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Research and development funding landscape

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 2019, total public and private expenditure on R&D in the UK was £38.5 billion – the highest level on record. This represents 1.74% of GDP in 2019, which is lower than in comparable countries like France (2.2%), the US (3.1%) and Germany (3.2%).

Total public spending on R&D, including the research councils and devolved higher education councils, was £10.45 billion in 2019. The majority of spending on R&D comes from the Department of Business, Energy and Industrial Strategy (BEIS). Most of this 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. This briefing paper covers the current R&D funding landscape, with a particular focus on public funding delivered through BEIS, 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. Reaching the 2.4% target will require a significant increase in both public and private investment in R&D. In the March 2020 Budget, the Chancellor announced that public R&D expenditure would rise from its 2017 level of roughly £9 billion to £22 billion by 2024/25. In the 2021 Autumn Budget and Spending Review, however, the date to reach the £22 billion target was pushed back to 2026/27.

To support its 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 plans 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, which replaces the 2017 Industrial Strategy and sets 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.

In addition to publishing new strategies, the Government has also 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 is scaling-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.

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 has since made its way through the House of Commons and has reached its Committee Stage in the House of Lords. A policy statement describing the rationale and intended purpose of ARIA was published by BEIS on the 19 March 2021.

International outlook

The UK has agreed to participate in the Horizon Europe programme – the EU’s flagship funding programme for research and innovation – as an ‘associated country’ and will pay a yearly fee for this purpose. It was expected that the March 2021 Budget would set out how the UK would pay for its financial contribution to the programme. This information, however, was subsequently announced by the Government on 1 April 2021 when 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 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, with some in the media speculating that the delay is linked to broader disagreements about the Northern Ireland Protocol.

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.

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