
Table of contents
DOI: https://doi.org/10.58248/HS59
Overview
The UK remains a global power in research, education, science and technological development. In 2023 the Royal Society noted that the UK was home to five out of the seven European universities in the Times ranking of global top 30 universities.[1]
A horizon scanning consultation of experts identified potential priorities for the government’s science and technology policies, including in research and development (R&D). They noted that the right policies could boost innovation and encourage the growth and scale-up of companies.
R&D drives the development of new technologies, industries, products, processes, understanding and UK global competitiveness (CBP7237).[2] In 2020, it was estimated that the UK spent 2.9% to 3% of its GDP on R&D (SN04223). This was fourth highest as a share of GDP after the USA (3.47%), Japan (3.27%) and Germany (3.13%) (SN04223).
In February 2023 the government established the Department for Science, Innovation and Technology, marking the first time science has had a dedicated secretary of state since 1994 (CBP7237). The government published a Science and Technology framework in 2023 to make “the UK a science and technology superpower by 2030”.[3]
The 2024 Kings Speech background briefing notes mention a Digital Information and Smart Data Bill that will “help scientists and researchers make more life enhancing discoveries by improving our data laws”.[4]
Interlinked factors that can impact innovation include funding, collaboration, and national strategies including about data, skills and supply chains.
Challenges and opportunities
Funding
Various experts have highlighted the pivotal role of universities in supporting regional economies and driving cutting-edge research and innovation, such as making new scientific and medical discoveries or creating new products and jobs for the future.[5],[6],[7]
However, higher education institutions face mounting financial pressures.[8] The Public Accounts Committee in 2022 and former government ministers in 2024 have questioned the long-term sustainability of the higher education funding models.[9],[10] The Office for Students reported that 40% of UK universities will run at a budgetary deficit in 2024.[11]
Some academics and advocacy organisations such as Universities UK suggested reforms for university finances, including:
- a single government department for higher education to facilitate better long-term financial planning and prevent counter-productive policymaking from different departments[12]
- reform of the student loan repayment scheme, such as those proposed by London Economics to be fairer across incomes and demographics[13],[14]
- increase funding for teaching through government grants and index-linking the cap on university fees[15]
- removing disincentives for international students to study in the UK to provide a more reliant critical funding stream for universities12,[16]
New companies can face obstacles when ‘spinning-out’ from universities and scaling up from start-ups to small and medium enterprises (SMEs). In oral evidence given to a 2024 House of Commons Science, Innovation and Technology Committee about commercialising research, executives of UK start-ups highlighted difficulties in attracting early phase funding to realise proofs of concept and obtaining further investments.[17] Executives noted that awareness of guidance and funding from organisations such as Innovate UK could be improved, and that the imposition of five-year spending reviews causes uncertainty and makes long-term commercialisation challenging.16
To address these challenges, experts recommended expanding the UK Catapult Network, which are centres supporting innovation through providing infrastructure, links between academia and industry and facilitating funding. The committee heard that SMEs that had worked with Catapults grew 50% faster than those that had not, with an average five-times return on investment. Executives also noted that obtaining public funding often led to private investment.16
Collaboration
In 2023, the Royal Society suggested that international collaboration is key to driving global influence of the UK’s research and innovation through knowledge transfer, pooling of resources, and access to large facilities such as CERN.1 It noted the success of global collaborations such as the Human Genome Project[18], which accelerated advances in medical treatments for cancer and other genetic conditions.1
In 2024, Wellcome suggested the UK should aim to lead the G7 in R&D intensity, which combines public and private investment as a percentage of GDP.[19] The UK is fourth in the G7 at 3%, with the United States leading at around 3.5%.[20]
National strategies
Experts have suggested that national strategies centred around specific technologies may help to unlock growth in the UK economy.[21],[22] The Royal Society and Wellcome have noted that without coherent national R&D strategies, a lack of regulation and infrastructure may create uncertainty for businesses on how to harness emerging technologies and safeguard against harms.1,18 Some academics have advocated for the development of R&D strategy using advanced data analytics strategies.[23],[24]
The Tony Blair Institute for Global Change suggested that an industrial strategy focused on AI could have benefits across the economy, public health and education, but reforms are needed to support this, such as:5
- investing in IT systems, specialised knowledge transfer organisations and training to facilitate the flow of data, talent and capital
- creating new regulatory frameworks for AI and the safe commercialisation of data
- establishing innovation labs and research institutes focused on AI technologies
The Alan Turing Institute has said that to support the UK’s strategic goal of securing access to critical digital components, technology strategies, reviews and funding should be aligned under a coherent strategy.[25]
Skills
Experts have highlighted that skills shortages are a significant obstacle to the UK’s capacity to innovate. For example, a 2020 Ipsos Mori survey revealed 62% of UK organisations using AI technology could not meet their goals due to a shortage of technical skills (PN 697).
Some researchers have noted how a unified workforce training strategy across university degrees and vocational courses could boost the efficiency of public education spending.12,[26] Prioritising links between universities and regional economic strengths could support local economies, such as advanced manufacturing in South Yorkshire.12
The UK population is ageing with fewer young people set to enter the workforce.[27] Some reports highlight the importance of recruiting, retaining and retraining older workers to address skills shortages and help the workforce harness innovations from technologies and automation.27
Key uncertainties/unknowns
UK universities have become increasingly reliant on tuition fees from international students, which make up 20% of total university funding and over 50% at some institutions.[28] International student numbers are affected by external domestic and international factors, leading to uncertainty in higher education funding streams.[29]
Experts have noted how vulnerabilities in supply chains for essential technologies and critical imports present a risk to domestic R&D. For example, semiconductors drive technological innovations expected to be key to the prosperity, security and global competitiveness of the UK, such as artificial intelligence and electric vehicles (PN 721). However, the semiconductor supply chain is highly vulnerable to disruptions, such as from geopolitical events such as conflicts or natural disasters, that could cause delays in obtaining products, price rises, disruptions to essential infrastructure and national security risks (PN 721).
Some strategic technologies, such as AI, require computational resources consuming large quantities of energy, water and rare earth elements (PB 57).[30] Resource constraints may affect how people are able to use and harness these technologies for innovation.
Developments in emerging technology regulations, such as AI, are ongoing. Therefore, the impact of regulations on how technologies could be used by businesses to aid with innovations is unknown.
Key questions for Parliament
- How can spin-outs from universities be encouraged and supported?
- How can the UK better support the scale-up of companies?
- How could public-private partnerships be used to boost early-phase investment in start-ups?
- What interventions may be needed to address the financial difficulties faced by higher education institutions?
- How could international collaboration in science and technology be supported?
- Is investment in R&D infrastructure sufficient to support the industries of the future?
- Could national industrial strategies focusing on specific technologies help to boost innovation and productivity?
- How can digital skills shortages in the workforce be addressed?
- What interventions are needed to ensure the security of the UK’s supply chains for critical technologies?
- What is the impact of Government policies on international student finances faced by universities, and how can the long-term certainty of university funding be reinforced?
- How can national strategies around AI be made compatible with AI regulation, energy security, supply chain resilience and resource management?
- Are there existing models to support open innovation, and should these be pursued by the UK? What regulatory frameworks need to be in place?
Related documents
- Research and Development funding policy – House of Commons Library
- Research and Development spending – House of Commons Library
- Financial sustainability of the higher education sector in England inquiry report – House of Commons Public Accounts Committee
- Commercialising Research Oral evidence – House of Commons Science, Innovation and Technology Committee
- Supply of semiconductor chips – POSTnote
- Data science skills in the UK workforce – POSTnote
References
[1] The Royal Society (2023). Why the UK needs a comprehensive international science strategy.
[2] techUK (2023). UK Research and Development: Addressing the modern realities of innovation.
[3] UK Government (2024). UK Science and Technology Framework.
[4] UK Government (2024). King’s Speech 2024: background briefing notes.
[5] Campaign for Science and Engineering (2024) The value of university led R&D to the UK research system.
[6] Universities UK (2024). Why does university research matter?
[7] Taylor, R. (2024). Higher education: Contribution to the economy and levelling up. House of Lords Library.
[8] PwC (2024). UK Higher Education Financial Sustainability Report.
[9] House of Commons Public Accounts Committee (2022). Financial sustainability of the higher education sector in England.
[10] Mason, R., et al. (2024). Ex-ministers warn UK universities will go bust without higher fees or funding. The Guardian.
[11] Office for Students (2024). Financial sustainability of higher education providers in England: 2024.
[12] Tickell, A., et al. (2023). Three university leaders reveal their hopes for the next election. Higher Education Policy Institute.
[13] Jeffery, C. (2024). UK University funding in crisis. University of York.
[14] London Economics (2023). Alternative options for higher education fees and funding for England.
[15] Universities UK (online). What’s the solution?
[16] Graham, A.M. (2023). Recommendations for International Student Policy. Higher Education Policy Institute.
[17] House of Commons Science, Innovation and Technology Committee (2024). Legacy – Parliament 2019–24.
[18] National Human Genome Research Institute (online). The Human Genome Project.
[19] Wellcome (2024). A Wellcome manifesto for science: How the next UK government can support UK research.
[20] OECD (2024). Main Science and Technology Indicators.
[21] techUK (2021). New Innovation Strategy starts a conversation on how to make the UK a global hub for innovation by 2035.
[22] techUK (2023). The Government’s Science and Technology Framework is a welcome step and now must to be backed by action.
[23] Technopolis Group (online). Big data for evidence-informed policy: from experiments to implementation.
[24] Suominen, A., et al. (2021). Research themes in big data analytics for policymaking: Insights from a mixed‐methods systematic literature review. Policy & Internet, Volume 13, 4, pages 464-484.
[25] Janjeva, A., et al. (2024). Semiconductor Supply Chains, AI and Economic Statecraft, The Alan Turing Institute and The Centre for Emerging Technology and Security.
[26] Russell Group (2024). University groups call for cross-government health education taskforce.
[27] The Prince’s Responsible Business Network (2022). Missing Link – An ageing workforce in the digital era: older workers, technology and skills.
[28] García, C.A., et al. (2023). Fifth of UK universities’ income comes from overseas students, figures show. The Guardian.
[29] Havergal, C. (2024). Dependant restrictions push UK student visa numbers down. Times Higher Education.
[30] Kirmer, S. (2024). Environmental Implications of the AI Boom. Medium.
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