4th Report, 2012 (Session 4): The EU's Horizon 2020 Programme for Research and Innovation

SP Paper 175


4th Report, 2012 (Session 4)

The EU's Horizon 2020 Programme for Research and Innovation

Remit and membership


The remit of the European and External Relations Committee is to consider and report on-

(a) proposals for European Communities legislation;
(b) the implementation of European Communities legislation;
(c) any European Communities or European Union issue;
(d) the development and implementation of the Scottish Administration's links with countries and territories outside Scotland, the European Communities (and their institutions) and other international organisations; and
(e) co-ordination of the international activities of the Scottish Administration.

(Standing Orders of the Scottish Parliament, Rule 6.8)


Clare Adamson
Helen Eadie
Bill Kidd
Hanzala Malik (Deputy Convener)
Jamie McGrigor
Christina McKelvie (Convener)
Aileen McLeod

Committee Clerking Team:

Clerk to the Committee
Ian Duncan

Assistant Clerk
Jennifer Bell
Jenny Goldsmith

Committee Assistant
Eileen Martin

The EU's Horizon 2020 Programme for Research and Innovation

The Committee reports to the Parliament as follows—


Background to Horizon 2020

1. The EU is committed to investing 3% of its GDP in research, development and innovation1 believing such an investment is the key to maintaining a competitive edge in the global market, creating growth and securing quality jobs. The Horizon 2020 programme is designed to achieve this end. The programme will cover the years 2014 to 2020 and has a proposed budget of €80bn. The Commission’s proposals were published on 30 November 20112.

2. The Horizon 2020 programme will combine all research and innovation funding currently provided through the Framework Programmes for Research and Technical Development, the innovation related activities of the Competiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT) and in so doing seek to deploy a common set of simplified rules.

3. The declared aims of the programme are to—

  • Strengthen the EU’s position in science with a dedicated budget of €24.6bn. This will support high-level research in Europe, (and include an increase in funding of 77% for the European Research Council (ERC).

  • Strengthen industrial leadership in innovation (€18bn). This includes major investment in key technologies, greater access to capital and support for SMEs.

  • Provide €32bn to help address broad issues such as climate change, developing sustainable transport and mobility, making renewable energy more affordable, ensuring food safety and security, or coping with the challenge of an ageing population.

  • Tackle societal challenges by helping to bridge the gap between research and the market by, for example, helping innovative enterprise to develop their technological breakthroughs into viable products with real commercial potential. This market-driven approach will include creating partnerships with the private sector and Member States to bring together the resources needed.

4. The Committee welcomes the Commission’s Horizon 2020 proposals and the efforts by the Commission to simplify the programme procedures, whilst ensuring that excellence remains the key criterion for securing funds. The Committee recognises their importance to Scotland’s university and research sectors and to business, particularly SMEs.

5. A full briefing on the Commission’s Horizon 2020 proposals is included within Annex B.

Research in Scotland

6. In the most recent figures available3, Scotland’s Gross Expenditure on R&D (GERD) decreased in real terms by 3.9% (£76m) between 2009 and 20104.

7. Higher education research and development (HERD) expenditure in Scotland in 2010 was £986m, 13.6% of the UK total and 0.81% of GDP. Scotland’s HERD as a percentage of GDP ranks top out of the 12 UK regions, and is the third highest among the OECD countries.

8. Scotland has been a major beneficiary of previous EU research programmes. In the current research programme (FP7) Scotland secured €351 million in funds.5

9. Although Scotland’s research and academia sector has been successful in drawing down funds, Scotland’s business sector has fallen short of the EU target for SME participation in the programme (13.5% participation against a target of 15%). In 2010, Business Enterprise Research and Development (BERD) expenditure was £622m, 3.9% of the UK total and 0.52% of Scottish GDP. In comparison to the other 11 regions within the UK, Scotland ranks ninth in terms of BERD expenditure as a percentage of GDP. Scotland’s BERD as a percentage of GDP ranks in the fourth quartile of OECD countries that reported in 20106.

Committee approach to Horizon 2020

10. The Committee’s engagement with Horizon 2020 has been in two stages. The first stage involved fact finding sessions with key stakeholders, EU actors and the Scottish Government, details of which are included in Annex C.

11. Out of this stage emerged three key themes—

  • Awareness – the Committee found that there was a poor awareness of European funding opportunities in general and Horizon 2020 opportunities in particular. Evidence received by the Committee show that business engagement in Scotland is lower than other parts of the EU.

  • Support – the Committee learned that the key to accessing EU funds was the nature and scale of support available to applicants. The Scottish Government presently had two specific programmes of support: (i) PACER (Programme Assistance for European Research) which is undergoing a review; and (ii) SPAF (Scottish Proposal Assistance Fund) which is to be discontinued7.

  • Networks – the Committee learned of the importance of establishing networks to share good practice, provide mentoring and resource and early warning offer of developments.

12. At its meeting of 31 January 2012, the Committee agreed to address these issues by staging a high-level conference. A conference format was deemed the most appropriate means to address the concerns raised in evidence by stakeholders since it would raise awareness, facilitate network building and provide exposure to the application support structures currently available. A conference would also provide a useful contribution to the on-going negotiations over the final structure of the Horizon 2020 proposals.

13. Horizon 2020 should not be considered in isolation. The Committee’s work on the EU Structural Funds8, has demonstrated significant synergies between the Structural Funds and the Horizon 2020. The Scottish Government has also recognised these synergies, and recently submitted a report to the European Commission.9


Format of the conference

14. The Committee’s Horizon 2020 conference took place on 25 May 2012, full details of which are included in Annex E.

15. The event took the form of a series of key note addresses followed by a series of breakout sessions exploring key themes. A list of the delegates is included in Annex F. Written evidence is included in Annex G and further evidence resulting from the conference is included in Annex H.

16. The event was addressed by

  • Marion Dewar, Member of the Cabinet of Commissioner Maire Geoghegan-Quinn, European Commission;

  • John Swinney MSP, Cabinet Secretary for Finance, Employment and Sustainable Growth, Scottish Government;

  • David Willets MP, Minster of State for Universities and Science, UK Government; and

  • Christina McKelvie MSP, Convener of the European and External Relations Committee.

17. The Committee would like to thank all the participants, speakers, chairs, facilitators and all those who assisted with the event. The Committee would also like to record its thanks to all those organisations whose early involvement with the Horizon 2020 proposals was crucial in the success of the conference.

18. The conference itself represents a contribution to the on-going negotiations on the future of the Horizon 2020 programme. Much of the discussion centred on the need to increase the participation of SMEs in research and innovation programmes, how Horizon 2020 can encourage and support greater collaboration between universities and SMEs, whether the necessary structures and mechanisms are in place to encourage this and how this can help SMEs and business increase their uptake of research and innovation investment and spending.

Key findings & recommendations

Bridging the gap between research and business: getting new ideas to market

19. Scottish Universities have been successful at accessing earlier EU research, with a significant proportion of Scottish University funding drawn from the EU. Scottish businesses have been less successful in drawing down EU funds, falling below the EU average for business participation.

20. Bureaucracy is considered to be the main barrier to business participation in the EU research schemes, both actual and perceived. Whilst the Commission is seeking to simplify the process, a perception lingers that accessing funds is complicated. There is therefore a need to raise awareness about accessing EU funds, a role that should be performed by the Commission at an EU level and the Scottish Government or its agencies (e.g. Scotland Europa) at a domestic level.

21. Delegates suggested that greater work must be undertaken on demand-side engagement, particularly with reference to SMEs. Further work is also required to convince businesses of the value of participating in EU funding, by showing clear evidence of the potential return on investment and engagement.

22. To access funds and find partners, businesses require assistance both upstream (at an EU level) and bilaterally (with potential collaborators). This issue is particularly problematic for SMEs, which often lack the capacity and expertise. A strategic approach to providing this support is required.

23. Universities should be more proactive in engaging with SME’s. Universities can learn from their counter-parts in countries which have a reputation for business engagement. Delegates suggested that each university/college draft an SME engagement strategy would be an important contribution.

24. The Committee recommends that:

  • The European Commission continues to increase its efforts to simplify the new programme to ensure it attracts interest from the business sector in general and SME in particular rather than deterring applications.

  • The Scottish Government to continue to work with the UK Government to ensure that the interests of Scotland’s key stakeholders (universities, colleges, research community, business sector) are reflected/represented in discussions at UK and EU level.

  • The Scottish Government and Scotland's MEPs ensure that excellence remains the principal criterion for assigning research funding under Horizon 2020.

  • The Scottish Government undertake a gap analysis to establish which sectors of business were under-represented in the recent funding programme and the reasons for this.

  • The Scottish Government develops a strategy aimed at the business sector (and particularly the SME sector) to encourage and facilitate engagement with the opportunities afforded by the Horizon 2020 programme.

  • The Scottish Government gives consideration to the provision of funding to support organisations during the application process. In particular, the introduction of a formal mentoring scheme to assist applicants as a contribution to a more cohesive ‘Team Scotland’ approach would be welcome.

Funding innovation: investigating new opportunities.

25. Delegates noted there is no one size fits all approach. It is important the correct strategy is adopted, whether it be sectoral or market based, to create link to market opportunities. However, suggested that more work should be done at a UK and Scottish level to develop geographical links where there are common interests and synergies.

26. Competition for Horizon 2020’s funds will be intense. It is therefore important that Scottish participants are ready and able to take advantage of the opportunities when Horizon 2020 goes live. Ensuring academic, business and SME leaders are aware and ready for this date will be important.

27. Public procurement is an important driver of innovation and can present real opportunities, particularly in terms of encouraging and supporting innovation in SMEs.10

28. Investing in cluster development could encourage and strengthen strategic innovation partnerships as well as a team Scotland approach. At present universities are good at this but it is important to explore practices that can strengthen innovation within both the academic and the private sector.

29. The Committee recommends that:

  • The European Commission, the UK Government and the Scottish Government raise awareness of the Horizon 2020 programme in advance of its formal launch to encourage maximum participation, and readiness for the opening of the bidding process.

  • The Scottish Government ensures that its procurement policies are structured in such a fashion as to encourage innovation.

  • The Scottish Government explore at an EU level as well as a domestic level how the development of clusters within the academic sector can be translated into similar clusters within the business sector (allowing for issues of competitive advantage) and between the business and academic sectors.

  • The Scottish Government ensures that any move toward a flat rate for indirect costs (i.e. staffing), which is unlikely to fully fund the staff commitment, does not serve as a disincentive to certain research bodies.11

Beyond the ‘usual suspects’: getting fresh talent into the system

30. SMEs were identified as the group that has the greatest potential to improve its engagement with EU funding. Raising awareness within this sector is vital to achieve greater participation, e.g. SMEs in certain Scottish priority sectors, such as finance and health, may be unaware of the Horizon 2020 programme entirely.

31. Delegates stated given that the development of Horizon 2020 is advanced, it is important that efforts are focused upon reacting to the policy rather than attempting to shape the regulation.

32. The Committee recommends that:

  • The Scottish Government develops a specific SME strategy, to both identify the obstacles to engagement and to provide support to overcome these obstacles.

  • The Scottish Government ensures that a proportion of the available funds is ‘market reactive’, thereby allowing enterprises (particularly SMEs) to respond to market opportunities and emerging demands in the market place.12

Role of Government: cutting red tape and securing value for money

33. The delegates noted that the scale and structure of Horizon 2020 means a degree of complexity and red tape is inevitable.

34. Improving networks and knowledge partnerships across Scotland is vital. Governments have previously recognised this and various schemes have been introduced to address this issue.

35. It is feared that introducing an additional level of assistance of screening will increase red tape. At the moment several portals exist within Scotland (such as that provided by Scotland Europa, Interface and some local authorities). There is a need to assess what portals are out there and how effective they are, and thereafter to build on what already exists.

36. The Committee recommends that:

  • The UK and Scottish Governments make every effort to further simplify the processes for which they are responsible and facilitate engagement through signposting, navigating and providing necessary advice.

  • The Scottish Government should assess the existing information portals and their utility with a view to developing a single comprehensive portal.

How to win the competition for funds

37. Delegates noted SMEs struggle with the length of the application process and its complexity. Arriving at the point of bidding for funds is often difficult and it can take up to 18 months to have a bid accepted. The Scottish Government fund (SPAF) that supported the organisations though the application process has been discontinued (although see footnote 6).

38. Although a lot of support is available, much of it exists in silos. There is a need to break down the walls of these silos and to share good practice more widely.

39. There is concern that there is only one national contact point for the whole of the UK compared to countries like Malta which has four national contact points. A greater number of contact points could benefit SMEs and universities and help ensure maximum participation in EU funding.

40. A focus on world-class research has the unintended consequence that much early-stage research can be overlooked. Match-funding was advocated as a means of addressing this and it was suggested that there is a potential role for Government in recognising and supporting such early level research.

41. The Committee recommends that:

  • Given the positive comments of the delegates regarding the SPAF programme, the Scottish Government undertakes a comparative study to determine whether the new funding arrangements to support applicants (i.e. arrangements post-SPAF) are an adequate successor to the popular SPAF programme.

  • The Scottish Government ensures that the PACER programme (currently undergoing review) is maintained.

  • As a matter of urgency, the Scottish Government and its agencies raise awareness within the business sector (particularly amongst SMEs) of the Government support available to assist applicants through the funding application process to ensure maximum uptake.

  • On the issue of national contact points, the UK and Scottish Governments should collaborate to ensure that there are an adequate number of national contact points.

  • The Scottish Government channels funds for early research programmes (which may not yet have demonstrated world class credentials) along with a commitment to multi-year funding for projects to ensure an innovative beginning does not falter.

42. The Committee notes the on-going negotiations between the Scottish and UK Governments and the EU institutions on Horizon 2020, and asks the Scottish Government to provide regular progress reports.

43. The Committee calls on the UK Government to recognise the significance of Horizon 2020 to the EU’s growth agenda in the on-going negotiations on the Multiannual Financial Framework (2014 – 2020).

44. The Committee recommends that the Scottish Government continues to be involved in key discussions at the UK level to ensure that Scotland’s particular research and innovation needs and concerns are reflected in the negotiations.

45. The Committee calls on the Scottish Government to ensure that Scotland’s voice is represented within the European Parliament and the EU Competitiveness Council.

46. The Committee would welcome regular updates from the Scottish Government on developments on the EU negotiations on Horizon 2020.

Annex A - Extracts of Minutes of the European and External Relations Committee

7th Meeting, 2011 (Session 4)
Tuesday 15 November 2011

2. Horizon 2020: The Committee took evidence in a round-table discussion from—

Professor Pete Downes, Chair of the Research and Knowledge Exchange Committee, Universities Scotland and Principal, University of Dundee;

Sandhya Kapitan, Senior Policy Officer, and Professor Paul Hagan, Director of Research and Innovation, Scottish Funding Council;

Luca Polizzi, Senior EU Policy Executive - Research and Development, Scotland Europa;

David Smith, Innovation and Enterprise Services Director, Scottish Enterprise;

Morven Cameron, Head of Research – University of the Highlands and Islands and learning infrastructure, Highlands and Islands Enterprise.

6. Horizon 2020 (in private): The Committee agreed to appoint a reporter, Aileen McLeod MSP, to attend a conference on Horizon 2020. The Committee also considered the evidence taken earlier in the meeting and agreed to write to the Scottish Government to ask for a response to the key points considered in the evidence.

8th Meeting, 2011 (Session 4)

Tuesday 13 December 2011

5. Horizon 2020: The Committee considered a report on a conference regarding Horizon 2020 from the Committee’s reporter, Aileen McLeod MSP.

8. Horizon 2020 (in private): The Committee considered a report from its 15 November round table discussion with stakeholders regarding Horizon 2020. The Committee agreed to send the report and follow-up questions to the Cabinet Secretary for Finance, Employment and Sustainable Growth.

1st Meeting, 2012 (Session 4)
Tuesday 10 January 2012

4. Horizon 2020 (in private): The Committee agreed a draft approach for an inquiry on Horizon 2020.

2nd Meeting, 2012 (Session 4)
Tuesday 31 January 2012

5. Horizon 2020 (in private): The Committee agreed to a proposal for a conference on Horizon 2020 and delegated the Convener to finalise the arrangements for the conference.

7th Meeting, 2012 (Session 4)
Tuesday 17 April 2012

6. Horizon 2020 (in private): The Committee considered an update on its forthcoming conference on Horizon 2020.

10th Meeting, 2012 (Session 4)
Tuesday 19 June 2012

3. Horizon 2020 (in private): The Committee considered a draft report on the recent conference and agreed to consider a revised draft at its next meeting. The Committee also agreed to appoint Aileen McLeod as a reporter for the Committee's forthcoming seminar in Brussels, and to agree a further reporter by correspondence.

11th Meeting, 2012 (Session 4)
Tuesday 26 June 2012

1. Horizon 2020 (in private): The Committee considered a draft report on its recent conference. Various changes were agreed to and the Committee agreed to publish its report subject to final amendments by correspondence.

Annex B – Horizon 2020 Briefings

Horizon 2020 - the EU Framework Programme for Research and Innovation


The Horizon 2020 programme will be the principal EU fund for innovation and research for the years 2014 to 2020, with a budget of €80bn. The programme is the 8th in a series of research funding programmes previously termed the Framework Programmes. (The EU is currently approaching the end of its 7th Framework Programme, 2007 - 2013).

The EU has been seeking to increase its levels of investment in research and development for some time, believing this to be a key factor is maintaining a competitive edge in the global market, creating growth and securing quality jobs. This is the overarching ambition of the Europe 2020 growth and jobs strategy just as it was with the preceding Lisbon Strategy. Specifically, the EU is committed to investing 3% of its GDP in research, development and innovation.

In a departure from previous programmes, Horizon 2020 will combine all research and innovation funding currently provided through the Framework Programmes for Research and Technical Development, the innovation related activities of the Competitiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT) and in so doing seek to deploy a common set of simplified funding rules.

The Horizon 2020 programme

The Horizon 2020 proposals13 were published on 30 November 2011, with the declared aims of:

  • Strengthening the EU’s position in science with a dedicated budget of €24.6bn million. This will support high-level research in Europe, (and include an increase in funding of 77% for the European Research Council (ERC).

  • Strengthening industrial leadership in innovation (€18bn). This includes major investment in key technologies, greater access to capital and support for SMEs.

  • Providing €32bn to help address broad issues such as climate change, developing sustainable transport and mobility, making renewable energy more affordable, ensuring food safety and security, or coping with the challenge of an ageing population.

  • Tackling societal challenges by helping to bridge the gap between research and the market by, for example, helping innovative enterprise to develop their technological breakthroughs into viable products with real commercial potential. This market-driven approach will include creating partnerships with the private sector and Member States to bring together the resources needed.

What is innovation and how will Horizon 2020 capture it?

While innovation is generally understood as the commercial introduction of a new or significantly improved product or service, innovations can also be for non-commercial applications such as for better public services or for addressing social needs ('social innovation'). As a result, Horizon 2020 will aim to support all forms of innovation. This includes innovation that results from research and development (R&D) activities. It also includes innovation that results from other activities, such as finding new uses or combinations of existing technologies or developing new business models or new ways of interacting with users.

Horizon 2020 will increase support for testing, piloting, and demonstrations of new technologies, so that their potential in the real world can be determined.
It will also support the market demand for innovation, including through the development of specifications for new standards and through supporting public bodies to procure research & development services or innovative products and services. New approaches are also foreseen, such as inducement prizes that reward the achievement of specific goals, encouraging a wider range of innovators to become involved. Furthermore, bottom-up activities are to be strengthened, with call topic descriptions to be less prescriptive, thereby encouraging greater freedom of interpretation.

Importantly, Horizon 2020 will introduce a new SME instrument specifically designed to help and support SMEs to innovate. This instrument is intended to fill the gaps in funding for early-stage, high-risk research and innovation by SMEs as well as stimulating breakthrough innovations. It is anticipated that some €6.8bn will be devoted to SMEs.

Further, Horizon 2020 will scale up financial instruments in which the public sector shares the risk with the private sector to make investments available for the development of innovative companies or projects.

New features of Horizon 2020

The Horizon 2020 proposals include a number of features significantly different from earlier research funding programmes. Important aspects include:

  • A single programme for all EU-managed research and innovation funding, with a single set of participation rules.
  • Full integration of innovation within the programme, which means that more support is provided for ventures closer to market application (e.g. demonstration projects, support for SMEs, innovation services, venture capital).
  • Simplified access for participants, including a single web portal for all information and projects, a reduction in the application paper work, and fewer controls and audits.
  • A more inclusive approach with specific actions to encourage the participation of researchers and innovators from across the EU, together with reinforced support for partnerships with the private and public sectors in order to pool resources and build more effective programmes.
  • A particular focus on the major societal challenges facing Europe and the world. This will mean marshaling different technologies, sectors, scientific disciplines, social sciences and humanities, and innovation actors to address these challenges.

Features similar to previous programmes

While Horizon 2020 represents a departure from past programmes there are also a number of continuing elements, including:

  • The continuation of the financial instruments of both the Framework Programmes and the CIP.
  • A strengthening of the role of the European Research Council as a point of reference for frontier research.
  • A reinforcement of the Marie Curie actions for training, mobility and career development of researchers.
  • An extension of the collaborative research actions, which have been core to earlier Framework Programmes, to include ‘innovation’ aspects such as market-replication, demonstration, involvement of users, design, IP and standardisation issues.
  • A continuation of the demand-side measures to stimulate innovation (in particular the public procurement of innovative solutions), support through clusters, Intellectual Property Rights management and exploitation, and SME innovation capacity support.

Although aligned with the strategy of Horizon 2020, the European Institute of Technology & Innovation (EIT) will maintain its mission of integrating the ‘knowledge triangle’ and experimenting with new approaches for innovation, notably involving the business community.

A challenge-based approach

Compared to earlier programmes, Horizon 2020 will adopt a challenge-based approach where it applies to ‘Societal challenges’. The challenges proposed for Horizon 2020 include:

  • Health, demographic change and wellbeing;
  • Food security, sustainable agriculture and the bio-economy;
  • Leadership in enabling and industrial technologies which will cover ICT, Space and nano-sciences;
  • Secure, clean and efficient energy;
  • Climate action, resource efficiency and raw materials;
  • Smart, green and integrated transport; and
  • Inclusive, innovative and secure societies.

In addition, certain elements of the current themes cut across several of the Horizon 2020 challenges and the enabling and industrial technologies will also be supported through the Future and Emerging Technologies objective.

How will Horizon 2020 funding work?

There are presently two main EU financial instruments supporting research and innovation, the Risk-Sharing Finance Facility (RSFF) and the High-Growth and Innovative SME Facility (GIF). The RSFF combines EU funds and European Investment Bank funding to share the risks associated with investing in projects: RSFF loans are available to public and private sector promoters of any size and ownership from the Member States. By mid-2011, funding for 91 projects worth over €9bn had been approved. A specific facility for SMEs has already begun.

The GIF provides venture capital for SME financing. Managed by the European Investment Fund, the GIF covers both early and growth-stage investments. By the end of 2010, some €222m had been committed to 19 funds supporting a target fund size of some €1.5bn.

In Horizon 2020, these financial instruments will be expanded in both scope and scale. A debt facility will provide loans and guarantees, and an equity facility will provide finance for early and growth stage investments. Their aim will be to support the achievement of the research and innovation objectives of all sectors and policy areas necessary for tackling societal challenges, to enhance competitiveness and to foster sustainable growth. It is intended that they will be implemented via a mandate to, or a partnership with, the European Investment Bank group and/or other international financial institutions and national intermediaries.

Greater use of financial instruments will help leverage further private research and innovation investments, including venture capital investments for innovative, high-tech companies, and in particular SMEs.

The proposed simplification of the funding rules

Following on from criticism of earlier funding programmes, the Commission has sought to introduce further simplification of the application procedure with the aim of: (i) reducing the administrative costs for participants; (ii) accelerating the process of proposal and grant management; and (iii) decreasing the financial error rate. These general objectives will be achieved through the introduction of a simpler programme architecture, which brings together all research and innovation funding in one programme. This includes a single set of participation rules covering all components of the programme. Clearer funding rules including:

  • Simplified reimbursement of real direct costs, with a broader acceptance of beneficiaries' usual accounting practices.
  • Using unit personnel costs (average personnel costs) for beneficiaries for which this is their usual accounting method, and for SME owners without a salary.
  • Simplification of time-recording by providing a clear and simple set of minimum conditions, in particular abolition of time-recording obligations for staff working full time on the EU project.
  • Only two reimbursement rates for all types of participants: 100% for research activities, 70% for piloting and demonstration and one single flat rate of 20% to cover indirect costs.
  • Output-based funding with lump sums for whole projects in specific areas with fewer ‘ex-ante’ financial capacity checks and a reduced number of certificates on financial statements. (Ex-ante financial capacity checks to be required only for co-ordinators )

With the adoption of these measures, the Commission deems it possible to reduce the average time to grant in Horizon 2020 to only 100 days. Further simplification of research and innovation funding will result from the revision of the Financial Regulation (e.g. no declaration of interest on pre-financing, eligibility of VAT, limitation of extrapolation of systematic errors).

The whole set of practical arrangements for proposal and project implementation will also be revisited and streamlined. This includes the detailed provisions on the content and shape of proposals, the processes for turning proposals into projects, the requirements for reporting and monitoring, as well as the related guidance documents and support services. A major contribution to reduced administrative costs for participation will come from a single user-friendly IT platform for all interactions with participants, based on the current FP7 Participant Portal.

Horizon 2020 and the other EU funding sources

It is also important to remember that Horizon 2020 will not exist in isolation. There is already substantial interaction between the EU’s research and innovation policy and its Cohesion policy. For example in the current research and innovation funding programme, investments in building excellence and innovation capacity are made through the ‘Regions of Knowledge’, ‘Research Potential’ and ‘Research Infrastructures’ actions. At the same time, Member States and regions have committed some €86bn from the EU’s cohesion budget for actions supporting research and innovation.

For the next programming period, Horizon 2020 will also contribute to research and innovation in the regions mainly by improving policy support, in order to build efficient, smart specialisation strategies in full co-operation with Cohesion policy. An increased effort is to also be made in the new Cohesion policy funds where support for research and innovation is to be one of the top investment priorities, to assist the less developed Member States and regions to climb the ‘staircase to excellence’.

What happens next?

The Horizon 2020 proposals are currently the subject of co-decision negotiations between the European Parliament and Council in Brussels. As would be expected these discussions will depend upon the simultaneous negotiations taking place on the future Multi Annual Financial Framework, which will of course determine the funding that will underpin the ambitions of Horizon 2020. It is anticipated that these negotiations will be brought to a satisfactory conclusion by the end of 2013, allowing for the launch of Horizon 2020 on 1 January 2014.

Scottish engagement in FP7, money awarded in Scotland and areas of strength

Early analysis shows that Scotland’s performance in the first years of the FP7 programme is very encouraging. The total amount of funds secured in Scotland from 2007 to April 2012 is equal to € 351 Million, with a national success rate of about 20%. Participation is particularly high across the country, with 789 Scottish organisations being involved in a total of over 4000 projects submitted at the EU level. The number of leading organisations is also growing, with 255 Scottish leaders directly involved in managing large projects with a long term and increased impact on the local growth. According to European foresighting analysis, the impact on local growth from European projects is 20% higher when participating as a leader than as partner.

When comparing Scotland’s engagement to wider UK, data shows Scottish participation accounts for 9.27% of organisations engaged securing 9.3% of the total money awarded to the UK (Wales 2.6% participation for 2.16% money; Northern Ireland 1.5% participation – 1.11% money). English participation accounts for the majority (86%) of UK participation and the money awarded is equal to 87.4%.

Looking at a breakdown of Scottish participation up to April 2012, we see that Scotland has exceeded the EU’s target of 15% SME involvement, with an overall participation rate of 18%. The percentage goes down to 12% if we consider purely business engagement however. (The 18% figure includes SMEs which are not purely business, such as some research entities formally established as limited companies). This represents a 17% increase in SME participation from FP6/FP5.

Scottish business altogether accounts for 8% of the total money going to Scotland, bearing in mind these figures include both large, and small and medium-sized enterprises.

In Scotland, as anywhere else in Europe, the Programme remains dominated by the Further Education and Research sectors that together account for 71% of the total Scottish participation of participation securing 84% of the total money awarded in Scotland.


Overall FP7 has a budget of 52 billion Euros, covering a funding period running from 2007 to 2014, when the new programme Horizon 2020 will start. The majority of the money in FP7 is allocated to the cooperation sub-programme, accounting for 32 billion Euros. The cooperation programme is supporting collaborative science projects, whereas the rest of the money is divided between frontier research (ERC – European Research Council grants), mobility (People programmes - Marie Curie grants) and capacity building and infrastructure (research capacity for SMEs and regional actors).

The analysis of Scottish engagement in the Cooperation programme therefore gives useful information about sectors of excellence, strengths where Scotland as a country can play a leading role at the EU level, and areas where Scotland has clear and demonstrated expertise and assets which could be better exploited for its economic and social growth. The analysis is based on the period running from 2007 until the end of February 2012.



 In million of €

Health (life sciences), ICT, agriculture/bio-economy, nano-materials (photonics, nanotechnologies and new materials) are the sectors whereby Scotland is performing extremely well, and it is in these sectors in which the majority of the Scottish engagement is concentrated (24% health; 28% ICT; 15% KBBE; 9% NMP). Whereas participation in the ICT sector secured 58 million Euros under a theme which accounts for 28% (€9.1bn) of the total budget of the cooperation programmes (€32bn), participation in the health/life science sector secured a similar amount of money (€50 million) under a theme which accounts only the 18% of the budget available. Equally in the agriculture/bio-economy sector Scotland secured €30 million under a theme receiving just the 6% of the budget available.

Worthy of note is also energy sector engagement, whereby the Scottish participation base is almost 4%, securing 3.8% of the money awarded to Scotland through a programme receiving only 7% of the total cooperation budget available at the EU level. On the other hand, engagement in ocean research activities is limited to 1% for a total of 2.2 million Euros secured.

These data demonstrate areas of considerable strength in Scotland, telling us where potential growth lies, based on skills, science and research products available nationally. They equally tell us which sectors might need additional support in terms of fostering a higher engagement based on natural assets and available skills which are not being fully exploited.

Scottish positioning in FP7 across themes – money secured and % of interest



Cooperation Breakdown @  28/02/12



% of engagment


€ 7.75



€ 13.66



€ 50.71



€ 58.48



€ 30.99



€ 20.05



€ 5.83



€ 2.57



€ 3.03



€ 10.01



€ 2.28



€ 205.36


Maximising Scottish participation - Building SME R&D Collaborative Capacity in Scotland

Scottish Enterprise is the lead partner in the Enterprise Europe Network Scottish consortium. Partners are Highlands & Islands Enterprise, Highland Opportunity Ltd and the European Commission. Since its launch in 2008, the Enterprise Europe Network Scotland team contributed to raise awareness in Scotland with a series of events, providing information and general assistance to Scottish businesses keen to be involved in FP7 applications.

Scotland Europa has over 10 years experience supporting Scottish Higher Education/Research sector members to engage in the EU Framework programmes. For FP7 these services were refreshed and resources increased, with support from Scottish Enterprise/SDI, to widen this to the Scottish business community. Scotland Europa is now offering a suite of services including; strategy development for influencing calls and priorities; strategic intelligence; projects clinics and one-to-one meetings with selected companies; capacity building and troubleshooting with Commission services; access to FP7 proposal writing support for strategic projects; and support for Scottish applicants looking for project partners.

Case studies

  • Northern Seas Wind Index Database (NORSEWInD), is an FP7 funded project launched in 2008 to accurately capture wind speed data in the Baltic, Irish and North Seas. NORSEWInD is the result of the co-operation among 15 transnational partners from small and large companies, Universities and Public Agencies. This €4million project is co-ordinated by Oldbaum Services; a Scottish based R&D SME, operating in the wind industry. Scottish partners include the Strathclyde University and Scottish Enterprise. Scotland Europa has worked closely with the Scottish organisations, providing support, from consortium building to negotiations with the European Commission thus helping a young SME to build the capacity to lead a highly innovative and large scale transnational project. NORSEWInD is currently one of the biggest dedicated instrumentation networks to measure wind speed data offshore.

  • STMicroelectronics is a leading and experienced European supplier in broad-range microelectronic components with a large amount of experience in the silicon technologies. With joint assistance from Scotland Europa and the National Contact Point preparing and analysing the proposal, STMicroelectronics submitted a project under the FP7 funding programme to develop a new photonic component for large format, rare-event imaging. Also involving the University of Edinburgh, the SPADNET project, was successful in creating a multinational consortium which obtained €3.7 million of EU funding for Scottish research.

  • Onorach Clinical is a small, newly formed Scottish SME specialising in supporting clients to set up and deliver clinical trials. The firm had had no previous participation in EU collaborative R&D, but in collaboration with Scotland Europa and the Enterprise Europe Network (EEN). Scotland Onoarch has recently submitted a successful application under the 2010-11 FP7 call to commence a five-year research study. The assistance helped Onorach to develop its own understanding of the complexities, challenges and requirements for successful research collaboration, and created a profile which could be subsequently used to promote the company to potential project partners as a specialist in the field of health science. Although the support could have benefitted from better access to technical experts, the assistance the firm received was instrumental in helping the firm to overcome the knowledge and experience gaps in partner-searching and submitting a successful application for European funding under the FP7 programme.

Bridging the gap between research and business: getting ideas to market

The challenges of translating research ideas into market-ready products and services are the subject of much discussion, and in particular the challenges in linking the research and business communities. University-business linkages are an important aspect of this. In a recent report, the Institute for Public Policy Research noted that “universities appear… to be a small influence on private sector innovation in general, but those firms that do collaborate do seem to show better performance.”14

In Scotland, 55% of businesses describe themselves as “innovation active”15 but, of these, only 13.5% co-operate with universities and only 10% consider universities to be important in terms of innovation sources and requirements.16 Indeed, research has further suggested that Scottish universities tend to have closer links with overseas or UK-owned firms than indigenous SMEs.17

While these statistics highlight that challenges undoubtedly remain, there has been considerable progress in strengthening links between universities and businesses. At a UK level, external income generated by universities through engagement with business and community has more than doubled in real terms since 2001 to £3 billion.18

The importance of networking, both formal and informal, to the development of effective collaboration is critical and a range of intermediaries exist to support this process. These range from service provided by in-house technology transfer or research commercialisation offices within universities, to more informal networking facilitation through organisations such as Scottish Enterprise. The Interface initiative, funded by the Scottish Funding Council, aims to provide information on the specialist expertise available in universities and research institutions and facilitate collaborations.

Funding Innovation: investigating new opportunities

According to the OECD, “innovation performance is a crucial determinant of competitiveness and national progress”. The Horizon 2020 proposals claim that the new programme will support innovation in its widest sense. As well as R&D activities, the intention is to capture innovation which results from other activities, such as finding new uses or combinations of existing technologies or developing new business models or new ways of interacting with users. The programme proposals also note that innovations can also be for non-commercial applications such as for better public services or for addressing social needs ('social innovation').

In Scotland, evidence from the Community Innovation Survey19 suggests that innovative activity has reduced in recent years, a factor likely to reflect the economic downturn. Other findings from the same survey include:

  • Innovation activity levels tend to increase with business size
  • Those firms which are innovation active show significantly higher turnover growth rates
  • Innovation active firms are more likely to be exporters and to collaborate with others on innovation

The challenges in stimulating innovation, particularly during an economic downturn, have led to a broader assessment of potentially untapped areas.

The potential role of public procurement as means for stimulating innovation is one such area. Representing 17% of EU GDP, public procurement is a major market with scope – if designed appropriately – to encourage innovation in areas such as construction, health care, transport and energy.20 Public sector agencies in Scotland are actively considering how best to exploit the opportunities presented by public procurement.

New technologies and social media also present new opportunities for helping to address the difficulties many innovators encounter in accessing funding. ‘Crowd funding’ is one such approach which is attracting much attention. The internet is used to contact a wide audience and seek funds, with each funder potentially contributing a small amount of the overall total. Various models exist and one of the challenges faced by governments is in ensuring that an appropriate legal framework exists to support such models (which are an example of innovation in themselves) without stifling their potential to provide much-needed funds.

Beyond the ‘usual suspects’: getting fresh talent into the system

A criticism of FP7, the current research and innovation programme that will be succeeded by Horizon 2020, is the limited participation from businesses, and in particular, small and medium-sized enterprises (SMEs). In terms of business participation, FP7 showed a poorer performance than FP6, with participation from industrial companies dropping from 34 per cent to 26 per cent.21 Scotland’s performance has been slightly better than the EU averages. According to Scotland Europa, Scotland has exceeded the EU target of 15% SME involvement, with an overall 18% participation from SMEs, accounting for 10% of the total Scottish funding. This represents a 17% increase in SME participation from FP6/FP5. However, Scotland Europa concede that, in Scotland, the Programme remains dominated by the Further Education and Research sectors that together account for nearly 80% of the funding attracted to Scotland.22

These issues are not unique to Scotland. According to Jack Metthey, Director, Framework Programme and Inter-institutional Relations at DG Research and Innovation, "We want to lower the barriers to entry to get new entrants. We want new blood. We don’t want a closed club – it’s not healthy and it’s not necessarily the most productive."21

Horizon 2020 will include a dedicated funding stream for SMEs, proposed to provide for funding of around 15%, or €6.8 billion, of the total combined budgets of the 'Tackling societal challenges' Specific Programme and the 'Leadership in enabling and industrial technologies' objectives.23

Scotland Europa and partners acknowledge that the level of research capacity and capability required to successfully compete for EU funding may not yet be present in some R&D SMEs. In survey work conducted by Scotland Europa, SMEs had highlighted the value of external support to stimulate initial engagement in EU Programmes. Over 50% of those responding had been introduced to the programme via parts of Scottish Enterprise and had used their support and services to facilitate engagement.22

Role of Government: cutting red tape and securing value for money

The problems facing businesses generally, and SMEs in particular, in accessing EU funding streams have been widely aired. These include:

  • Rigid qualification criteria, including financial requirements
  • The complexity of rules and procedures, including monitoring arrangements
  • The costs of accessing programmes, described by Jack Metthey, Director, Framework Programme and Inter-institutional Relations at DG Research and Innovation as “lethal” for SMEs

Successive Framework Programmes have aimed to reduce complexity, but comments from participants suggest that this has not been achieved.24 The Horizon 2020 proposals again set out to reduce complexity, reflecting a desire to attract more top researchers and a broader range of innovative enterprises. The changes proposed include simplification of eligibility criteria, funding rates, audit controls and accounting methods – all areas that have been subject to criticism in previous programme rounds. According to the Commission, the proposed changes should reduce the turnaround time from grant submission to decision from the current 350 days to 250 days.25

Once the new proposals come into force, the Scottish Government cannot do anything to alter the requirements placed on applicants. However, the Scottish Government, and its agencies, can and do offer support to applicants, such as through the Enterprise Europe Network. Evidence suggests that such support can be valuable. The UK Government also offers advice and guidance, which can be accessed by Scottish applicants.

However, the extent to which awareness of these services is sufficiently widespread is unclear and there could be a case for wider dissemination of information on the support available to ensure that the pool of applicants is broadened. Evaluation of existing support services has highlighted some challenges in identifying the appropriate target audience.26

How to win the competition for funds

According to the European Commission, the success rate for FP7 applicants in 2010 was 24%. The UK performance was slightly above average, at 25.6%.27 It is widely recognised that businesses, and SMEs in particular, find the process of applying for EU funding complex and bureaucratic. There is guidance available from the European Commission, but many countries, including Scotland, provide additional support to potential applicants. This reflects the complexity of the process and the need for additional guidance.

Research conducted by Scotland Europa in 2007 identified that other European countries were committing a higher level of resource than Scotland to supporting applicants for European R&D Framework Programmes. This led to the development of a more extensive support framework targeted at the needs of potential FP7 applicants and aimed at tackling the barriers to participation.28

Enterprise Europe Scotland, which works in partnership with Scotland Europa, provides a dedicated service to support Scottish organisations and help them to capitalise on the opportunities that exist for European Research and Development funding opportunities. Enterprise Europe Scotland runs events and provides advice to potential applicants, including support in identifying suitable partnerships and submitting proposals. Feedback from those who have received support through these channels has generally been positive28, although it is unclear how many others could have benefitted from such support, but may have been unaware of its availability.

Annex C

Background to Horizon 2020

1. The proposal for a successor to the EU’s 7th Framework Programme (FP7), which supports research & innovation, is a declared priority of the Committee. The new programme has been named ‘Horizon 2020’.

2. The European Commission published its proposals for Horizon 2020 on 30 November 2011. The programme will succeed the current FP7 programme in 2014 and run to 2020. The draft Multi-Annual Financial Framework (MAFF) proposes a budget of €70bn.

3. Horizon 2020 is the financial instrument designed to implement the Innovation Union (a Europe 2020 flagship initiative which itself is aimed at securing Europe's global competitiveness). It will combine all research and innovation funding currently provided through the Framework Programmes for Research and Technical Development, the innovation related activities of the Competitiveness and Innovation Framework Programme (CIP) and the European Institute of Innovation and Technology (EIT).

4. The declared aims of the programme are to:

  • Strengthen the EU’s position in science (with a dedicated budget of €25bn).

  • Strengthen industrial leadership in innovation through investment in key technologies, greater access to capital and support for SMEs (€18bn).

  • Address major concerns such as climate change, developing sustainable transport and mobility, making renewable energy more affordable, ensuring food safety and security, or coping with the challenge of an ageing population (€32bn).

5. Following publication, the proposals were discussed at the Competiveness Council on 6 December 2011. The legislation will now be discussed and agreed between the co‐legislators, the Council (representing the Members States) and the European Parliament during 2012 ‐ 2013.

Background to Committee’s inquiry on Horizon 2020

6. The Committee agreed at its business planning day that it would adopt a new two-stage approach to future inquiries. Stage one would be a period of fact-finding and would involve roundtable discussion, correspondence with interested parties, and informal briefing and dialogue with the European Commission. This process would allow the key aspects of the issue to emerge; so allowing for stage two, the development of a detailed remit for the inquiry which would lead to a focused report.

Stage 1 of inquiry

7. Accordingly, the Committee began this inquiry with a variety of fact-finding activities. The Committee hosted a roundtable discussion on the subject on 15 November 2011. In attendance were representatives of the university sector, funding bodies and enterprise agencies. A report of the discussion is appended in Annex 1.

8. The Committee also met with Keith Sequeira of the Directorate-General for Research and Innovation at the European Commission during their visit to Brussels (29 November 2011). A summary of his presentation is included in Annex 2.

9. In addition the Committee appointed Aileen McLeod MSP as a reporter to attend a seminar on the subject organised by the Scottish Government and Scotland Europa in Scotland House, Brussels (1 December 2011). A verbal report of this event was provided to the Committee on 13 December 2011, details of which can be accessed via the Official Report (Col. 276):


10. Following the roundtable discussion the Committee wrote to the Scottish Government seeking clarification and information on several points. The exchange of correspondence will be circulated shortly.

The draft Horizon 2020 regulation

11. During the early stage of the Committee’s engagement with the issue, the draft Horizon 2020 Regulation and accompanying documents was published (30 November 2011)

Emergent themes

12. Following the completion of this first stage of the committee’s inquiry, it has been possible to identify a number of specific aspects of the EU’s proposed Horizon 2020 Strategy that require further examination, namely (a) awareness, (b) support, and (c) networks.


13. This theme is focused on the manner in which interested parties are made aware of European opportunities in general and Horizon 2020 opportunities in particular.


14. Scotland has been successful in securing significant funds from the Framework Programmes. Up to the mid-point of 2010, Scotland had secured £256m from the current programme, a 40% increase in funding over a similar point in the previous programme. Despite this, Scotland fell short of the EU target for SME participation in the programme (13.5% participation of SMEs against a target of 15%).

15. However, early evidence presented by Scotland Europa shows that business engagement is still lower in Scotland than other parts of the EU. It was for this reason that Scotland Europa and Scottish Enterprise/SDI have committed increased resource to working with companies to develop awareness and involvement in these programmes.

Proposed areas to be explored (i): awareness of funding opportunities

  • What is the role of the Scottish Government and its agencies in raising awareness amongst potential participants in the funding programmes? Have adequate funds been allocated for this venture?

  • What other bodies could have a role in raising the profile and participation in the funding scheme?

  • How can the participation of SMEs be increased? Should a specific scheme be created tailored to the specific needs of the SME sector?

Proposed areas to be explored (ii): awareness of collaboration opportunities

  • Is there a role for academic institutions to promote the commercial opportunities raised by their research amongst the commercial (particularly the SME) sector? If so, how could this undertaking be supported and delivered?

  • Should a forum be established to bring together representatives of the academic and commercial sectors to encourage both collaboration and joint funding applications? If so, who would be responsible for such a forum?

  • How can academic institutions encourage entrepreneurship amongst their graduates? Should entrepreneurship be a part of all/certain degree courses? Who would fund this innovation, the academic institutions themselves or government?


16. The second themes relates to the nature and level of support available to interested parties (educational institutions, commercial enterprises and importantly SMEs) as they engage with the Horizon 2020 application process.


17. Two specific schemes have been developed by the Scottish Government (and the earlier Scottish Executive) to provide support to potential research fund applicants:

PACER (Programme Assistance for European Research); and

SPAF (Scottish Proposal Assistance Fund).

18. The PACER scheme, which began in 2003, was designed to assist Scottish research institutions in preparing submissions to European research funds. A Scottish Government review of 2006 noted that in the financial year 2004 - 2005 institutions received £104,290 of PACER funding and attracted £9,895,295 of research funds. Six of the nine institutions making applications to PACER were successful in attracting FP6 funding. The PACER scheme is currently undergoing review.

19. The SPAF scheme provided grant support for Scottish companies preparing proposals for the EU’s Framework Programme. The scheme provided financial assistance to small and medium sized companies (SMEs) based in Scotland. The grant (of up to 50% of eligible costs) could be used to engage a consultant to assist in the preparation of an application and/or to contribute towards travel costs to meet potential consortium partners. The Scottish Government announced the end of the scheme in the recent 2011 spending review.

Proposed areas to be explored

  • What is the role for the government and its enterprise agencies in this support function?

  • What schemes are likely to be available to support educational institutions and commercial enterprises (particularly SMEs) in the application process?

  • How will these schemes be administered and funded?

  • Given that the European Commission is considering the creation of a dedicated SME instrument to encourage SME participation, what involvement has the Government and its agencies undertaken/propose to undertake to engage with the process?


20. The final theme relates to the importance of established networks and the prospect of new networks to share good practice, provide mentoring support and early warning with regards the application (and later with regard the auditing) process.


21. A number of contributors to the Committee’s roundtable discussion noted that stakeholders from across Scotland and Europe have worked together for the first time to develop a more co-ordinated and strategic Scottish approach to being engaged in European R&D activity. The Scottish Steering group included the Scottish Government, Scotland Europa, Scottish Enterprise, Highlands and Islands Enterprise and the Scottish Funding Council.

22. The aim of the group was to help to raise Scotland’s profile and the level of influence at a strategic level. The group sought to share expertise, increase the participation of the business community while also maintaining and improving our academic engagement.

Proposed areas to be explored

  • Is there a permanent role for the Scottish steering group to provide a network for the sharing of good practice, a one-stop-shop for advice, and a means of engaging directly with the EU?

  • Is there a role for a website/web portal to provide a one-stop-shop facility for all parties?

  • Should the government provide support/funding for these proposals?

Proposed action

23. To address these themes it is proposed to schedule 3 panels of witnesses (see below for the proposed participants) over two Committee meetings in February and March. A report will be drafted for consideration by the Committee following these meetings. Possibilities for follow-up action are to invite the Scottish Government’s views on this report or to present it to the European Commission.

24. A list of suggested participants for evidence panels on Horizon 2020 is included in Annex 3 for discussion.

25. To compliment this approach it is proposed that an open call for written evidence be issued to ensure all interested parties have an opportunity to contribute.


26. The Committee is invited to agree to the proposed actions and suggested witnesses for its inquiry on Horizon 2020.

Committee Clerk
January 2012

Annex 1 - Horizon 2020 – summary of roundtable discussion


27. The Committee staged a roundtable discussion on the implications for Scotland of the EU’s proposed Horizon 2020 (Framework Programme 8) Strategy at its meeting of 15 November 2011.

28. The participants were:

  • Professor Pete Downes, Universities Scotland

  • Sandhya Kapitan and Professor Paul Hagan, Scottish Further & Higher Education Funding Council

  • Luca Polizzi, Scotland Europa

  • David Smith, Scottish Enterprise

  • Morven Cameron, Highlands & Islands Enterprise

29. The report addresses a single broad theme, namely what are the lessons to be learned from the application of the current framework programme and how can the successor programme address these shortcomings while building on Scotland’s strengths in research and innovation.

30. Full details of the discussion can be accessed in the Official Report of the meeting.

General points

31. European funding represents one of the most significant opportunities for Scottish institutions. Scotland has been successful in securing significant funds from the current programme. Up to the mid-point of 2010, Scotland had secured £256m from FP7, a 40% increase in funding over a similar point in the previous programme.

32. Scotland’s colleges and universities are competitive in their endeavours to secure funding. However, there has been a greater pooling of research between the universities allowing for joint applications – a Team Scotland approach.

33. The generally egalitarian research culture in Scotland may be responsible for broadly high levels of achievement in research but an absence of a significant number of areas of world class excellence. In the future a sharper focus on a more limited number of research endeavours may be productive.

34. The FP programmes are primarily focused on research establishments. As a consequence funds tend to be directed toward universities rather than to colleges. However colleges with a strong research base can apply and have been successful, notably the University of the Highlands & Islands with regards marine science and biofuels.

Lessons from Framework Programme 7 (FP7)

35. A weakness in Scotland’s current engagement with FP7 is the link between commercial organisations (notably SMEs) and the academic community. Scotland has a high level of funding of institutions relative to the rest of the UK, but a low level of SME-related funding. This area is widely considered a potential growth area for funding.

36. The majority of funds secured by SMEs in this regard are directed toward companies that have been ‘spun off’ from a university.

37. To secure monies from Europe, Scotland’s research establishments need to be more proactive in engaging with EU institutions. There was a general agreement that Scotland Europa had been a successful vehicle for such engagement, acting as both an informed conduit and as a source of intelligence. The role of the Scottish Government in opening doors in Brussels was also appreciated. Scotland Europa and Scottish Universities also take advantage of engagement with the relevant UK departments, and with the UK representation in Brussels.

38. Scotland Europa has played a significant role in improving awareness and engagement between Scottish institutions and the institutions of the EU. Within Scotland, Scotland Europa has organised a series of workshops and has consulted widely within the research sector. Scotland Europa has also engaged directly with the Commission, lodging 45 specific recommendations on how to improve access to Horizon 2020.

39. There is still a weakness in the engagement of individual academic staff with the funding opportunities offered by Europe. This weakness is often born out of unfamiliarity with the EU process and players, the complexity of the process, the length of time taken to secure funds (which can act as a deterrent) and the manifest differences between EU and UK funding procedures.

40. Creating partnerships between academia and the private sector is considered essential. This often requires a culture shift amongst academics from the pure research and its publication to a more applied approach, engaging directly with those who can use the technology/concepts.

41. Of significant importance in addressing these shortcomings has been PACER (Programme Assistance for Co-ordinating European Research) which provides supports to funding applicants, notably in developing internal capacity and proving guidance on the application processes. Importantly PACER funding comes to an end in 2012. The employment of consultants to assist in the application process can also be of value, with Dundee University securing a six fold increase in funding between FP6 and FP7 through the use of consultants.

42. A similar weakness is also evident in the SME sector, which often finds the application process for FP funding complex, time consuming, jargon heavy and overly bureaucratic. Presently 13.5% of the participants in FP7 are SMEs, below the EU target of 15%.

43. The elimination of SPAF (Scottish Proposal Assistance Fund) in the most recent spending review may well have contributed to the difficulties in getting SMEs engaged, since it was specifically designed for this purpose. However, both Scottish Enterprise and Highlands & Islands Enterprise have striven to provide direct support, either through mentoring or individual companies/clusters or through relationship management between commercial enterprises and academia.

44. Also of concern in the academic sector is the relatively low number of Scottish Universities ‘leading’ applications (as opposed to being a partner in them).

Early engagement with Horizon 2020

45. Scotland Europa established an informal steering group in 2009 to lead Scotland’s engagement with preparations for Horizon 2020. The group comprised the Scottish Government, the Scottish Funding Council, Scottish Enterprise, Highlands & Islands Enterprise and Universities Scotland. The first stage of engagement has been with the Commission, phase two will recognise the important new role for the European Parliament.

46. The Horizon 2020 programme is expected to place a strong emphasis upon ‘smart specialisation’, i.e. research focused upon addressing specific societal changes and themes. This is broadly supported by the round table participants.

47. The new approaches expected in the Horizon 2020 programme have been broadly welcomed by Scottish institutions. There is support for the Marie Curie actions and for the broader European Research Council. In terms of join programming, Scottish institutions are well placed to take advantage of this initiative.

Annex 2 Summary of presentation on Horizon 2020 by Keith Sequeira, Policy Officer, DG Research & Innovation, European Commission


  • The previous research initiative, known as Framework Programme 7 (2007 – 13), provided €54 billion of funding for R&D. The money was disbursed via four main programmes:
    • Co-operation (collaborative research)
    • Ideas (European Research Council)
    • People (Marie Curie actions on training & mobility)
    • Capacities (Infrastructures, SMEs, Regions)
  • This approach was complemented by a Competitiveness and Innovation Programme, and the European Institute of Innovation and Technology.
  • The successor programme, Horizon 2020 has:
    • 3 priorities: smart, sustainable and inclusive growth;
    • 5 headline indicators, including 3% of GDP on R&D;
    • 7 Flagship initiatives, including Innovation Union.
  • The Commission is proposing a budget of €80 billion (2014-20, in constant 2011 prices), which would increase the share of stable EU Budget (up to 8.5% of overall EU budget).
  • The new policy will have : (i) common objectives based on Europe 2020 and Innovation Union; (ii) integrate research and innovation in a single programme; (iii) apply a challenge based approach; and (iv) apply common rules across all of Horizon 2020.

Innovation Union

  • The purpose of the initiative is to provide for a strategic approach to EU R&D. This approach would necessarily tackle the weaknesses inherent in the earlier framework programme (namely under investment and fragmentation) as well as building upon its strengths (focusing on societal challenges, embracing a broad concept of innovation, and including and involving all actors).

European Research Area (ERA)

  • The ERA is a ‘single market’ for free movement of knowledge, researchers, technology, open to the world. Its ostensive aim is to improve co-operation of research policies and programmes – avoiding duplication, improving efficiency.

Horizon 2020 priorities

  • A world class excellence which develops and attracts talent
    • European Research Council
    • Future and emerging technologies
    • Marie Curie actions on skills, training and career development
    • Research infrastructures
  • Industrial leadership & competitive frameworks capable of raising private investment
    • Enabling and industrial technologies (ICT, nano, materials, bio, manufacturing, space)
    • Access to risk finance (loans, equity)
    • Support for innovation in SMEs
  • Tackling societal challenges as defined in the other EU core policies
    • Health, demographic change & wellbeing
    • Food security, sustainable agriculture & bio-based economy
    • Secure, clean &efficient energy
    • Smart, green and integrated transport
    • Climate action and resource efficiency including raw materials
    • Inclusive, innovative and secure societies
  • Tackling societal challenges as defined in the other EU core policies
    • Health, demographic change & wellbeing
    • Food security, sustainable agriculture & bio-based economy
  • Next steps
    • The MAFF negotiations will determine the size of the funding pot.
    • The Horizon 2020 proposals will be published before the end of 2011, with legislative decisions taken during 2012 – 2013, with the new policy beginning in 2014.
    • Until then the current Framework Programme will continue to act as a bridge. 

>Annex D – Letter from John Swinney MSP, Cabinet Secretary for Finance, Employment and Sustainable Growth (646KB pdf) <

>Annex E – Official Report of the Conference on Horizon 2020 (810KB pdf)

>>Annex F – List of attendees








National Contact Point




Glasgow Caledonian University




University of Glasgow



Biagi MSP

Scottish Parliament




Chrichton Carbon Centre




University of Abertay




Scottish European Green Energy Centre (SEGEC)




Scottish Government




Scottish Government




Highlands and Islands Enterprise




Edinburgh City Council




IMES Group




Scottish Government




Office of Catherine Stihler MEP




Scottish Southern Energy




Scotland Europa




Angus Council




Edinburgh Napier University




UK Government




University of Abertay




Selex Galileo




Scottish Enterprise




Scottish Borders Council




Science and Technology Facilities Council (STFC)




EU Commission




University of Dundee




Scottish Parliament




Scottish Funding Council



Ferguson MSP

Scottish Parliament




Scotland Europa




Queen Margaret University




North Bay/ Research Relay




Scottish Technology Network




Scottish Funding Council




Scottish Government




Scottish Hydrogen and Fuel Cell




Industrial Communities Alliance Scotland




Scottish Government




Life Sciences Association




University of Strathclyde




University of Edinburgh



Kidd MSP

Scottish Parliament




Glasgow School of Art




Universities Scotland




University of Dundee




Scottish Chambers of Commerce




Gael Ltd




Scotland Europa



McArthur MSP

Scottish Parliament




Scottish Government




University of Strathclyde








Scotish Power



McGrigor MSP

Scottish Parliament



McKelvie MSP

Scottish Parliament



McLeod MSP

Scottish Parliament



McMillan MSP

Scottish Parliament




Open University Scotland




Heriot Watt University




Business Therapies




EFPC Group




Scottish Enterprise




Glasgow City Council




Innovators' Counselling and Advisory Service for Scotland




University of Glasgow




UK Government




National Union of Students




Glasgow School of Art




University of Edinburgh




Robert Gordon University








Marie Curie Actions




Scottish Parliament




Scotland Europa




Scottish Borders Council




University of Edinburgh




Scottish Agricultural College




Scottish Government




Scottish Government




Scottish Enterprise



Smith MEP

European Parliament




Kite Innovation Europe




University of the Highlands and Islands



Swinney MSP

Scottish Parliament




University of Edinburgh




European Parliament




University of Aberdeen




Scottish Enterprise



Willetts MP

UK Parliament








University of the West of Scotland




European Commission




Scottish Chambers of Commerce







West Lothian Couuncil

Annex G – Written evidence received


Submission from Heriot Watt University

Heriot-Watt University has had considerable success in securing research and related funding under the European Commission's Framework Programmes.

For example under the current programme (Framework Programme 7) we have been a partner in 48 successful projects and led a further 10 projects. This has amounted to nearly £14million being securing just for the University (i.e. excluding those elements awarded to other partners in these projects).

As always the exact and detailed nature of the initiative will not be visible until the Work Programmes become available. However, we would make the following observations on Horizon 2020.


We welcome the bringing together of the Framework Programme for Research, the innovation related activities of the Competitiveness and Innovation Framework Programme and the European Institute of Innovation and Technology.

Content and Activities

The work programmes within Societal Challenges should ensure they will be supporting the developments, research, innovation and exploitation of the underpinning technologies required to deliver the identified ambitions of these themes.

Bringing together research, innovation and education is an important function and this has been identified as a key role of the European Institute of Innovation and Technology (EIT). We would wish to see more detail about how these connections will be brought about.


We welcome the increase in funding for the European Research Council.

We welcome the increase in overall budget from €50M in Framework Programme 7 to €80M in Horizon 2020. However, we would wish to be reassured that the total for all elements in Horizon 2020 which support and bring together excellent researchers do not represent a decrease in funding compared to Framework Programme 7.

The financial regulations and eligible cost arrangements for Horizon 2020 should be arranged in such a way that UK Universities can recover their costs of engagement in the programme at a level comparable to the UK's Research Councils.


We strongly support the ambition to make "a radical simplification of architecture, rules and procedures and control strategy, to attract the top researchers and the most innovative enterprises." However, there have been attempts to undertake this in previous Framework Programmes and therefore this needs to be widely consulted upon and tested to ensure that it is delivered.

In general, we feel enthusiastic about the prospects of Horizon 2020 and will endeavour to successfully engage with it where possible.

Submission from EFPC (UK) Ltd

EFPC (UK) Ltd. and responders qualification

The company is a Scottish SME founded in 2004. We believe it is the most successful SME in Scotland measured by the number of its successes in EU RTD funding. We have completed 4 projects (1 as coordinator) and are currently working on an additional 3 projects. We also have several additional project proposals in evaluation.

M W Morron who is the CEO of EFPC (UK) has been involved with EU funded RTD projects since 1984 when he was involved with setting up the Framework Program. He has been a National Representative to two different FP Management Committees and has been personally involved in many projects since 1984 as well as having served as an evaluator 14 times.

Sources of understanding of Commission Proposals for Horizon2020

Our current formal understanding is based on the written documents produced by the Commission in December 2011 as clarified by meeting with Robert Jan Smits, Director General of Research of the Commission on 17 January 2012.


Prior to making its detailed proposal in December, the Commission sought input from a wide set of sources. Those who provided input included several Scottish Universities, Scottish Enterprise and other senior Scottish bodies. However in our opinion it is too late to influence the proposal substantially but allows Scotland to organise so it maximises the benefits from it. The proposal still has the following problems from an Industrial point of view. Even though it is a stated aim to make the program more SME friendly, most of the major problems in FP7 that cause problems remain unaddressed.

Scottish Industry does badly in FP7. If one looks at the statistics, one sees that although Scottish Academics do reasonably (but not brilliantly), industrially we do very badly. In cash terms during first 5 years of FP7, Scottish Companies received 4% of UK industrial total. Scottish companies received 0.45% of the total FP7 funding but the rest of the UK companies received 10.65% of the industrial total. It is industrial performance that can improve the Scottish economy. (As an additional comparison, Israeli companies received six times that of their Scottish counterparts.) Even if Scottish companies received at the UK industrial rate, this would be an extra €5M per year. Because the Scottish perspective is generally ignored by the UK and the EU, the best approach is to try and change this in Horizon 2020.

I see the following Scottish industrial problems in FP and Horizon 2020 and suggest some solutions:

1. Complexity of the rules
2. Time to payment
3. The currency problem
4. Built in bias against small companies
5. Mistaken Commission reliance on SMEs being able to enforce contracts
6. Lack of industrial interest in Scotland
7. Inexperience of most auditors
8. Lack of Scottish representation

1. Complexity of the rules

Every new Framework Program has a stated goal to reduce complexity. None has succeeded in reality. As each successive FP has grown in size – mainly by incorporating other pre-existing programs – they have brought with them a variation in the rules. This always adds complexity.

2. Time to payment

Theoretically, within the Framework Program, there should be no cash-flow problems for SMEs – but in reality it is an enormous problem. Although pre-payments are normally made expeditiously, frequently it is not passed on expeditiously to partners. However the Commission takes an enormous time to make interim and final payments. It is not uncommon for final payments only to be made one year after a project ends. There are a variety of reasons but the Commission itself is extremely bureaucratic internally. This never used to occur when the Commission made payments directly to all participants instead of the current practice of making them via the coordinator. In effect the Commission passed the problem from themselves to the participants and as a result SMEs suffer.

3. The currency problem

All contracts and financial matters are in Euros. Thus payments and costs have to be in Euros. This creates financial risk for organisations outside the Euro zone. For SMEs it is particularly difficult. The prepayment is done in relation to a Euro budget generally created the previous year based on exchange rates at that time. When a payment is received one normally changes it to local currency at that time. However after say another year when a cost claim has to be made it generally uses the exchange rate of the first of the month after the accounting period. Thus one does not know during a period how the financial costs will relate to charges/budget. This is particularly difficult in the final cost period. Most SMEs overspend to ensure they can fully use their assigned budget in Euros.

4. Built in bias against small companies

The majority of the industrial budget is under Collaborative Research. However “impact” and “exploitation” are important factors in the evaluation. During the first four Framework Programs Technical Evaluations of Proposals were undertaken anonymously. i.e. the Evaluators could only evaluate the technology without knowing who the organisations were. Now it is not anonymous and there is an obvious bias towards known large companies/research institutions. This is especially true when “impact” and “exploitation” are taken into account as those large organisations are generally assumed to be better at this. As this is scored during evaluations equally with the technology, it impacts SMEs in getting their ideas approved.

There is additional bias in that the SMEs do not have a strong voice in Brussels. This is best illustrated by Consortia Agreements. They are compulsory for Collaborative Research and are concluded between consortium members. The Commission promulgates, but does not officially endorse, “standard” CAs produced by large entities in Europe that are basically anti-SME. Most consortia are lead by large entities. One reason for this is that coordinators have to meet very strict financial criteria as all funding now passes via them. It is extremely difficult for an SME to meet these financial criteria, especially for the larger projects. The “standardised” CAs generally permit the coordinator to have SMEs pay not only their own bank charges but also those of the coordinator when money is transferred to them. In addition most coordinators do not transfer funding ”expeditiously” as required but may take several months which makes time to payment worse. This is compounded by the next point.

5. Mistaken Commission reliance on SMEs being able to enforce legal contracts

Since the Commission tried to lower its own administrative overheads by working via the Consortia Leaders i.e. the Coordinators – unlike previously, when Commission funding was passed by the Commission directly to the recipients, it now goes via Coordinators. The Commission relies on partners taking Coordinators to court if they break signed agreements such as the CA. This is an unreasonable assumption, as an SME will only very rarely sue a large organisation and they seldom win in court. Coordinators frequently break the rules but there is little that SMEs can do. In the past the Commission dealt with it but they will not now.

6. Lack of industrial interest in Scotland

We are constantly surprised by the apparent lack of interest of Scottish SMEs in participating in FP funded projects. This is partially because of the difficulties outlined in this paper, but more importantly because of the lack of promotion, encouragement and support within Scotland. It is relatively easy for Scottish SMEs to receive some funding directly from Scottish Enterprise.

7. Inexperience of most auditors

There are two levels of audit; that provided within Scotland by accountants giving, as required, certification of costs incurred and external auditors appointed by the Commission to audit individual companies. There is no training for either type of auditor in the complex FP financial regulations. Even the auditors appointed by the Commission have little knowledge. The Commission contracts with an accounting company who send staff accountants for specific assignments that know little about the FP contract. This can result in an SME having its correct costs disallowed. The individual Scottish SME does not know enough to argue their case and as a result can lose much of their grant.

8. Lack of Scottish Representation

Scotland is unique in Europe in that it is a country – not a region of a Member State. Even so, it is treated as a region both by the UK representation and the EU. Some regions are treated better than Scotland in the FP Management Committees. Belgium is a classic example where each region is represented on the Management Committees. The UK is represented on all those Committees but in this respect UK is synonymous with England. Very little information is passed from the UK Management Committee representatives to Scotland. For example the delegates receive a list of all organisations that applied for funding but were unsuccessful. Do we get the Scottish list? A Scottish representative should be part of the UK delegation to each Management Committee. The Commission funds two people from each Member State to attend. Traditionally the UK used to send five or six representatives to the ICT Management Committee – with no-one from Scotland.

There is additional funding/support for countries/regions that are under-represented in EU Research funding – Scotland has never been put forward or considered in this context.

Immediate steps that could be taken to improve Scottish position

  1. Set up a Scottish Framework Program office and assign a Scottish coordinator for each program
  2. Insist that these coordinators participate as part of the UK delegation to each Management Committee.
  3. Have a Scottish stand at important FP events/conferences
  4. Ensure that as a precondition for application funding support, Scottish Universities take a Scottish Industrial company with them into projects.
  5. Have Scottish Enterprise ensure that Industrial companies, where appropriate, have considered FP funding before giving them direct funding.
  6. Encourage Scottish Industrial companies that are in foreign EU ownership to leverage their owner participation in funded EU RTD.
  7. Set up an office to support Scottish SMEs regarding funding/legal issues.
  8. Support Scottish SMEs legally against coordinators that do not hold to signed agreements/contracts.
  9. Set up a fund that would hedge currency fluctuations for SMEs in a similar fashion to the EU Guarantee fund in Brussels.

M W Morron
6 February 2012

Submission from Scotland Europa, Scottish Enterprise, Highlands and Islands

Enterprise and The Scottish Funding Council


The updated Scottish Government Economic Strategy sets out the importance of developing a culture of innovation across the Scottish economy in order to deliver on our strategic aims. In particular innovation in its widest sense must be recognised and encouraged across the entire business base, whether large or small, long-term established or starting up, science and technology based or a more traditional or service based business. Developing new processes, products, services and business models to take advantage of global and market opportunities, often through incremental change - is vital to boosting growth.

In light of European Union 2020 policy and the desire to put innovation at the heart of future competitiveness policy, it is timely to consider the changing European landscape and the future direction of state aid frameworks and support mechanisms, such as the Horizon 2020 programme. The changing approach within the European Union will both complement and challenge how we intervene in support of our Innovation System and the economy more widely.

Innovation is one of the most fundamental processes underpinning economic growth and a key component in developing solutions to economic and social challenges such as climate change, ageing society and sustainable energy. These societal challenges are powerful drivers of change and will also provide major new global market opportunities for businesses.

With an ageing population and strong competitive pressures from globalisation, Europe’s future economic growth and jobs will increasingly have to come from innovation in products, services and business models. This is why innovation has been placed at the heart of the Europe 2020 strategy for growth and jobs. The scope of the Innovation Union agenda is extensive and the Horizon 2020 programme a key pillar of the EU agenda for enhancing Europe's global competitiveness.


We have an opportunity to shape and influence elements of this new policy agenda, to ensure that we maximise the opportunities it can open for Scottish companies and

Scotland’s overall competitiveness.

A new horizon for EU Research and Innovation

On 30 November 2011 the European Commission published its proposals for future EU policy and funding to support Research and Innovation from 2014-2020. The Horizon 2020 programme, as it is called, is a financial instrument which aims to:

• Strengthen the EU’s position in science (with a dedicated budget of €25bn).

• Strengthen industrial leadership in innovation through investment in key technologies, greater access to capital and support for SMEs (€18bn).

• Address major concerns such as climate change, developing sustainable transport and mobility, making renewable energy more affordable, ensuring food safety and security, or coping with the challenge of an ageing population (€32bn).

For the first time, Horizon 2020 brings together all EU research and innovation funding under a single programme. It focuses more than ever on turning scientific breakthroughs into innovative products and services that provide business opportunities and change people’s lives for the better. At the same time it drastically cuts red tape, with simplification of rules and procedures to attract more top researchers and a broader range of innovative businesses. In order to deliver on these ambitions, the proposal from the Commission includes a budget increase of around 40% on the previous Research programme, to €80bn over 7 years.

Considering the scale of the opportunity presented, Scotland has contributed with a single

voice to this process through a “Team Scotland” approach. To this end a Scottish Steering Group involving the Scottish Government, the Scottish Funding Council, Scottish Enterprise/Scotland Europa and Highlands and Islands Enterprise was set up in August 2010. The aim of such an approach was to increase Scotland’s influence in the policy framing and legislative processes and to strengthen our performance, particularly the participation of our business community. This will help to raise business research and development (R&D) and make a positive long-term impact on Scotland’s sustainable economic growth across key economic sectors, in line with Scottish Government Economic Strategy.

Milestones achieved by the steering group include the production of a Scottish position paper (submitted in November 2010) on Scottish key strengths and views on future EU R&D funding priorities; a series of events and workshops to raise awareness and facilitate the input of stakeholders, including business; the Scottish contribution (submitted in May 2011) to the EU consultation on Research and Innovation funding for the period 2014-2020); a position paper on the simplification of the participation rules and high level meetings between Scottish Government Cabinet Secretaries and Ministers and key EU institutional players.

Scottish response to EU consultation on Research and Innovation funding 2014-2020

In May 2011 Scotland contributed to the European Commission’s consultation on the Common Strategic Framework for Research & Innovation for 2014-2020. The response was the product of collaboration between the Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise, Scotland Europa and the Scottish Funding Council and followed an extended consultation with stakeholders across the business (large and SMEs), academic and public sector communities in Scotland.

It identified areas for improvement in order for the new Programme to facilitate more business participation (particularly SMEs), stimulate innovation and ultimately growth:

Need for a more transparent, simplified and fast process for participation, selection,

award of the grant and audit checks, with better balance between control based and

trust-based systems.

More challenge-based calls are likely to stifle innovation and creativity

• Support to the entire innovation chain: from blue skies through to applied research towards the proof of concept stage to encourage more innovation

• More financial support to large scale demonstrators to reduce the risk being taken by the industry in testing new technologies

• Public procurement as an instrument with great potential to drive innovation and knowledge transfer

Some of these recommendations are now reflected in the structure of Horizon 2020.

Horizon 2020 – The economic opportunity for Scotland

1. Strengthening Scotland’s Science Capability

Scotland’s priority to deliver a collaborative research base that remains highly competitive internationally; nurtures, attracts and supports world-class international researchers in Scotland; and attracts high levels of project support from a variety of funding sources is entirely consistent with our aims to increase our participation in Horizon 2020.

Scotland has one of the strongest university research bases in the world. It received 1.8% of all world citations and has been the top 2 in the world in terms of impact of its research in recent years. A survey in 2009 of Scotland’s agricultural research institutes rated these first in the world for citations in agricultural science. These are considerable achievements for a nation of only five million people.

Importantly, Scotland’s main research strengths are already closely aligned with European priorities including:

• Low Carbon Energy Technologies and Climate Change (with expertise in Offshore Wind, Marine Energy, Carbon Capture and Storage and Power Systems) and Marine Technologies/Sustained environment

• Biomedicine and Life Sciences (including Regenerative Medicine, Stratified Medicine and other Priority Health Areas)

• Food and drink, including Animal Health

• Security (water, food, energy, information)

• Built environment, including Power Transmission and Transport Infrastructure

• Creative industries/digital media

• Mobile/digital technologies/informatics

• Medical imaging and diagnosis

The concept of "research pooling" has been developed in Scotland to encourage greater collaboration between networks of researchers across universities. Research pooling has helped to create a new and distinctive research landscape within Scotland. By concentrating investment on networks of excellence with our partners, we have created powerful, well resourced communities that are now attracting research talent from across the world. Scotland has funded 11 research pools covering a broad range of research expertise, with an emphasis on enhancing excellence and including life sciences, energy, imaging, informatics and computer science, marine science, engineering and geoscience.

The evidence, so far, is of a significant added value in terms of the enhanced quality of research and competitiveness of Scottish science from harnessing our research and development operations within such structures. Our research pools are underpinned by excellence and are in a strong position to bring this expertise to bear on the Europe’s ‘Grand Challenges’. We would see considerable benefits in terms of global competitiveness in R&D and innovation emerging for Europe from linking research pools from different European member states.

2. Addressing Societal Challenges – An opportunity to support great Scottish ideas reach new markets

Scotland as a great deal of knowledge and expertise which it can contribute to the key themes identified within the Horizon 2020 programme. Horizon 2020 offers a win-win situation by supporting research that will both tackle problems related to health, food security, energy, transport, climate change and a secure society; and at the same time that will create new business opportunities for Scottish companies.

A major objective of the Horizon 2020 programme is to make public money work better by leveraging as much money as possible from other public and private sources.

Public Procurement

Public procurement accounts for some 17% of GDP in the European Union and offers an enormous potential market for innovation in products and services. Within the Construction sector 40% of all procurement at EU level is carried out by public sector and for defence, civil security and emergency operations sectors the figure is almost 100%. There is clearly a major role for public procurement to help develop new markets and to support innovation transfer.

Work is already underway in Scotland to consider how best to take forward procurement innovation to ensuring public procurement is open to new solutions and new suppliers with new ideas to underpin greater innovation.

Horizon 2020 offers an additional opportunity to bring excellent research and innovation results to market, through existing and new partnerships between researchers, businesses, governments and civil society.

In addition active participation in the Horizon 2020 will bring additional benefits in the form of knowledge transfer and innovative thinking to help Scotland tackle the societal challenges we face in the future.

3. Industrial Leadership - Building on Scotland’s strengths

As part of the Innovation Union agenda Europe’s regions are being encouraged to develop a strategic approach based on their unique competitive advantages – in so called “smart specialisation strategies”. This approach concentrates resources on the most promising areas of comparative advantage, e.g. on clusters, existing sectors and cross-sectoral activities, eco-innovation, high value-added markets or specific research areas.

Clearly Scotland has been pursuing a smart specialisation approach, without using the term, in its Key Sector focus. The Scottish Government’s Economic Strategy has already established a pathway for developing Scotland’s key sectors. The current focus is on developing niches within these sectors in which Scotland can demonstrate European (and global) competitive advantage, and strengthening joined-up delivery of industry-led sector strategies across the public sector.


Horizon 2020 will provide an opportunity to leverage additional investment to strengthen our leadership in areas of comparative advantage and identify scope for increased collaboration and partnership with regions with complementary strengths. It will help inform future investment prioritisation in our key sectors in the context of where the greatest opportunities lie in global value chains.

Next steps in Scotland’s approach

The European Parliament is now considering its views on the Commission proposals, due

To be adopted by mid2012. The proposals will also be considered by the EU Member States in Council with the final adoption of the legislation foreseen by the end of 2013, to allow the first calls for projects funded under Horizon 2020 to be launched in 2014. Initial discussions in the European Parliament indicate they are keen to increase the budget for Horizon 2020 still further, up to €100bn.

Next steps for the Steering Group therefore include meetings with Scottish and UK MEPs and high-level Commission officials to make sure the legislative process will include Scottish views from both business and academia. We have also been begun a productive process of engagement with the Scottish Parliament External and European Affairs Committee at the EU level to contribute to this influencing agenda. Meetings have been already facilitated between Committee Member Aileen McLeod MSP and the Secretary General of the League of European Research Universities, an extremely influential organisation in the development of Horizon2020.

The success of this strategy will see more coordinated influencing work at the Scottish level, more business engaged in the next framework programme, more funding available in Scotland for research and innovation and greater growth in key economic sectors such as renewable energy, life sciences, food and drink.

Maximising Scottish participation

In terms of the particular focus on business and SME engagement in the future programmes, and following discussions at the round table hosted by the Scottish Parliament External and European Affairs Committee, we have undertaken a new phase of evidence gathering.

Early analysis show that Scotland’s performance in the first years of the FP7 programme is very encouraging, accounting for 9.27% (participation) – 9.3% (for money awarded) of overall UK participation (Wales 2.6% participation 2.16% for money; Northern Ireland 1.5% participation 1.11% money). English participation accounts for the majority (86%) of UK participation whereas the money awarded is equal to 87.4%. These data includes public bodies, universities, research bodies and companies.

Looking at a breakdown of Scottish participation up to 31 October 2011, was can see that Scotland has exceeded the EU target of 15% SME involvement, with an overall 18.44% participation, with about 10% of the total Scottish uptake of €304,255,997. This represents a 17% increase in SME participation from FP6/FP5. In Scotland the Programme remains dominated by the Further Education and Research sectors that together account for nearly 80% of this funding attracted to Scotland.

Innovation and Internationalisation feature strongly as major priority themes in the business plans of SE, HIE and SDI. The current business plans highlight the investment and support, which has been targeted at enhancing the R&D capacity of SMEs and the outcomes achieved. The 2012-15 business plans will continue to place a strong emphasis on these priority themes particularly the importance of supporting companies to increase export activity.

Building SME R&D Collaborative Capacity in Scotland

Scottish Enterprise is the lead partner in the Enterprise Europe Network Scottish consortium. Our partners are Highlands & Islands Enterprise, Highland Opportunity Ltd and the European Commission. Since the launch in 2008, the Enterprise Europe NetworkScotland team have;

  • Answered 5589 European business enquiries
  • Published 359 partnering profiles across the Enterprise Europe Network databases on behalf of 321 Scottish companies
  • Hosted or accompanied 584 Scottish companies taking part in Enterprise Europe Network brokerage events and company missions, supporting them in 691 transnational meetings.

Scotland Europa has over 10 years experience supporting our Higher Education/Research sector members to engage in the EU Framework programmes. For FP7 these services were refreshed and resources increased, with support from Scottish Enterprise/SDI, to widen this to the Scottish business community.

Building SME R&D Collaborative Capacity in Scotland (cont.)

Scotland Europa now offers a suite of services including:

  • Strategy development for influencing calls and priorities
  • Strategic intelligence, projects clinics and one-to-one meeting with selected companies
  • Capacity building and trouble shooting with Commission services
  • Advice and signposting to a range of information resources
  • Access to FP7 proposal writing support for strategic projects
  • Support for Scottish applicants looking for project partners

Scotland Europa support continues to reach the majority of Scottish Universities/research institutes. To date the new services have been accessed by nearly 300 companies and 41 projects submitted. The success rate from these projects was slightly over 35% (the EU average being 20-25%).

In February 2012 Scottish Enterprise/Scotland Europa surveyed a sample of Scottish companies with a view to capturing their experience of engaging with the EU Framework Programme and understanding the factors that will influence their continued engagement in Horizon 2020. The sample included a mixture of SMEs (over 50%) and larger organisations with various rates of success and levels of participation.

From this work, and that of the steering group, a number of themes appear to be emerging:

1. Deepening SME’s participation in Horizon 2020

It is recognised that FP7/EU Research and Innovation programmes represent a long-term game, which entails considerable investment in terms of time and resources that make the programme considerably different from national grants. Projects are implemented through transnational collaboration involving multiple partners from different countries. Applications must demonstrate state-of the art research at European level and an excellence and quality that is increasingly high. Such competition requires a significant level of research capacity and capability that not all R&D SME’s may have yet achieved.

It is therefore a “step change” for SMEs to embark in the FP7 learning curve for the first time. Key themes emerging from the survey were:

  • All respondents to the survey recognised the value of some external support to stimulate initial engagement in EU Programmes, with over 50% having been introduced to the programme via parts of Scottish Enterprise and using their support and services to facilitate engagement.

  • All companies were of the same view that organisations need to build and improve their own internal capacity and resource in preparing applications rather than making too heavy a use of external consultants.

  • All participating companies praised the services that has been made available so far in Scotland and stressed the need for a continued targeted support that can meet the need of companies, particularly SMEs and “new comers” to embark and stay successfully engaged in Europe.

  • They also criticised the length of time it takes, up to 18 months, to move from project concept to project start due to the lengthy evaluation and negotiation phase and the seeming lack of clarity in the selection process.

Case Study: SME Benefits of FP7 participation

Most respondents identified the opportunities for networking and for building the company’s profile and reputation at EU and international level amongst the most immediate short-term benefit of participating in Framework Programme projects in. According to one interviewed SME, in the short-term FP7 collaborations generate an increased capacity to offer advanced solutions and service to clients while enhancing the organisation competence and capacity to excel in the specific field. In the long term SMEs can gain capability to create and innovate in an international context, usually “in an area which is highly desirable” for companies but difficult to develop due to the limited in house resources.

EU R&D collaboration can indeed contribute to building SME capacity, as noted above. Scotland’s SME participation levels are already quite high in relation to the total number of SME's with the necessary R&D needs and capabilities. In deepening SMEs participation in Horizon 2020 we therefore recognise the need to target those companies with high level of R&D “preparedness”, which we define as “the capacity and readiness to participate and benefit from the involvement in the programme”.

2. Improve the engagement of and support to sectors that are key to the Scottish economy

A sectoral approach is believed to provide an effective way to target and “cluster” companies to participate in European projects and ultimately create the necessary critical mass – by sector to effectively influence Europe. Engaging with the specific sectors and Industry Leadership Groups will also allow for a more strategic use of Horizon 2020 opportunities to support projects and sectors that are instrumental to realise the Scottish economy strategy - rather than potential Scottish participants competing with each other they could be supported to work together. We will look at increasing collaboration with all stakeholders including a better coordination with the Industry Leadership Groups to identify the priorities and the capacities in Scotland. Through a coordinated Team Scotland approach we could use Horizon 2020 funds to, for example, demonstrate those technologies that must be brought to market by 2020 to meet the EU’s targets for 2020 as well as targets for 2050 emissions reduction and low carbon economy goals. Developing particularly capacity in areas of strength will also support Scottish bids for other large scale EU funded R&D initiatives such as the Knowledge and Innovation Communities (KIC) under the European Institute of Technology.

3. Use Horizon 2020 to identify/support emerging growth potential sectors in Scotland

The two approaches highlighted above respond to the need of a two-pronged strategy to maximise Scottish uptake of Horizon 2020 money. It is however recognised that a sectoral approach cannot just be focused on those key sectors where Scotland has already demonstrated its strong innovation capacity. It was been noted by one company interviewed for this exercise, that Scotland will likely have successes in energy sector, green technologies, and health care. However, Horizon 2020 could also be used to support those sectors where technological innovation needs to be improved to provide additional funding for the risk of developing new technologies. Survey respondents commented that Scotland is already good at research but less good at innovation; Horizon 2020 could be better used to promote innovation, particularly in those sectors where Scotland has lost high-tech businesses. Horizon 2020 could help develop competence that specific clusters need in order to be competitive EU and worldwide. Equally, Horizon 2020 could support emerging high-growth potential sectors/companies increase their competitiveness.

4. Develop research/SME collaboration tools to support Horizon 2020 participation

In September 2011 Cabinet Secretary, Michael Russell, announced additional support for the research pools to encourage them to engage further in increasing collaboration with their European peers; continue to attract funding from Europe and engage with stakeholders, both at home and in Brussels, on the development of Horizon 2020. The main purpose of the Pools Engagement in European Research (PEER) funding is to encourage pools to submit applications for European funding under the FP7, with engagement with a Scottish business or businesses being expected as part of this. The funding will foster greater collaboration, greater business (particularly SME) engagement and will help to build further critical mass.

Our approach to research pooling could also be considered an example of best practice in the implementation of new and innovative instruments supporting the engagement of business in EU R&D and narrowing the gap between industry and academia.

Scotland wants to build on this expertise by working with research partners to establish new pools where there are benefits and clear links with European priorities, in particular, we will explore how we can bring together our research expertise and develop research pools that are aligned to the Joint Programming Initiatives and ensure improved exploitation of research results across the EU.

Scotland wishes to see greater translation of European research excellence into business opportunities and growth. Stimulating the development and alliances of ‘research pools’ across Europe, would ensure that that excellence in R&D that is distributed within and across member states is harnessed to best effect.

Scotland also has a wealth of expertise, including its experience of implementing successful knowledge transfer and commercialisation initiatives and supporting Scottish business to invest in innovation and R&D. A number of initiatives have already been successfully introduced in Scotland including SEEKIT, Interface, the Innovation Voucher Scheme and Proof of Concept. These programmes form a key part of the Scottish Government's framework for innovation, and aim to enhance collaboration between business and the science base; improve business innovation and investment in R&D; and therefore result in greater economic growth.


In terms of developing new instruments for Horizon 2020, Interface is a good practice example. Interface acts as a brokerage service and provides information to companies regarding specialist expertise that is available in Scotland’s 20 Higher Education Institutions and nine Research Institutes. Since 2005, over 1,000 businesses to academic partners have been introduced, and as a result more than 488 academic-industry collaborative projects have been initiated. This is a resource that could be further exploited to facilitate the development of collaborations for EU project development.

>Annex H – Evidence following the conference

Submission from Melfort Campbell, IMES Group

I find I see things from a quite different perspective to those who set and implement policy in this area. With this gap I find that, as billions of pounds or euro’s are made available it means these funds are not available for the type of businesses I run. We carry on and some succeed but I am convinced my interest is in an area ignored in almost all other circles.

I think it is quite simple, all the funding and programmes are for the commercialisation of academic and scientific research, development and innovation. I describe it as supply push.

I have no argument with this as we, in Scotland, and to pretty much the same degree for the whole of the UK, are amongst the top of the league in academic and scientific research and its commercial exploitation. We are less good on ensuring this exploitation has a positive impact on the Scottish economy and this could be improved. I feel this is a vital focus and we should sustain effort and spend in this.

However, we are near bottom of the pile for what I term broadly as business innovation. Business spend on R & D is one measure but there are plenty more not least our continuing failure to catch up in productivity and competitiveness must also be measures that show a poor impact of our innovation activities compared with what we should be capable of. It is often referred to that we are inventive, creative, innovative, yet this does not show in these broader measures. I think I know why.

I have a number of businesses and their common thread is that they produce market reactive innovative solutions to capture market opportunities. The catalyst for the innovation is the demand need; new, emerging or unmet customer need, that represents an opportunity for a new or differentiated product or service.

This near to market driven innovation is where we perform poorly. Indeed so poorly that it is an area that is simply not mentioned in policy, not recognised by politicians or bureaucrats and is handled by the likes of Scottish Enterprise almost on the quiet so no one notices. However, it can and should be the catalyst for a great deal of our Research, Development and Innovation activity.

If we stimulate and support this activity, we have our companies finding demand need for new products and services, meeting those needs and so becoming more productive and competitive, and capturing more business. Further they develop the need for support from the intellectual, scientific and academic sectors as they seek more new ways to exploit the market opportunities. This is what I call the demand pull. We need companies and individuals who have an identified market opportunity trawling our academic and scientific institutions for help, support and indeed existing technology to meet these opportunities.

What this signifies and argues is that we are keeping our intellectual innovation capability remote from our market reactive, demand need led, innovators. The reason I argue this with such strength is I have seen what happens on the rare occasions that a market oriented innovator introduces an intellectual innovator to an identified and relevant market opportunity.

If you want your report to make a difference, it will steer Scotland not to replace one with another, but to learn how to the two ends can meet and work together.

I do have plenty of ideas as to how this could be made to happen, but have so far failed to get them past bureaucrats who only understand supply push of academic and scientific research outputs.

Submission from Professor Geoff Simm, Scottish Agricultural College

Many thanks for hosting the Horizon 2020 Conference on 24 May which I found very useful.

I raised a question on the proposed funding model during the discussion, and I wonder if I could expand on the issue and ask that it is considered further by your committee?

As I mentioned during the conference, there is much to applaud about the Horizon 2020 proposals, and SAC is looking forward to engaging fully, as we do in Framework 7. however, if we understand the proposals correctly, participation for SAC (and other research organisations) would be less financially sustainable than with the current funding model, which already operates below full economic cost.

As we understand it, the suggestion is that indirect costs (‘overheads’) will be paid at the flat rate of 20% of all project work in many Scottish, other UK research organisations, and other European research organisations. Most research projects call for high levels of staff input (usually significantly more than 50% of total costs) and indirect/overhead costs on staff are usually around 100% of staff costs. A flat rate of 20% on total costs would rarely, if ever, meet the real overhead costs.

As you will be aware, research institutions and Universities in Scotland and the rest of the UK have moved significantly towards the adoption of Full Economic Cost (FEC) models as the basis for research funding. While there continues to be some element of ‘core support’ for research, this covers only a small part of the real total costs of research. Additional research projects that do not come with funds that approach FEC therefore become a net cost to research organisations – and a few such organisations can find ways to support those net costs.

Horizon 2020 puts a significant emphasis on innovation and practical impact to research with an applied flavour and with strong encouragement for industry involvement. This is the kind of research that fits more closely with organisations that are akin to Contract Research Organisations (CROs) than conventional academic organisations. CROs by their nature operate to FEC as a funding model. The suggested Horizon 2020 funding structure is likely, therefore, to be a disincentive to the very kinds of organisation that are likely to fit best to its stated purpose.

Scotland has a strong record of winning and delivering good science through EU funding. If the suggested ‘20%’ funding model were to be adopted for Horizon 2020 we believe that this would be a major disincentive for Scottish organisations to continue to be involved with major EU programmes; we simply could not afford to do the work on this basis. This would be a significant loss both in research income for Scotland and in science delivery.

The most desirable funding model would be FEC. If this is not deemed to be affordable by the EU, then a return to a ‘matched-funding’ model would be the next best option. in this structure EU funded activity is aligned with relevant associated work supported from other sources e.g. on a 17:25% cost basis. The onus, on project proposers, is then to find support for work that can, appropriately, be aligned with EU supported activity. This model has applied in the past and can be made to work effectively. In our area of work (agriculture etc.) the majority of funded work that is likely to align with EU funding would probably come from Scottish and UK government sources. We have heard, indirectly, that IF there were to be a matched-funding model in Horizon 2020, Member State Governmental sources of funding may not be allowed to be used as matched funding. This, again, would be a major disincentive to compete for EU funds.

On a slightly separate point, you will be aware that some of the funds for agriculturally-related research in Horizon 2020 will be supported by the use of some funds from the CAP (€4.5bn has been mentioned). Pressures on budgets, and the ongoing uncertainties about the final outcome of the future CAP structure, may yet mean that this apparent good news will not materialise at anything like the current suggested level. We believe that it is very important that there is a significant commitment to funding agriculturally-related research through Horizon 2020 irrespective of the outcome of the CAP discussions.

It would be extremely helpful if your committee could raise these points on behalf of future Scottish interests in Horizon 2020. If you think that there is more information that we could provide to help with the presentation of a case to secure economically sound future engagement of research establishments in future EU research in agriculture, we would be happy to respong.

Prof Geoff Simm
Academic Director and Vice Principal Research


1 Europe 2020 Strategy

2 Horizon 2020 Proposals

3 Scottish Government, Gross Expenditure on Research and Development Scotland 2010

4 GERD comprises the R&D undertaken by the Business (BERD), Higher Education (HERD) and Government (GoveRD) sectors. The decrease in GERD is a result of reduced expenditure across all three sectors: (i) BERD: £622m in 2010, a 3.9% (£25m) decrease in real terms since 2009; (ii) HERD: £968m in 2010, a 4.0% (£41m) decrease in real terms since 2009; (iii) GoveRD: £300m in 2010, a 3.3% (£10m) decrease in real terms since 2009.

5 Scotland Europa briefing to European and External Relations Committee, February 2012

6 Scotland Europa briefing to European and External Relations Committee, February 2012

7 In written evidence, the Cabinet Secretary for Finance, Employment & Sustainable Growth stated that although SPAF funding no longer exists, the support that was once offered through SPAF is now delivered by the enterprise agencies through a range of support mechanisms (16 January 2012. Annex D):

  • Scottish Enterprise has integrated SPAF into its Innovation Support Service, which offers free advice to businesses on innovation activities. For SMEs this can include a specialised FP7 project surgery or two days of consultancy help to develop a project idea or proposal.
  • For businesses seeking to participate in collaborative R&D programmes for the first time, funds are available through Scottish Enterprise's Innovation Support Grant for their first project application. Similar support is offered by Highlands and Islands through its account management and Research and Development programmes.

8 Link to European and External Relations Committee report on Structural Funds

9 Meeting of Scottish Parliament, Ministerial Statement, 9 May 2012

10 According to the Scottish Government’s Scottish Procurement Policy Handbook “The procurement of innovative goods, services and works by contracting authorities can contribute to improvements in the quality and delivery of public services and lead to growth in the Scottish economy by encouraging suppliers to invest in and deliver pioneering solutions to current and future public service needs”. http://www.scotland.gov.uk/Resource/Doc/256155/0076031.pdf

11 Recommendation based upon supplementary evidence received following the conference (Annex H)

12 Recommendation based upon supplementary evidence received following the conference (Annex H)

13 The Horizon 2020 package consists of: (i) a proposal laying down the general objectives, the financial envelope and provisions on control, monitoring and evaluation; (ii) a proposal for a single specific programme to implement Horizon 2020, laying down the implementation measures; (iii) a single set of rules, covering funding/ reimbursement, conditions for participation, selection and award criteria and rules on ownership, exploitation and dissemination of results; and (iv) a separate proposal dealing with atomic issues. The proposals are accompanied by impact assessments. In addition a separate proposal deals with revision of the EIT Regulation.

14 http://www.ippr.org/images/media/files/publication/2012/02/beyond-bricks-mortar-boards_Feb2012_8659.pdf

15 Community Innovation Survey 2009

16 Scottish Enterprise, research forthcoming

17 http://www.scotland.gov.uk/Resource/Doc/89713/0021562.pdf

18 http://www.publications.parliament.uk/pa/cm201012/cmselect/cmsctech/writev/valley/valley00.htm


20 http://www.bis.gov.uk/assets/biscore/science/docs/f/11-901-funding-eu-research-innovation-from-2014

21 http://www.sciencebusiness.net/news/75699/Horizon-2020-Different.-But-different-enough75699



24 See for example: http://www.scottish.parliament.uk/S4_EuropeanandExternalRelationsCommittee/Inquiries/EFPC.pdf

25 http://www.sciencebusiness.net/news/75699/Horizon-2020-Different.-But-different-enough75699; http://ec.europa.eu/research/horizon2020/pdf/press/fact_sheet_on_rules_under_horizon_2020.pdf#view=fit&pagemode=none

26 http://www.evaluationsonline.org.uk/evaluations/Browse.do?ui=browse&action=show&id=466&taxonomy=INO

27 http://ec.europa.eu/research/evaluations/pdf/archive/fp7_monitoring_reports/fourth_fp7_monitoring_report.pdf

28 http://www.evaluationsonline.org.uk/evaluations/Browse.do?ui=browse&action=show&id=466&taxonomy=INO

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