, (7) Market Access, (8) Workforce Mobility, (9) Banking, Finance and Insurance, (10) Negotiation Process (including Northern Ireland, Research and Innovation, Defence, Financial Commitments).

The objective of the project teams is to identify the potential risks posed by the exit of the UK from the EU and to propose constructive approaches to countering these risks. The project teams are looking at the regulatory issues in the individual policy areas on the European and the national level. The BDI is also a member of a similar task force at Business Europe, the umbrella organisation for European business. The work of the BDI Task Force Brexit will progress in line with the official negotiations.

This position paper is based on the background information developed by the BDI Brexit Task Force. The views expressed in this position paper are those of the BDI and do not necessarily reflect those of the other members of the Task Force.

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Contents Research and Innovation: Challenges of Brexit .............................................................................. 4 Research Community & Research Cooperation ................................................................................... 4 Measures ............................................................................................................................................... 5 Innovation Funding & Research Clusters .............................................................................................. 5 Assumptions .......................................................................................................................................... 5 Measures ............................................................................................................................................... 6 Mobility and Exchange of Researchers ................................................................................................. 6 Assumptions .......................................................................................................................................... 6 Measures ............................................................................................................................................... 6 Patents: Unitary Patent System, Post-Brexit Patent Harmonisation ..................................................... 7 Assumptions .......................................................................................................................................... 7 Measures ............................................................................................................................................... 7 Export Control / Dual Use ...................................................................................................................... 7 Assumptions .......................................................................................................................................... 7 Measures ............................................................................................................................................... 7 Imprint .................................................................................................................................................. 8

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Research and Innovation: Challenges of Brexit Economic integration and research relations between German companies and research institutions and companies in the UK are deep and mutually beneficial. The parameters to ensure the continuation of these relations need to be clarified swiftly. These include the free movement of staff (German researchers at British institutions and vice versa) as well as no or low barriers to research collaborations. As a general rule, no burdens should be imposed within the context of commissioned R&D. Continuity is essential both during and after the transitional period. Even in cases where the project leader (consortium leader, managing entity) or funding recipient is based in the UK, the continuation and orderly execution of projects needs to be ensured. Many European research-based companies have benefited from the multinational research networks created by the ongoing EU Framework Programme Horizon 2020 (H2020) and its predecessors. For larger companies, these networks are a key reason for participating in funding programmes as they provide access to knowledge beyond their own organization. A departure of the UK would jeopardise these long-standing research networks.

Research Community & Research Cooperation Many innovative industries operate at a global level in everything from basic research to product development, manufacturing and commercialization. This holds especially true for the life sciences industry. With its long tradition of bioscience research, excellence in academia and clinical research as well as industrial investment in life science clusters, the UK has become one of the leading centres in the world for developing new medicines.

For many German and international companies, access to skilled European Economic Area (EEA) migrants is crucial for staffing the specialist roles needed to undertake innovative, cutting-edge work and providing the specialist knowledge required in emerging technology areas.

Research collaboration within Horizon 2020, in particular, brings significant benefits to many industries, especially the life science industry. Indeed, many universities and other research institutions in the UK are major recipients of EU funding. Reducing or, even worse, cutting this funding would have a major impact on research and analysis sales within the UK. In addition to the loss of EU funding, decreased collaboration opportunities with European academia would reduce the appeal of the UK as a location for academic research. This would have a detrimental impact on many research locations in the UK and make the development of scientific and technological opportunities in the UK less effective.

Furthermore, the UK is currently an important advocate for European science-based policy making.

The influence it brings to bear on promoting industrial R&D and innovation will be missed, in particular its efforts to advance R&D and innovation in a wide range of industries. British biotech research plays a major role in making the entire EU biotech industry competitive with other regions of the world.

Furthermore, the UK has the second largest number of life science companies in Europe (after Germany) and ranks first in the number of innovative therapeutic companies (according to KPMG’s report “Site Selection for Life Sciences Companies in Europe�). The UK occupies a similar position in the research community and collaboration structure in the physical sciences. There are, for example, a large number of collaboration projects between the UK and EU R&D institutions and companies in the photovoltaic materials and renewable energy fields aimed at enabling low-carbon power generation in cities to meet the need for clean growth.

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Measures Continued research collaboration with the EU, access to EU funding streams, and streamlining of UK research grant applications post-Brexit should be the goal. Partnerships across the EU, which provide access to networks, intelligence and expertise sharing, are essential to R&D and need to be maintained.

Current private public partnerships (PPPs) within European Framework Programmes (e.g. Horizon 2020) with UK participation should not face any disadvantages. That means maintaining the UK’s access to the EU Joint Technology Initiatives (JTIs) including the Innovative Medicines Initiative (IMI), Bio-based Industries Consortium (BIC) and Clean Sky 2. These PPPs must be able to continue without any restrictions.

The European Medicines Agency (EMA), which plays a key role in approving new drugs, is based in London and has benefited considerably from the input and assistance provided by UK government agencies. EMA issues recommendations to the European Commission on marketing authorisation applications submitted through the centralised procedure. A decision has been made to relocate the EMA headquarters to Amsterdam. The EMA must be provided with sufficient resources at its new location, including qualified personnel, to ensure that it continues to run smoothly.

Innovation Funding & Research Clusters Assumptions Brexit will have serious consequences for business financing and for the financial markets, and these consequences will need to be managed stringently. The UK tops all other European countries when it comes to raising capital for innovation and new technologies and receives the highest net per capita EU funding for health research (16 percent of total EU health research funding). Financial investors from the UK have also helped finance German biotech firms, in particular, through cooperative ventures and the close ties afforded by joint EU membership.

Furthermore, the United Kingdom is both one of the largest funders and one of the biggest beneficiaries of European research policy. Brexit will eliminate the UK's contribution to the European Union budget.

The UK is the second largest net contributor after Germany (€11.5 billion in 2015). The extent and form of Britain’s participation in Horizon Europe (HEU) will also determine whether British institutions will, be recognised as fully associated partners and thus be fully funded post-Brexit, or whether UK institutions will then only be able to participate in HEU projects but not receive any funding..

In the current EU Framework Programme Horizon 2020, 48 percent of all Horizon 2020 projects with German participation also involve the UK. At the level of the programme pillars, the share of projects with British partners the highest by far in Pillar III, Societal Challenges, at 64 percent, followed by Pillar II, Industrial Leadership (46 percent), and Pillar I, Excellent Science, at 36 percent. Until now, the United Kingdom has been a preferred partner for German organisations because of its size and scientific strength.

Overall, the post-Brexit options open to the UK in science and research are limited. If the UK does not accept concessions, such as a substantial financial contribution to the EU budget and personal mobility in return for full access to EU funding instruments (“Norwegian scenario”), it will only be able to participate in EU research initiatives as a partially associated (“Swiss scenario”) or non-associated third country (“Canadian scenario”).

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Measures Investment flows from UK financing ventures into the EU27 and vice versa will be impeded significantly

by Brexit. The exit negotiations should therefore endeavour to ensure that investors can continue to invest in companies on the other side of the channel barrier-free.

A “Norwegian scenario” with the fewest changes to the status quo as possible appears to be the best available solution for both sides in terms of continued cooperation in R&D and innovation. It would allow the long-standing cooperation under the Framework Programme to continue, the unimpeded exchange of knowledge with UK institutions, and maintain access of EU27 researchers to positions at UK universities.

In the case of a hard Brexit and non-associated third country status for the UK, the EU27 should launch programmes to further support research collaboration with the UK on a bilateral basis.

Mobility and Exchange of Researchers Assumptions The UK’s position as a leader in life sciences is largely founded on its ability to attract, develop and retain a highly-skilled workforce. A key component of this has been enabling talented individuals to move and collaborate freely – intellectual circulation being critical for developing the next generation of innovators and business talent. There will, of course, always be a need to access talents from abroad.

A restriction to the free movement of people would make it difficult for UK-based businesses to employ people from across the EU. The life sciences companies in the UK, in particular, would face difficulties in accessing EU staff for scientific, executive and operational positions. Increased administrative burdens will also reduce the companies’ ability to move staff between different units in different countries, which may trigger a brain drain from the UK. In addition, scientific staff would suffer from restricted EU research funding, which has enabled their mobility and exchange across Europe until now.

Barriers resulting from a reduction in the free movement of people would ultimately risk a long-term erosion of the excellence of UK science research.

Measures The uncertainty surrounding Brexit is already making it difficult to attract and retain talent, partly by creating the negative impression that the UK is closed to international researchers, innovators and workers. The continued mobility of highly-skilled workers in cutting-edge industries post-Brexit must be ensured. Failure to do so would have a major detrimental impact on corporate activities in the UK and the UK’s competitiveness, especially in the area of life sciences and advanced materials more generally.

Reaching the right agreement on migration is crucial and will ideally also facilitate the mobility of skilled students, researchers and workers. In the short term, immediate action is needed to ensure that EU nationals can continue to work and study in the UK. This is an important step to counter concerns that the UK will become an unappealing environment for foreign workers. The system should be needsbased, straightforward, swift, and provide certainty of outcome.

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Patents: Unitary Patent System, Post-Brexit Patent Harmonisation Regarding the EU patent, harmonisation at the European level would be possible if the UK was integrated into the EU patent system. The UK had, after all, ratified the agreement on enhanced greater cooperation to create the EU patent before voting to leave the EU. Assumptions Judging by the latest discussions and recent developments, Brexit is not expected to have a major impact on the intellectual property system in Europe / the UK. All business areas could nonetheless be affected if there is a divergence between intellectual property (IP) protection in the EU and the UK postBrexit with divergent IP systems. This could lead to differences in the term of patents, scope of patent claims and protection, as well as different terms for supplementary protection certificates (SPCs).

Moreover, it could have an impact on the current SPC manufacturing debate and the entire incentive debate within the EU. Measures ▪

Support the introduction of the Unitary Patent System and keep UK as a member.

▪

Encourage the UK to remain in the current European Patent System based on the EPC (European Patent Convention).

▪

The establishment of the European Unified Patent Court (UPC) for the settlement of disputes relating to European patents should not be held up by the exit negotiations. The UPC is essential for the creation and functioning of the EU patent.

Export Control / Dual Use Assumptions At a global level, specialisation, the division of labour, and multinational collaboration are state-of-theart and involve the exchange, not only of communication, data and researchers, but also of, e.g., substances. This is especially important in the life sciences sector. Some of the substances used in research such as dual-use items or drug precursors require special export control permits when being shipped to third countries. This is not the case when these substances are shipped within the single market.

Measures The UK and the EU authorities should adapt their export control processes and resources as rapidly as possible in order to maintain a functioning exchange of substances for research and development purposes and to uphold the close collaboration between EU and UK researchers.

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Imprint BDI – Federation of German Industries Breite Strasse 29, 10178 Berlin Germany www.bdi.eu T: +49 30 2028-0 Editor Christian Rudelt T: +49 30 2028-1572 c.rudelt@bdi.eu

Special thanks go to the valuable expertise of: Viola Bronsema (BIO Deutschland), Séverine Féraud (Merck KGaA), Christoph Busch (BITKOM), Michael Kahnert (BIO Deutschland), Markus Krischer (Bayer AG) and Gregor Strauch (Böhringer Ingelheim) and Klara Schwobe.

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