The UK's lead in funding new companies in the sector has been squandered, says Trevor Clawson

Perhaps the most surprising thing about nanotechnology is just how much of it has already left the research laboratory behind. From sun creams and cosmetics through to medical treatments, electronics and telecoms, technologies that manipulate materials at a molecular scale—known as nanotechnology—are being applied to a rapidly increasing number of everyday products.

Although the UK Soil Association made headlines when it banned their use in organic foods back in January, the number of commercial nanotechnology applications in the consumer sector alone already exceeds 500, according to research published by the US-based Project for Emerging Nano Technologies. Meanwhile, projections published by the Center for Economic Growth in New York suggests that the worldwide market could be worth as much as $1,100bn (£558bn) by 2010. In other words, while nano components are microscopic, the potential revenues are measured in the kind of numbers usually reserved for astrophysics.

And the good news is that the UK has been playing a leading role. Much of the early research was carried out within the walls of university laboratories, but increasingly the work of academics is being spun out into commercial ventures. The government-sponsored Micro and Nanotechnology Network (MNT) currently lists 643 UK nanotechnology companies, supported by a mix of public and private sector investment.

So, on the face of it, the UK seems set to reap the economic benefits of a branch of science that will have an impact on just about every industrial sector. But the bad news is that, if a report published in March 2007 by the Council for Science and Technology (CST) is to be believed, Britain has slipped out of pole position in the race to bring new applications to the market. As the review chairman, Sir John Beringer, said at the time: "In 2004, the UK was seen as a world leader in its engagement with nanotechnologies. It is now widely believed to have lost that lead." 

So what went wrong? Well, the first thing that has to be said is that world- beating research doesn't necessarily attract the kind of financial support required to transform ideas into viable businesses. According to Paul Barraclough, the founder of Tecmentor, a Cheshire start-up consultancy, the bulk of private investors want to see healthy balance sheets rather than innovative, but untried, research. "Traditional venture capitalists want to invest in business concepts," he says. "What they find with nanotechnology is a huge element of research with the rewards downstream. They aren't comfortable with that."

It's a familiar Catch-22. Without cash you can't develop a product. And without a product it's tough to get the cash. It's not a universal truth, of course—the venture capital community has specialist technology investors—but the UK remains behind the US in terms of the cash that can be raised for early-stage nano projects. 

The alternative to private investment is public-sector cash. The Department for Business Enterprise and Regulatory Reform has earmarked £90m over six years to support the nano industry and funding is also available from regional development agencies and the EU. But the timing of awards isn't always helpful. "I've been very pleasantly surprised by the amount of public support available," says Gerry Ronan, CEO of nanotechnology measuring firm Farfield Group,"but the funding does tend to be awarded retrospectively, so the money isn't there when you need it most."

What's more, the overall pot of public money available for nanotechnology research is much smaller than the sums available in other major European countries, such as France and Germany. According to Steffi Friedrichs, director of the Nanotechnologies Industries Association, that is unlikely to change. "If you look at Germany there is a very different spirit in terms of the role of the public sector in supporting industry," she says.

The upshot is that many start-up nanotechnology companies have to work on minuscule budgets until they can develop products that meet the criteria of public funding agencies and private investors. "Initially we had to work on a shoestring," says Ben Jensen, chief technology officer of Surrey Nanosystems, a spin-out from the University of Surrey. "There is a huge amount of incredible research being done across the UK that is not being leveraged because it is difficult to the financial support."

It's a view shared by Friedrichs, who believes that the UK is punching well below its weight in terms of turning ideas into commercial success. "What we have in the UK is a disparity between fantastic research and the economic value that is created from that research," she says. "In that respect, we are not only behind the US but also behind the rest of Europe."

Small product, big risk
The challenges facing the UK nanotechnology sector extend beyond funding. Scientists working in the field are constantly developing materials with new properties and no-one knows for sure how the tiny components coming out of the lab will interact with the human body and the wider environment. Prince Charles caused a stir in 2004 when he suggested that nanotechnology could result in "similar upsets to thalidomide" and, while the industry deplored his choice of words, there is a recognition that further research into the potential impact is essential. "This is a huge issue for the industry," says Steffi Friedrichs, director of the Nanotechnologies Industries Association. "The area of toxicity and risk is very important for the future." Without joined-up research to fall back on, fears of exposure to some kind of biological disaster are bound to be a deterrent to investment.