New data released on university finances between August 2020 and July 2021 shows the impact of the pandemic on sources of university income.

On the surface, the headlines are positive. Total income increased by 4% from 2019-20, reaching £44 billion. Despite the disruption introduced by the pandemic, the income level kept on track with the average income observed during the last five years.  The data shows that income increases mainly come from funding from ‘body grants’ (increased by 3% from 2019-20) and ‘tuition fees and education contracts’ (up by 3% from 2019-20).*

However, these headlines do mask variation across other income streams. Income from Research grants and contracts fell (-2% from 2019-20, and -8.4% from 2018-19). Other sources of income, including investment income, donations and endowments, have seen average reductions of about 16% from 2019-20.

There are two particularly interesting observations to make on the data on income generated from Knowledge Exchange (KE) specifically. First, most income sources remained aligned with the broader trends observed over the last five years despite the turbulence. In particular, KE income increased in areas that are most subject to the availability of public funds, such as collaborative research involving public funding, regeneration and development for both UK and EU programs. Second, areas that are dependent on other sources of funding and demand, such as industry income and charitable income, have seen declines against the average, recording compound annual growth rates of -6.2% and -3.8% respectively, compared to pre-pandemic average annual growth rates of 2.7% in industry income and 1.1% in charitable income. See trends in figure 1.

Figure 1

Exploring other income streams from KE between universities and business shows two trends. First, a change in the composition of the income portfolio as consultancy services with SMEs have gained more weight during the pandemic, whilst contract research has gradually decreased. In particular, income from consultancy services with SMEs saw a substantial increase from £68 million to £75 million between 2019-20 and 2020-21 (up by 11%). This may reflect capacity constraints across the system as elements such as consultancy were in higher demand. Consultancy is also carried out across the academic spectrum (teaching + research). On the other hand, contract research, saw a significant reduction down by 20% from 2019-20 for SMEs engagement and down by 10% for the case of large business (see figure 2).

Figure 2

There are a range of possible explanations for this trend, which we will be exploring in the months to come for our 2022 State of the Relationship report. The change in the income portfolio from interactions could reflect changes in demand (market opportunities). It could also reflect changes in the strategy in KE income accumulations and universities KE operations (supply). The pandemic likely challenged both sides of the equation. On the demand side, an NCUB-UCI survey last year showed that 64% of R&D active businesses that engaged with universities before the pandemic did not plan to increase R&D and innovation activities in the months from September 2020 to August 2021 (see the report here). The reports also showed that about 8 in 10 businesses reported delays or stoppages to research activities during the pandemic.

On the supply side, last week NCUB and UCI published a report on the ongoing effects of the pandemic on universities (here). The report shed light on how universities navigated the crisis and showed that the response was heterogenous across the university landscape with some universities more severely affected than others. On the operational side, universities saw the most challenges coming from recruitment and retention of qualified staff, the ability to access necessary facilities and the ability to cover the full economic costs of projects and activities. This demonstrates the challenges faced by universities’ Knowledge Exchange departments.

The report also shows that universities are proactively considering their KE strategies and how to respond to the ongoing changes and turbulence that the UK faces. It is imperative that the policy environment created by a new Government supports effective knowledge exchange that helps to grow businesses and our economy.

* All changes registered once accounting for price differences between the period of analysis.