University technology transfer activity in the UK is booming, according to the University Companies Association (UNICO). The fourth UNICO survey of university commercialisation shows an increase in total licensing income from £31.3m in 2003 to over £40m in 2004, with the number of licence agreements more than doubling during this period. In the past two years alone, 20 spin-outs from UK universities have floated with a combined value of over £1bn. The data in the survey is collected from 106 institutions, including 47 of the top 50 UK universities (by research income). The research was conducted from April to June 2005 and asked institutions about their commercialisation activities during the 2004 financial year.
According to UNICO, there is a steady increase in the number of people employed in commercialisation activity and an increase in the number of invention disclosures. However, UNICO fears the decrease in the amount of funding allocated to intellectual property protection is of concern and may indicate that some universities are not able to access sufficient funding for this activity.
An increase in the total number of spinouts companies established is reported, although it is noteworthy that compared with last year fewer universities hold shares in their spinouts. This is mainly due to the impact of the introduction of Part7, Income Tax Earnings and Pensions Act 2003 (Schedule 22). Before July 2003, academics who took a stake in a business set up by their university to commercialise research they had produced were charged only on capital gains. This was payable after selling shares. The changes to the Finance Act meant they had to pay income tax based on the value ascribed to their shares as a result of first round investment. And this charge would have been incurred before the academic had necessarily sold any of his or her stake. However, UNICO has worked closely with the Inland Revenue and in December 2004 this issue was resolved.
According to UNICO, 35% of the spinouts established in 2004 raised external investment finance. This indicates that universities are doing a better job of creating investment-ready ventures attractive to the investment community. Fewer university spinouts, however, are being funded by University Challenge Seed Funds, mainly due to the fact that these funds are drawing to a close. This may lead to a new funding gap for the VC industry.