State Aid. It’s a fairly innocuous-sounding term, which belies its importance and the potential consequences for those who ignore its implications. State Aid doesn’t represent a glittering, enticing opportunity for universities, and it certainly isn’t the sort of topic that animates and enthuses researchers, professional services staff and vice-chancellors.
That said, I suggest that the sector should be paying more attention to this issue. An understanding of the basic principles of State Aid is likely to facilitate improved decision-making by academics and senior managers who are active in innovation.
It’s for these reasons that the Association for University Research and Industry Links (AURIL) and PraxisUnico – the two main professional bodies representing university knowledge exchange practitioners – have developed new best practice guidance in this area.
(I’ll take this opportunity to remind the reader that it isn’t just in relation to research, development and innovation that universities may need to consider State Aid, as there is scope for market distortion and unfair competition in other areas of higher education activity. Still, that’s beyond the scope of the project reported here.)
What’s the significance of State Aid?
Typically, State Aid is recognised as a concept of the European Commission. It refers to public aid given to undertakings (usually, but not exclusively, businesses) on a discretionary basis. So it is seen to have a potentially distorting effect on competition and trade between member states of the European Union.
The public aid need not necessarily entail a cash transaction: for example, free or subsidised consultancy advice provided by a university to a company could be State Aid. Immediately we can see that it could have an enormous bearing on the increasingly important ‘impact’ agenda for universities.
In early 2014, the Department for Business, Innovation and Skills and HEFCE called a meeting with university knowledge exchange staff to explore State Aid issues. It covered the sector’s understanding of the legislation, and whether there were any key areas which might have negative impact on the commercialisation of research results.
This so-called ‘sounding board’ session was organised by AURIL and PraxisUnico, and one outcome of the meeting was for the two organisations to consider a collaboration to produce new guidance for the UK higher education sector on State Aid. HEFCE awarded a grant to part-fund the project and this supported the involvement of expert advisers, namely Blake Morgan LLP (represented by Emyr Lewis) and Northwood Reid (represented by Christine Reid, who is probably best known in the sector for her contributions to the Lambert Agreements).
The guide was prepared to inform universities, which are active in research, development and innovation, about State Aid legislation so they can assess any associated risks and mitigate them.
The goal was to encourage research, development and innovation – and so economic growth – by demystifying the regulations and providing examples (case studies) which resonate with the higher education sector.
Ultimately, the sector must comply with the State Aid regulations, but there are broad exemptions. The General Block Exemption Regulation, for example, provides universities with a great deal of freedom to operate effectively in commercialising research outcomes.
Institutions run the risk of unwittingly falling foul of the legislation if their interactions with external organisations are carried out without due regard to its restrictions. Conversely, if they aren’t aware of what the legislation permits, they might be overly conservative or risk-averse in their interactions with industry.
When universities act appropriately and in accordance with relevant legislation, it, in effect, protects their industry partners. A breach could require those businesses to repay unlawful aid. This highlights the intended use of the guidance: to inform risk assessment and decision-making by universities, and so to support knowledge exchange and innovation.
Many universities generously contributed to developing the guidance, including project steering group members and those who provided ideas for the case studies which are used to bring to life the concepts spread throughout the document.
I also gratefully acknowledge the advice received from further afield, including the Department for Business, Innovation and Skills, the UK Research Councils, the Confederation of British Industry and State Aid experts from the devolved administrations across the UK.
‘State Aid in research, development and innovation: A guide for universities’ is now available as a free download from auril.org.uk and praxisunico.org.uk.