Ahead of the May Bank holiday weekend, the Department of Business, Energy and Industrial Strategy (BEIS) published details of how it plans to spend its £11.3bn R&D budget for the financial year 2021-22.
The headline overall is that Government spending on R&D in 2021-2022 is £14.9 billion, its highest level in four decades, demonstrating progress towards our target to increase total public and private R&D investment to 2.4% of gross domestic product (GDP) by 2027. This represents an increase of £1.7 billion in 2021-22, which includes around £1.3 billion to fund UK participation in EU programmes, as well as investment by other government departments.
UKRI have been allocated a budget of £7.9 billion, which represents a drop of £539m (or 6.3%) in UKRI funding compared to the previous year. This drop is caused by by a reduction in Official Development Assistance (ODA) Funding, as well as a drop in science infrastructure capital spending, following a one-off £300m boost for labs in 2020-21.
The UK’s Research Councils will receive an increase in excess of inflation to their core budgets. However, the cuts to ODA will inevitably affect research councils differently depending on the proportion of their budgets that is ODA.
Concerns have been raised in the immediate term about how the sector will absorb a funding reduction without damaging projects and partnerships both here and overseas. Many in the higher education sector are already working hard to minimise the impact of a reduction in funding.
However, there are longer-term questions worth considering too.
Even with £14.9 billion as your starting figure, there is still a mountain to climb to get to £22 billion of public R&D investment by 2025 and to achieve the 2.4% target by 2027. It’s timely and important to ask: is the Government on track?
Whilst the overall uplift in R&D spending to £14.9 billion is positive and must be welcomed in the current fiscal environment, many in the research community would have been hoping for more in order to realise the UK’s ambitions to become a science superpower.
One of the big unknowns is still how association to Horizon Europe will be paid for in the future. The breakdown of the BEIS £14.9bn budget allocations this year reveals that £1.3m of its budget will actually go towards the UK’s contribution to European Union R&D programmes. Before Brexit, this money came out of the UK’s EU membership fee. When that amount is deducted, the rise in public R&D spending from last year’s £13.2bn is only around £400m. Funding for Horizon Europe next year could be a significant blow to the R&D community if taken from existing budgets.
It’s important to remember that public spending helps to underpin and leverage private R&D investment and innovation. NCUB commissioned research showed that achieving the 2.4 per cent target, and all the economic, social and health benefits that come with it, will require businesses to invest £17.4 billion more in R&D by 2027 than they did in 2017. This is estimated to equate to £42.7 billion of private R&D investment per year. To illustrate the scale of the ambition to increase R&D spending articulated in the R&D Roadmap, the average increase in privately funded R&D expenditure per year from 2007- 2018 was £0.9 billion.
As we noted in our blog back in April, business R&D spending depends on a range of factors, but the foundations of the system, underpinned by public funding, are among the most important. Steep rises in public research spending as we near 2027 will do much less to leverage private investment than patient, steady investment over a number of years.
Although any increase in public research funding must be welcomed, the Innovation Strategy, expected later this month, coupled with the Comprehensive Spending Review later in the year, must achieve more ambitious and long-term growth in public funding for research.