Research and Development funding policy

Research and development funding

Research and development (R&D) funding is defined as expenditure on research, mostly in science and technology, that results in new products, processes and understanding. It includes research undertaken by, and funding from, public and private sectors.

The most recent data from the Office for National Statistics (ONS) shows that, in 2020, total public and private expenditure on R&D in the UK was £61.8 billion. This figure follows changes made in 2022 to the methods used by the ONS to produce estimates of R&D spending, which has led to a substantial increase in the total.

Total public spending on R&D was £17.1 billion in 2020. Much of the spending on R&D comes from what was the Department for Business, Energy and Industrial Strategy (BEIS) and is allocated to UK Research and Innovation (UKRI), established in 2018.

The governance of, and funding for, R&D has undergone significant changes over the past few years, most notably through the integration of the seven research councils, Innovate UK, and what is now Research England, under the umbrella of UKRI. In addition, the government established a new Ministerial department in February 2023 – the Department for Science, Innovation & Technology (DSIT) – marking the first time that science has had a dedicated secretary of state since 1994. Previously, science and R&D were the responsibility of the Department for Business, Energy and Industrial Strategy (BEIS)

This briefing paper covers the current R&D funding landscape, with a particular focus on public funding delivered through what was BEIS and is now DSIT, as well as ongoing policy changes and those planned for the near future.

The 2.4% target

The Government’s 2017 Industrial Strategy committed to spending 2.4% of GDP on R&D by 2027. In Budget 2020, the Chancellor announced that public R&D expenditure would rise from its 2017 level of roughly £9 billion to £22 billion by 2024/25, taking public spending on R&D to 0.8% of GDP. In the 2021 Autumn Budget and Spending Review the date to reach the £22 billion target was pushed back to 2026/27. However, recent changes to the methodology used by the ONS to calculate Business Enterprise Research and Development (BERD) statistics has led BEIS and others to suggest that total spending on R&D in the UK was between 2.9% and 3.0% of GDP for 2020.

R&D Strategies

To support its 2.4% ambitions, the Government published an R&D roadmap in July 2020, detailing how it will enhance the UK’s science, research and innovation capabilities. With the help of advisory boards, the Government planned to develop several detailed strategies, including an R&D People and Culture Strategy (published in July 2021) and a UK R&D Place Strategy. In March 2021, the Government released a new policy paper, Build Back Better: our plan for growth, replacing the 2017 Industrial Strategy and setting out the Government’s plan to support economic growth through “significant investment in infrastructure, skills and innovation”.

A new Innovation Strategy has also been published, while the Levelling Up White Paper, published in February 2022, set a target for BEIS to invest “at least 55% of its total domestic R&D funding outside the Greater South East by 2024-25”. Most recently, in March 2023, the Government published its Science and Technology Framework which it described as a “strategic vision” setting out 10 key actions to achieve its “Science and Technology Superpower agenda” by 2030.  

As well as publishing new strategies, the Government has established new bodies, in the centre of Government, to take its science, technology and research agendas forward; the Office for Science and Technology Strategy and a National Science and Technology Council.

Though overall public expenditure in R&D has risen, the Chancellor announced significant cuts to the Official Development Assistance (ODA) budget in the Spending Review 2020, which has resulted in UKRI’s ODA budget being almost halved to £125m. As a result, UKRI scaled-back ODA-funded projects and many stakeholders across academia and industry have expressed concerns over the cuts.

As part of the 2021 Autumn Budget and Spending Review, the Chancellor subsequently announced plans to increase ODA spend on R&D from £600 million in 2021/22 to £1 billion in 2024/25. This represents part of the Government’s wider commitment to return to spending 0.7% of GNI on ODA. At the 2022 Autumn statement, the Government confirmed that spending is not projected to be restored to 0.7% until at least after 2027/28.

A new funding body: Advanced Research and Invention Agency (ARIA)

In the March 2020 Budget, the Chancellor announced that the UK Government would invest “at least £800 million” in a new research funding agency specifically aimed at providing long-term support for “high-risk, high-reward” “blue-skies research” (whose immediate applications are not always apparent). On 2 March 2021 the UK Government published a Bill to create what is now called the Advanced Research and Invention Agency (ARIA). The Bill became an Act in February 2022. A policy statement describing the rationale and intended purpose of ARIA was published by BEIS on the 19 March 2021. Ilan Gur and Matt Clifford were appointed as the founding CEO and Chair, respectively, in July 2022 and the Agency was formally launched in late January 2023.

International outlook

The UK has agreed to participate in the Horizon Europe – the EU’s flagship funding programme for research and innovation – as an ‘associated country’ and will pay a yearly fee for this purpose. On 1 April 2021, the Government stated that it would be making £250 million of funding available that would contribute to the cost of associating with the programme. Further funding details were provided in the BEIS R&D budget allocations for 2021/22 and in the Autumn Budget and Spending Review 2021, where the Government committed to “fund full association to Horizon Europe”.  At the time of writing, the UK’s association to Horizon Europe has yet to be finalised; the delays were linked to broader disagreements about the Northern Ireland Protocol, though progress may follow from the formal adoption of the Windsor Framework.

In light of the delays, UKRI established a ‘Horizon Europe guaranteed funding scheme’. It provides a “financial safety net” to successful UK Horizon Europe applicants who are “unable to sign grant agreements with the EU prior to formalisation of the UK’s association to the programme”. The government has also indicated that it is ready to establish an alternative global R&D programme if the UK is ultimately unable to associate to Horizon Europe.

Following the UK’s departure from the EU, a new Global Talent visa has been introduced as part of the Government’s plans to “attract the world’s top scientists, researchers and mathematicians” to the UK.

Science and technology are now also at the core of the Government’s long-term approach to defence and foreign policy. In its Integrated Review of Security, Defence, Development and Foreign Policy, the Government set a goal of incorporating “S&T as an integral element of our national security and international policy” and for the UK to become a “science and tech superpower by 2030”.