How UK Government is helping virtual and augmented reality flourish

by Megan Stagman on 24 Oct 2018

TechCrunch estimates the immersive tech industry will be worth $108 billion in 2021. Citi estimate $569 billion by 2025. But despite these staggering projections, many people’s understanding of the technologies fails to extend beyond the viral sensation of Pokemon Go.

By contrast, the reality is that the technology is developing and diversifying at breakneck speed, and that 60% of augmented and virtual reality spending in 2018 was in fact for commercial uses. Commercial application is set to expand even further to represent 85% of the worldwide total in 2021, being deployed in a wide range of sectors including retail, real estate, healthcare, manufacturing, and tourism among others. As a result of the potential growth and applications, immersive tech is increasingly becoming the focus of not only small tech start-ups, or indeed Silicon Valley, but also large multinational corporations like Ikea and Volkswagen.

Such a wide range of cross-sector applications and prospective economic growth go a long way to explaining why the British Government is so keen to support the UK’s own burgeoning immersive tech industry.

How do we define ‘immersive tech’?

Immersive tech is an umbrella term under which several types of technology fit:

  • Virtual reality (VR), where a 3D environment or image can be interacted with in a seemingly real way;
  • Augmented reality (AR), where a user’s real world experience is enhanced with additional overlays;
  • Mixed reality (MR), where virtual elements sit on top of the real world using headsets or glasses;
  • Haptics, that can recreate the sense of touch and thus immerse a user even further.

The various developer, producer, software and hardware manufacturing companies that make up this industry do not in any way exist in a vacuum; they are being supportively incubated by government through funding, mentoring, and even to involvement in shaping supportive regulation.

So how can ambitious immersive tech companies go about attracting UK Government support for their growth and development?

Funding

Immerse UK, the cross-sector network for the UK’s various immersive technology stakeholders, recently found that as many as 60% of immersive specialists viewed access to finance as a barrier. However, companies may not be fully aware of the extensive government assistance already available in this regard. For example, one of the many schemes currently open at the time of writing is offering up to £8 million for business-led R&D projects that would enable better content production. A rough indication of what companies can hope to attract with the average grant is approximately £100,000 for idea testing and approximately £1 million to develop a prototype.

Various funding opportunities exist for very specific use cases of VR and AR, so companies should look for government initiatives particular to their sector. For example, in October 2018, the Government’s Digital Health Technology Catalyst (DHTC) programme granted £453,000 to a partnership between the University of Chester and Countess of Chester Hospital to work on a VR project helping stroke patients practise and re-learn daily activities. The DHTC programme is a £35 million fund being run over four years, available to digital health innovation projects.

Beyond these sector-specific schemes, companies might also consider looking to either larger scale programmes at the EU level or smaller local authority initiatives. For example, the European Union’s Horizon 2020 programme is allocating nearly €80 billion of funding over seven years for research and innovation, which has already been of benefit to immersive technology researchers. Meanwhile, at the regional level in the UK, Local Enterprise Partnership (LEPs) have their own growth hubs responsible for supporting local businesses, providing smaller grants than national programmes but more focused on areas in need.

Spearheading national public sector funding efforts for the industry is UK Research and Innovation, an organisation that brings together the seven public sector Research Councils (who fund academic research), Research England and Innovate UK (the Government’s innovation funding body). Its largest and most explicit commitment to immersive technology has been £33 million of funding made available for immersive tech companies throughout 2018 and 2019. This funding pot sits within the £150 million ‘Creative Industries Sector Deal’, which in turn is part of the wider Industrial Strategy Challenge Fund, and is composed of three parts:

  1. A £16 million Audience of the Future Demonstrators programme. Running from May to August 2018, this competition invested up to £4 million in four different large-scale creative industries demonstrator projects.
  2. A further £12 million has been pledged to fund research and development projects
  3. £5 million has been provided for an Industry Centre of Excellence, for training and research programmes to develop the creative talent pool.

Immersive tech companies should also be aware of the tax incentives that the Government is offering. In May 2018, three in ten immersive specialists claimed to have benefitted from tax incentives in the last 12 months, a figure which could be raised through greater awareness building among the industry.

Tax incentives available to companies include:

  • The Research and Development reliefs available to companies that work on innovative projects in technology, through which SMEs can claim back up to 33% of their R&D costs and larger companies up to 12%.
  • The Video Games Tax Relief, specific to the gaming sector of course, but applicable to British companies supplying video games to the general public and worth up to 20% of their development expenditure.
  • The Patent Box, enabling companies to apply a rate of corporation tax as low as 10% to profits earned from patented inventions.

Mentorship and practical support

The sector’s primary ally when it comes to networking and representation is Immerse UK, which was set up by Innovate UK in 2016.  Immerse UK’s role is to facilitate discussion and networking within the immersive tech sector and provide information for companies about possible sources of government and other funding. Members of Immerse UK include businesses, researchers, activists, thinkers and investors.

Another key supportive public sector stakeholder is the Digital Catapult, a body established by Innovate UK to promote the development and early adoption of digital technology, and which lists immersive technology as one of their three speciality areas for provision of assistance. Their 10-week Augmentor Programme, for example, runs annually and gives immersive tech companies access to technical and business mentorship.

Another Digital Catapult initiative includes their rolling three-month innovation programme called Creative XR, which supports small businesses to create immersive content through funding, expertise, facilities, workshops and pitching opportunities. Companies to benefit last year included Immersive StoryLab, a project to build a mixed reality experience around the UK coastline, and Third Lighter, a project creating VR learning experiences for museums.

Finally, in 2017 the Digital Catapult has set up Immersive Labs across the country, in the Brighton, London, Belfast and the North East, allowing businesses of all sizes, or researchers, to become acquainted with immersive technology or to demonstrate ideas to prospective clients or investors. These labs also run educational sessions to help organisations work out where they could apply VR and AR technology in their sectors – a real issue hindering current uptake of the technology.

Access to Government

The examples above demonstrate the role that the public sector is taking in supporting immersive tech companies in their commercial development, but it should also be expected that government will start to take an increasingly regulatory role as well. While immersive tech has much to offer, it is also likely to come across various policy hurdles as it develops, such as content regulation, data protection and intellectual property rights.

Establishing relationships that extend beyond transactional funding or support schemes is therefore important if the growing sector is to provide input into the creation of the regulatory framework for the industry.

One way to participate in the forthcoming debate surrounding regulation might be through techUK, the UK’s trade body for the tech industry which provides a collective voice for its members and fosters connections between government and the sector. The organisation has demonstrated an explicit concern for the immersive tech sector, holding a conference in February 2018 on how AR and VR would revolutionise consumer tech and media, and another in May 2018 on what VR meant for data protection.

Getting ahead of the policy debate

While the regulation of immersive tech is still at an early stage, the broader regulatory debates around the tech sector - in particular how content regulation responds to new technologies - will have a direct impact on immersive tech. It will take time for organisations like techUK to build consensus amongst their members, and publicly funded bodies like Immerse UK are not able to directly lobby government. Companies at the leading edge of the sector are therefore better served by developing their own direct contacts with policymakers, explaining how their technology works and can be utilised and how regulatory issues can be dealt with in the least intrusive manner.

If you can see the regulatory issues coming down the track, or have already hit a regulatory roadblock, please get in touch with Inline Policy. We can develop and deliver a tailored strategy for your specific business model that puts you in contact with the most relevant policymakers and help you take full advantage of the support on offer.

Topics: Immersive Tech, Virtual Reality (VR), Augmented Reality (AR), Innovation policy, UK politics

Megan Stagman

Written by Megan Stagman

Megan provides political analysis and monitoring clients with a focus on the data economy and the future of work.

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