Chancellor must recognise how research, teaching and knowledge exchange affect one another, says Shaun Holmes. This article was first published on Research Professional here.
Understanding the new government’s thinking on research and innovation, higher education and skills has sometimes felt like reading tea leaves. There have been positive signs and less-positive ones, but they are difficult to draw together into a coherent picture.
This is always the case with a new government, as it develops its policies in the context of real-world delivery. But this time around, for many in and around the university sector, the stakes feel higher than usual.
The sustainability and extent of current funding models is a familiar topic, but the sense of urgency around it has increased recently. Added to this, government lines on the UK’s financial situation and the difficult budgetary decisions it faces have raised anxiety levels in the sector.
Chancellor Rachel Reeves’ autumn budget, set for 30 October, will be the first real indicator of Labour’s approach and priorities, and is awaited with bated breath.
Four priorities
In its representation to the budget, the National Centre for Universities and Business recommendations cluster around four themes. All are important for future success and the ability of educators and research performers to continue to produce quality outputs that benefit the UK economy.
They are: public and private funding for R&D; a strategy for foreign direct investment in R&D; the financial sustainability of a diverse range of research-performing organisations; and developing a framework for the growth and skills levy.
The Universities UK Blueprint published early this month rightly argued that universities are well placed to respond to the government’s growth-led missions. Research and innovation is an important part of that; economic models show that long-term growth depends on new R&D.
An NCUB analysis released this August shows that each £1 of public funding potentially generates between £3.09 and £4.02 in private R&D investment—an even greater return than previously thought.
However, the UK has historically underinvested public funds into R&D compared with key competitor nations. And, while private R&D investment is rising globally, it is in decline here.
That’s why we want the government to commit to real-terms growth in public research spending and an ambitious target of 5 per cent growth in private R&D investment over the next three years. We recommend supporting this goal through a strategic approach to driving up foreign direct investment in UK R&D.
Businesses tell us that universities are one of the UK’s greatest strategic assets, helping to encourage and support private investment. Sustaining this depends on a diverse range of institutions. We have therefore made a number of recommendations for ensuring their financial sustainability.
Unintended consequences
A holistic view is important, taking into account cross-subsidising within institutions, such as between tuition and research income, and the knock-on effects of policy changes on other important issues for the economy, such as skills.
There’s a risk that smaller but important cross-cutting functions will be overlooked amid the high-stakes discussion of potential changes to the university funding system such as raising tuition fees.
One such function is knowledge exchange between universities and business. Many recent NCUB outputs attest to its vital role in unlocking growth, both nationally and regionally.
Knowledge exchange does not just happen—it needs strategically planned, dedicated support. Universities and businesses need to invest in the structures and mechanisms that enable and encourage it. And these structures are at risk.
Historically, universities used the EU’s European Regional Development Fund to engage with local small and medium-sized companies, build joined-up R&D processes and infrastructure, and support technology transfer and entrepreneurship. NCUB estimates that between 2014-2022, 124 institutions benefited from £812 million of ERDF income that, post-Brexit, is no longer available.
Financial pressures—rising costs, declining tuition fee values, growing research grant deficits, and increased global competition for international students—could easily weaken universities’ commitment to knowledge exchange. Some universities are already unable to sustain previous levels of research activity and industry collaboration.
Ultimately there is a risk that, if not considered as a whole, the system will fall into multiple vicious circles. Research quality, the reputation of the UK higher education sector, recruitment of international students, institutional cuts, business connections, and business investment all interact with and exacerbate each other. This needs to be better and more widely understood.
Senior Policy Manager
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