Balance and effectiveness of research and innovation spending Contents


In its 2017 ‘Industrial Strategy’, the Government committed to raising total investment in research and development to 2.4% of GDP by 2027, and to reach 3% of GDP in the longer term. This compared to an investment of 1.69% in 2017, beneath the OECD average. We welcome the Government’s target, which—if achieved—would represent a significant increase in the research intensity of the UK economy. Although private sector investment will be critical to achieving this target, it is apparent that public investment will also be required and will gain greater traction if it is undertaken earlier. The Government should consider whether a separate Government R&D spending target, either as a proportion of GDP or in real terms, would benefit the current national target.

Both UKRI and BEIS have committed to producing roadmaps to show the path to 2.4%. We recommend that these are published as soon as possible and no later than the end of 2019. Plans contained in the roadmaps should show an integrated approach between UKRI and BEIS that suitably reflects the strengths and prospects of the UK economy. These plans should be developed beyond 2027 to ensure travel towards the longer-term 3% target. In order to aid public understanding the roadmaps should update the Dowling Review schematic, including details of the main R&D funding streams available through the Industrial Strategy and UKRI.

The creation of UKRI created a significant opportunity for improving the strategy and co-ordination of research funding. We recognise the complexity of addressing the balance of funding of the dual support system, and that UKRI strategy is to approach the task cautiously and without any sudden shifts in funding. UKRI should also assess and report on other dimensions of balance such as the regional concentration of funding, the balance between research and innovation, and the balance between capital and current spending in a similar manner to its analysis of the dual support system. We believe more immediate changes to funding are appropriate to influence balance in these areas. There are many possible ‘balances’ or policy mixes, and this political choice should be transparently set out. UKRI should continually monitor the appropriateness of balances struck in the operation of the dual support system and publish the advice given to the Government, alongside analysis and commentary, at regular intervals.

We support UKRI’s commitment to evaluation, however the current focus appears too strongly to follow traditional metrics, measuring outputs such as publications and patents that should only be one element of evaluation. Research on research is an increasingly important field, and we recommend that UKRI consider a dedicated approach to supporting it, including how this research is incorporated into UKRI strategy and its assessment of the balance of R&D funding. Relatedly, UKRI should attempt to analyse the benefit gained by its creation through its enhanced ability to capture data across research councils and through cross-cutting funds. We recommend that UKRI also develops a ‘big data’ focus for evaluation. It should publish a plan for creating and investing in new data sources and analysis techniques beyond traditional measures of patents and publications.

The flat profile of quality-related (QR) funding in recent years suggests that it has not been prioritised in funding decisions, although the announcement of a £45 million increase in QR funding by Research England in July 2019 indicates that there may be a change in this focus. We recommend that focus on QR funding is maintained in future considerations, and that QR should continue to be prioritised to address previous real-terms reductions in funding. We recognise, however, that the seven-year Research Excellence Framework (REF) cycle creates barriers for smaller but potentially fast-growing institutions or areas of excellence who receive lower QR allocations. We recommend that in UKRI’s ongoing evaluation work it reviews whether additional support for these institutions should be provided, possibly through specific gearing of investment across the REF period, through additional review periods for smaller bodies, or through separate QR stream for smaller and specialist institutions.

Place is a key focus within both the Industrial Strategy and the UKRI strategic prospectus and development plan. The Government should aim to build further research excellence outside of its existing predominance in the South East of England. We strongly agree that additional regional funding should not be to the detriment of this ‘golden triangle’. However, in order to contribute to the 2.4% R&D target, regional strengths will need to be harnessed and cultivated. For UKRI, the main lever with which to stimulate regional excellence is through the Strength in Places Fund (SIPF). The SIPF is still in its infancy, but its rationale and its goals remain somewhat opaque and it is too modest to drive any significant rebalancing of investment. We recommend that UKRI and BEIS substantially increase the size of the SIPF given it appears to be the primary lever through which it is attempting to influence the regional concentration of funding and create new centres of excellence beyond the golden triangle.

The balance across research disciplines should be easier to monitor and adjust under UKRI. Historic patterns clearly should not be maintained for their own sake. We are concerned that the Strategic Priorities Fund (SPF) may not have been established in a way that effectively addresses this. We recommend that UKRI review the SPF and ensure that individual research councils are not exerting excessive influence on what is intended to be a cross-council, multi-disciplinary focus. Future consideration of the balance between disciplines must include robust evaluation of research areas within each discipline. We find the case regarding entrenched concentration of research analysed in The Biomedical Bubble compelling. UKRI analysis should widen this approach and conduct relevant cost-benefit analysis of larger research areas within different disciplines to establish whether R&D spending remains productive.

We welcome the opportunity to redress reductions in capital investment for research. In order for UKRI to take ownership of the ‘batteries not included’ issue, we recommend that decisions for investment include consideration of the co-ordination of capital and revenue funding and the long-term requirements of new and existing investments. Major capital investment project plans should explicitly state assumptions regarding future QR or research council funding that may be required to staff or run them.

The Government strategy for reaching 2.4% R&D investment should highlight the significant R&D investment that is undertaken by Government departments. The Government needs to make it as easy as possible for businesses to locate and access opportunities to benefit from this investment, and should create a central linking point or web portal to facilitate this. The creation of UKRI represents an opportunity for it to operate as the ultimate steward of this system. The Government’s roadmap should include detail on UKRI’s role in coordinating this investment. UKRI should analyse the potential impact of cross-Government funding on dimensions of balance such as regional concentration of spending.

We agree with the Connell Review that the Small Business Research Initiative (SBRI) has a “unique and valuable role to play in the innovation and procurement landscape”, supporting UK businesses in developing innovative new products while enabling public sector bodies to source innovative solutions to the challenges they face. However, the Government’s response to the Connell Review so far is limited. We recommend that the Government fully adopts the recommendations of the Connell Review, and establishes a central SBRI fund with a National Board to oversee its delivery as part of the 2020 Spending Review.

Alongside increasing the size and reach of SBRI, the Government should produce a procurement strategy and communications plan that specifically identifies innovation opportunities and promotes innovation-friendly practices. It should address barriers currently perceived by the business community, such as treatment of risk and intellectual property. The benefits of a central portal that collates procurement opportunities from across Government should be pursued.

Published: 12 September 2019