University-business interaction in 2025: An initial view

Interactions between universities and business are foundational to the UK’s innovation ecosystem by enabling cutting edge research and fostering an environment of progress.  

New data from the Higher Education – Business and Community Interaction (HE-BCI) survey provides invaluable insight into the current state of university-business interaction. 

The income generated by interactions rose by 0.2% in inflation-adjusted terms, as seen in Figure 1. Although this rise is small, it is impressive given the external financial pressures impacting universities. The impacts of these pressures were seen last year, when interaction income declined by 6%; therefore, an increase – even a small one – is welcome.

Figure 1 

Mixed signals by business type 

We can see in Figure 2 that this increase in interaction income was driven by collaborations between universities and large businesses, which rose by 0.4%. Income from collaborations with small- and medium-size enterprises (SMEs) fell by 0.5%. At the same time, the number of collaborations grew meaningfully among both large businesses (1.3%) and SMEs (8.7%). As a result, the average value per interaction fell slightly among large businesses (0.9%) and precipitously for SMEs (8.5%).  

Figure 2 

All this paints a mixed portrait. The small bump in large business interaction income is a positive reversal from last year, when it fell by 3%. However, the stagnation of SME interaction income follows two years of meaningful growth. This downturn fits with recent evidence from NCUB that SMEs are investing significantly less in research and development (R&D) than they have in the past. Between 2022 and 2023, SMEs spent 6.5% less on R&D, while large business R&D investment fell by less than 1%.  

That the number of SME interactions grew between 2022/23 and 2023/24 suggests that more universities are seeking out collaboration and partnership with private enterprise, especially small businesses. However, due to limited R&D investment by SMEs, these collaborations are smaller and cheaper. 

We can unpack these figures one level further and gain more clarity on what drove these trends. Figure 3 below shows the income generated by each type of collaboration with both SMEs and large businesses. All types of collaboration declined, except for contract research with large businesses (which rose by 3%) and facilities and equipment (FE) provision with SMEs (13%).  

Both of these categories constitute the most prominent type of collaboration for large businesses (contract) and SMEs (facilities and equipment). This provides further insight into SME R&D investment behaviour. With less ability and/or desire to invest in R&D, SMEs may be focusing solely on their most important types of interaction, FE. So too with large businesses. Although large business interaction income increased, it was slight (0.4%). What’s more, we know from other datasets that their R&D investment declined by 0.9%. Amidst this slowing investment in R&D among large businesses, they may also be choosing to lean more on their most prominent type of interaction, contract research.  

Figure 3 

The changes in collaboration among large businesses and SMEs also varied drastically by geography, as shown in Figure 4. For instance, in the East of England between 2022/23 and 2023/24, the income generated by collaboration with SMEs grew by over 35%, while that generated by large business collaboration fell by almost 15%. The West Midlands saw the opposite: large business collaboration income rose by 25%, while SME collaboration income fell by 22%. In some places – notably the northern English regions of North West, North East, and Yorkshire and the Humber – both SME and large business income declined.  

Figure 4 

A similarly nuanced picture of commercialisation 

For instance, Figure 5 shows that income generated by IP and licensing fell across SMEs and large businesses. In the past two years, in fact, IP income declined by over 13%. However, this follows a substantial increase in IP income in the years before 2021/22. This year’s IP income is still above the last 9 year average, though the further decline suggests a waning of previous gains. 

Figure 5 

After falling substantially for two years, the number of patents granted rose by almost 20%. On the other hand, for the fourth year in a row, the number of patent applications fell, totalling a 30% decline since 2019/20. Also, the cumulative patent portfolio, shown in Figure 7, declined for the first time in the last nine years (data is only available for nine years). This means that more patents are expiring than are being approved, a clear consequence of the continually declining number of patent applications. Taken together, this indicates a dour state of innovation output productivity – for which patents can serve as a useful proxy. 

Figure 6 

Figure 7 

On the other hand, the state of spinouts is largely positive. Figure 8 displays the percent change in a variety of spinout metrics, relative to 2014-15. The number of active spinouts increased in 2023/24; so too did spinout employment, external investment, turnover, and survival (spinouts still active after three years). The only metric which has seen a decline is the number of newly registered spinouts. In 2020/21 there were 177 new spinout registrations. In 2023/24, there were only 128.  

While all the other metrics include pre-existing spinouts in their figures, new registrations does not. This indicates that the downturns discussed here – declining SME collaboration and R&D investment, declining IP income, and diminishing patent activity – may be having a negative impact on the number of spinouts being formed via university-business collaboration. 

Figure 8 

Collaboration in a wider context 

Tinting all these findings – positive and negative – is the current state of financial tumult facing UK universities. Positive findings – like the minor rise in large business collaboration income, the doubling down on SME FE collaboration, and the solid state of spinouts – reflect an impressive resiliency among universities, as they continue to devote resources to innovation and collaboration, despite current challenges.  

However, when we consider the negative findings detailed here, it’s hard to ignore the dire financial straits, which undoubtedly are forcing universities to make hard choices. Collaboration – though critical to the UK’s economic growth and standing as a global innovation superpower – is not on the front lines of university activity. Thus, in the face of fiscal headwinds, university-business collaboration is likely to see reduced emphasis and investment.  

The government must work closely with universities and businesses to reverse this trend. Collaboration is good not just for universities – for whom it provides willing and eager private sector sponsors. Nor is it just good for businesses – for whom it provides world-leading research staff, knowledge exchange, facilities, and other informal resources. It is good for the UK economy, as it unlocks innovation and encourages technological, scientific, and economic progress. The UK must provide a level of support for collaboration which matches its importance. 

NCUB will continue to analyse these trends in the coming months as it develops its Collaboration Progress Monitor and State of the Relationship report. The SoR provides a detailed, data-driven examination of changes in university-business collaboration, as well as case studies to better understand the causes and effects of these trends, according to university and business stakeholders.