The future of research and development funding

Summary

Broadly, research and development funding covers expenditure on research, predominantly in science and technology, that results in new products, processes and understanding. It includes research undertaken in, and funded by, the public and private sectors (for example universities and businesses).

In the UK in 2018, total R&D (gross expenditure on research and development) was £37.1 billion, the equivalent of 1.7% of GDP. This was £558 per head.

Government funding for R&D

Public funding for R&D (including government, research councils and the devolved higher education funding councils) was £9.6 billion in 2018, 26% of total R&D funding.

The majority of public expenditure on R&D comes from the Department for Business, Energy and Industrial Strategy (BEIS), which in turn allocates funding to UK Research and Innovation (UKRI). UKRI then allocates funding to the research councils, Research England, and Innovate UK, through grants.

Government commitments on R&D

The UK Government has made several recent commitments to UK R&D funding:

• The Government’s 2017 Industrial Strategy committed the UK to spending 2.4% of GDP on R&D by 2027 and 3% in the ‘longer-term’ (including both public and private sector spending).
• The March 2020 budget set out plans to increase public investment in R&D to £22 billion per year by 2024-25.
• In the November 2020 Spending Review (SR20), the Treasury announced what it called “significant increases in research and development (R&D)”, with “almost £15 billion in 2021‑22 including funding for clinical research to support delivery of new drugs, treatments and vaccines.”

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

The 2020 Budget proposed spending, “at least £800 million” on the establishment of a new “blue skies” research agency intended to fund high-risk, high reward research. On 2 March 2021 the UK Government published a Bill, (the Advanced Research and Invention Agency Bill 2019-21), to create the Advanced Research and Invention Agency (ARIA), an independent UK scientific research agency that will fund “cutting-edge science and technology”. Its announcement has been broadly welcomed by the House of Commons Science and Technology Committee and other research stakeholders.

Horizon Europe

Horizon Europe is the EU’s next funding programme (Framework Programme 9) for research and innovation.

The UK will participate in Horizon Europe as part of the Trade and Co-operation Agreement (TCA) with the EU. The UK Government has said that it will pay a “fair and appropriate share into the budget of this programme to enable the UK science and research sector to further their partnerships with our European neighbours.” An announcement on the funding is expected “in due course”.

UKRI Official Development Assistance cuts

At SR20 the Chancellor announced a reduction in the overseas aid budget as a result of financial pressures caused by the Covid-19 pandemic. This announcement has, in turn, had implications for UKRI’s planned Official Development Assistance (ODA) expenditure. On 11 March 2021, UKRI stated that the BEIS ODA allocation to UKRI “has reduced significantly in planned ODA expenditure for FY21/22, leading to a £125m budget and a £120m gap between allocations and commitments.”