On a recent visit to Warwick Manufacturing Group (WMG), David Willetts told its founder and director, Lord Bhattacharyya of Moseley, that he thought he had "seen the future of how universities and industry can work together".

Mr Willetts, the universities and science minister, has also observed that science was spared the worst of the cuts in the recent Comprehensive Spending Review because of its successful depiction of itself as an engine of growth.

The government's subsequent announcement of a ?200 million investment in technology and innovation centres patterned on Germany's Fraunhofer model was further proof of its belief in science's potential to help rebalance the economy by reducing its reliance on financial services.

But you could be forgiven for assuming that the University of Warwick's gigantic advanced technological research facility had succeeded in turning a sports car into a time machine and transporting the political class back to the future.

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WMG, after all, has been around since 1980. It became the darling of Margaret Thatcher during a previous Conservative-governed period of falling university budgets and worries about British industry.

"We were a Fraunhofer institute before they were ever dreamed of," Lord Bhattacharyya told Times Higher Education.

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The former apprentice at motor and aerospace components manufacturer Lucas Industries said he began WMG to get British manufacturing "out of the pits" of poor management, industrial unrest and the technological backwardness resulting from decades of underinvestment and a mutual lack of interest among universities and companies in collaboration and personnel exchange.

WMG's first venture was a part-time master's degree for senior industry staff that considered technology and management as a unified whole, with modules taught at a purpose-built residential centre.

"Previously (manufacturing companies) sent senior people to do an MBA, but all they did when they came back was make short-term decisions to restructure downwards," Lord Bhattacharyya said.

Initially the master's "went down like a bomb" in the academic community.

"Everybody said: 'Where is the robustness and rigour? You are allowing industry to corrupt the (academic) system'," Lord Bhattacharyya recalled.

"But I said: 'These are our partners and the market for our graduates. Engineering is applied science and if we don't engage the market it is pointless.'"

The market responded positively, and as companies began to send staff to WMG in ever greater numbers, Lord Bhattacharyya decided it was time to set about "fixing the research base" as well.

The professor of manufacturing succeeded in persuading the cash-strapped university to lend him money - albeit at a commercial rate of interest - to build a centre where academics could collaborate with industrialists on the development of the next generation of products in the aerospace and automotive industries.

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Transfusion of fresh ideas

"People within companies are stagnant, but universities have fresh blood going through them all the time. If you combine experience with that innovative ability it is a win-win situation," he said.

"Industry benefits from the intellectual horsepower going in, and our people learn because they are working on practical projects."

The building was opened in 1990 by Mrs Thatcher and, once again, industry responded enthusiastically. The income generated allowed WMG to build a further two large buildings to accommodate the group's expansion into other areas, including construction, pharmaceuticals, mining, information technology and food and drink.

The most recent addition is a digital lab that incorporates, among other things, an institute of digital health. This resulted from a request from health authorities - sweetened with funding for two chairs - for WMG to look at hospitals "the way it looks at companies".

The hope is that, working in collaboration with Warwick's medical school, the institute will develop technology that allows patients to manage their own health, and create digital imaging and simulation techniques to improve treatments and medical training.

Also in the pipeline is an ?8.5 million institute that will focus on the manufacture of new materials and help UK industry develop products that can compete with those made by high-quality foreign manufacturers such as Siemens.

WMG works with the boards of companies to design both open and bespoke, company-specific programmes. Lord Bhattacharyya said it was happy to work on a commercially confidential basis, on the sealed floors of company premises.

This frequently involves the academics involved agreeing not to publish the resulting research until after an agreed embargo - often with the firm's name eliminated.

But David Clark, principal Fellow at WMG, said that in practice managers were often happy for embargoes to be broken, allowing researchers to get credit for their work more quickly.

"Universities can give profile to the company if they think it through, and it could be an enabler to the next grant. Also, the company doesn't just want proof of concept: it wants peer feedback, too," he said.

WMG has advised banks on investment in manufacturing and has even counselled foreign governments on manufacturing policy. Links are particularly strong in China, where WMG has been engaged since the 1980s, and India, where the group is helping to establish a technical university.

But for Lord Bhattacharyya, the ultimate proof that the "them and us" mentality in industry and academia has been consigned to history came in October 2010, when Jaguar Land Rover announced that it would be co-locating its ?100 million-a-year research and development division at WMG. The partnership will see the group training the company's personnel "from cradle to grave" and helping to develop the products that will come to market in the next 10 to 15 years.

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Blueprint for success

WMG outgrew its original administrative home in the university's department of engineering five years ago and is now a separate, graduate-only department with a large amount of autonomy.

According to Lord Bhattacharyya, it accounts for 30 per cent of the university's entire research activity and has more than 2,500 postgraduate students, 650 of whom study full-time at Warwick, with the rest spread around WMG's global network of outposts.

With only 20 of its 450 staff and 10 per cent of its ?120 million annual research budget funded by the Higher Education Funding Council for England, WMG is also a cash cow for the university.

Its success, Lord Bhattacharyya believes, vindicates the university's streamlined decision-making structure and the courage in his convictions displayed by Lord Butterworth, Warwick's founding vice-chancellor, during the 1980s.

Lord Bhattacharyya, who was made a Labour life peer in 2004 and who donated ?1 million of his own money to Warwick last year, is delighted that "everybody" is now trying to emulate WMG.

He is particularly proud that in 2010 the group was cited in a US National Science Foundation report as an exemplar of the practical impact that research can have on industry and wider society.

Lord Bhattacharyya claims the credit for being the first to push the impact agenda in the House of Lords four years ago, and he notes that its adoption by the government and funders will see WMG's star rise even higher, standing its parent university in good stead regardless of its position in league tables that rely primarily on citation counts.

He is anxious for the UK to continue with blue-skies research, at which it is "the best in the world".

"But what is the point of putting such a lot of money into research by the nation, especially applied research, if a proportion of it doesn't have direct economic impact?" Lord Bhattacharyya asked.

paul.jump@tsleducation.com