University-business collaboration has long been a cornerstone of the UK’s innovation ecosystem.

However, recent data from the Higher Education – Business and Community Interaction (HE-BCI) Survey reveals an interesting contrast. While interaction levels have dipped, the value per interaction has grown, primarily due to a lesser decline in income from these interactions. It’s important to highlight that while HE-BCI mainly tracks formal interactions like contract research, consultancy services, and the utilisation of facilities and equipment, the spectrum of collaboration extends further.

The initial headline feels alarming. Following years of steady growth, only briefly and partially interrupted by the Covid-19 pandemic, the number of interactions between universities and businesses dropped by 5% in 2022/23 from 80,881 interactions in 2021/22 to 76,619 between August 2022 and the end of July 2023 (See Figure 1 below). This decline was accompanied by a slight decrease in real income (0.9%).

Fewer Interactions, but of higher value

However, the detail suggests a more nuanced picture. The decrease is primarily due to a drop in engagement with both large businesses (8.8%) and SMEs (3.5%), putting the current level of interaction 16% below pre-pandemic times. While income from large businesses dropped by 2.8%, particularly from facilities and equipment use (11%) and consultancy services (7%), income from SME interactions actually increased by 5.6%, driven by similar services (see Figures 2-5 below). This is an important trend, suggesting that universities have continued to invest substantially in SME interaction despite a range of headwinds, including the loss of European Regional Development Funding (ERFD).

This juxtaposition, alongside a significant rise in the average value per interaction to £14,154 (the highest in 9 years, up from £9,416 in 2014/15), suggests a potential shift towards higher-value collaborations. Universities might be prioritising deeper, more strategic partnerships with businesses. The rise in SME interaction could also indicate a demand for more specialised services, commanding a higher premium.

 

Regional disparities and brighter income picture

The impact isn’t uniform across the UK. Universities in the South East, South West, London, North East, and Wales saw increased numbers of interactions, while others experienced a decline.

However, when we look at income, a more positive picture emerges. Most English regions (except the West Midlands, Yorkshire and the Humber, and the South East with declines exceeding 10%) and all UK nations saw growth, highlighting regional disparities, but also suggesting a potential for resilience and adaptation in many places (See Figures 6-7).

 

Commercialisation activity: A mixed outcome

HEBCIS offers some insights into commercialisation trends too. Total intellectual property income and licences issued decreased (down by 22% and 13%, respectively), particularly with large businesses (see Figure 8). However, these declines need context: they follow recent substantial increases in intellectual property income and licensing.

While the total patent portfolio continues to grow (5%), a reduction in new patents (8.5%) signals a need for continued innovation efforts. (See Figure 9).


Of particular interest is the trajectory of spinout companies, which has shown a consistent increase in survival rates over three years (see Figure 10). This suggests resilience and potential for sustained growth within the innovation ecosystem.


 

 

Causes and looking ahead

Several factors likely contributed to the decline in the number of interactions: lingering pandemic effects, economic headwinds (inflation, skill shortages, supply chain disruptions), funding stream losses (e.g. ERDF), and current financial pressures on universities hinder collaboration efforts.

Despite the decline in interactions, the data underscores the importance of university-business collaboration for the UK’s economic growth. Close monitoring of these trends and addressing the financial challenges universities face are critical steps. Stakeholders, including policymakers and industry leaders, need to prioritise initiatives that support and strengthen university-business collaboration.