Research, innovation, and the next Welsh government

When the current Welsh government set out its views on the issues facing tertiary education in Wales in its “Five Challenges” briefing paper, it provided a reasonably clear steer on where it thought the sector’s attention – and that of the next administration – should be with respect to research:

With EU structural funding having come to an end, Welsh universities must pivot towards other sources of competitively awarded funding.

The focus was put squarely on the ability of Wales’ universities to obtain their fair share of UK-wide opportunities:

Wales still receives a disproportionately low amount of UKRI competitive grants, at 3 per cent compared to 4 per cent of research active staff and 5 per cent of the population. The proportions are even lower for some of the largest UKRI councils, which often require a greater scale of bid to be competitive, such as Engineering and Physical Sciences, and Biotechnology and Biological Sciences.

This whole framing neatly ignores the side of the equation which is directly within the government’s gift, via Medr research funding. Universities Wales’ response to the call for evidence homed in on this:

Pro-rata to population size, in 2024–25, the funding allocations made by HEFCW (now Medr) for research and innovation in Wales were £57m lower than those made by Research England for England and £86m lower than in Scotland. Between 2021-22 and 2024-25, Wales’ quality-related research (QR) funding declined by 6.2 per cent, while England’s allocation increased by 13.7 per cent. Research Wales Innovation Fund (RWIF) allocations also fell by 6 per cent.

Seen in this light, it’s easy enough to argue that universities’ performance in competitively awarded funding opportunities follows pretty directly from the underpinning support on offer from the Welsh government – which is exactly the case that Universities Wales made:

Where that underpinning is weak, the ability to win competitive grants and attract co-investment is structurally constrained.

It’s not a new bone of contention – in fact, it is a debate that has recurred for many years – but as the Five Challenges report went on to gesture towards, it is one that assumes a renewed importance in light of the UK industrial strategy and how UKRI is changing up its operating principles in response. And as such, it’s a question the next Welsh government is going to have to grapple with.

Priority (Westminster) missions

One could see the Five Challenges’ characterisation of the problem as very much an outgoing government’s assessment of the situation – that is, a means to demonstrate that the issues at hand are not a result of Welsh Labour underfunding. But it is undeniable that UKRI’s bucket-inspired approach to funding allocations are going to begin to loom large soon enough. As the paper concludes:

UKRI funding will be increasingly directed to support priority missions, and there is an expectation that universities develop specialisms to gain this funding. The aim will be to reduce duplication and improve genuine specialisation to build critical mass and world-leading research and innovation excellence.

Or more bluntly: “this suggests that more specialisation will be needed in Welsh institutions.”

While the exact operation of UKRI’s bucket two remains to be seen, December’s allocations confirm that this is where the portfolio growth is: £8.3bn over four years, with the lion’s share in digital technologies, life sciences, energy, and advanced manufacturing.

And the industrial strategy and its accompanying sector plans are pretty clear about where it sees Wales playing a role in its eight priority sectors.

Seen in this light, the appropriate sector response would seem to be ready-made – specialisation in the areas and geographies announced by the industrial strategy, in single-minded pursuit of the main source of new research investment that UK governments are prepared to offer.

Universities Wales’ response to the consultation was clearly mindful of higher education institutions being railroaded down this path, seeking to re-route the argument back to the question of Welsh government block funding: “without sufficient foundational research capacity, universities struggle to align with and compete within UK-wide missions.”

But it’s worth digging further into the representative body’s problematising of any future specialisation agenda for Wales – reading pages 48 to 50 of its submission in full is well worth your time – not least because they represent one of the few occasions where we have seen universities setting out in proper depth the issues with asking the sector to consolidate and refocus, even if it’s through the proxy of the Welsh sector giving its views on what would happen if the Westminster white paper policy vision was ported over to the nation’s smaller and distinctly organised HE system.

It concludes:

A strong policy emphasis on specialisation […] carries risks alongside potential benefits. These include geographic concentration of opportunity, reduced institutional adaptability, perceived hierarchies between providers and diminished system resilience. In research, overly narrow portfolios may limit responsiveness to emerging technologies or shifts in UK funding priorities. In teaching and employment, aggressive narrowing may constrain the diversity of skills available to regional economies.

Collaboration and agglomeration can enhance efficiency, innovation and employment outcomes, particularly where they build scale around recognised strengths and economic alignment. However, the form that specialisation takes is critical. In the Welsh context, approaches that emphasise collaboration, strategic investment and the strengthening of existing institutional strengths are more likely to sustain long-term competitiveness and workforce capacity than structural concentration or enforced differentiation alone.

The issues immediately appear more acute within a system with nine universities, many of which are the beating heart of their local economies and the overarching contributors to national research and innovation in a way that is even more pronounced than in England.

That said, the issues identified here – what happens to teaching and employment were you to enforce research specialisation? Or to international partnerships? To student recruitment? To local labour markets? – are essentially the same ones that DfE and DSIT in Westminster have appeared incurious about since Labour came to power.

Plaid’s in-tray

In all the above, we can see how the next few years of research policymaking and sector lobbying might have played out, were Labour to stay in power in Wales.

But the party is set to be emphatically removed from office on Thursday, and while the results are extremely uncertain at this vantage point, the only party that seems to have a plausible route to a leading role in government at the moment is Plaid Cymru.

On that assumption, it’s worth unpacking what the party has said about research funding in opposition and in its manifesto. The foundational text here is Plaid’s new economic plan, Making Wales Work, published almost exactly a year ago. This document had plenty to say about a “renewed approach to innovation in Wales,” one which would:

offer a clearer articulation of what we want research, development and innovation policy to achieve in and for Wales (that is, the kind of society we want to build), a renewed package of financial support for research and development activities – particularly (though not exclusively) in Wales’ universities – and the creation of a new and protected institutional space for creativity, collaboration and networking, and new approaches to emerge.

On the funding side, this would “at a minimum” restore QR funding in Wales to the (substantially higher) levels recommended in both the Reid and Diamond reviews. Beyond that baseline, the plan calls for a wider-ranging review of QR funding, to at the very least “examine the possibility of parity with other parts of the UK.” And in terms of a clearer policy vision, the plan floated the idea of a National Innovation Agency for Wales to coordinate.

Neither of these ideas made it into the manifesto. All questions of HE funding are left to the full cross-party review which the party would seek to launch in its first 100 days of government. Making Wales Work was clear that this review would have research squarely within its remit – for example, considering to what extent research in Wales held “direct and specific relevance” for the nation – but this isn’t made explicit in the manifesto. You’d be forgiven for assuming that questions of student finance and university teaching will be its major priorities, and given Plaid’s spending commitments elsewhere the whole thing already has a bit of a “cost-neutral recommendations” vibe. We will have to see.

The National Innovation Agency idea hasn’t been taken forward either – a party spokesperson told us:

We are not proposing a standalone National Innovation Agency for Wales at this election – however, echoing proposals in Making Wales Work – we are proposing that driving innovation, building new networks for innovation, and co-ordination between businesses, universities and other relevant stakeholders would sit with and form a key part of the remit of a new National Development Agency.

The establishment of this development agency with a remit for innovation raises a larger question about research funding and the whole “UKRI competitiveness” angle. It feels patently clear that Plaid is not going to come into office and begin reforming the Welsh HE sector – or allowing it to transform itself, should it want to – in a way that merely aligns with Westminster’s industrial strategy.

To the extent that research gets a mention in the manifesto, it’s limited to one line:

We will continue to call for Wales’s share of UK research funding to be devolved.

This is no small ambition, it should be stressed. Presumably, were it to come about, Welsh research institutions would no longer compete for UKRI competitive grants, but rather the Welsh government would have a consequential share of that pot combined together with QR and other Medr research funding, to dispose of as it saw fit (including using it to plug holes elsewhere in its budget, if push came to shove).

For Wales’ research-intensive universities this would go down incredibly poorly, you feel, as they would be frozen out of much larger opportunities. But it’s worth stressing that to “continue to call” for devolution of research funding is one of many such aspirations in Plaid’s manifesto. Others include:

• the devolution of justice and policing “as an immediate priority”
• devolution of rail (alongside a separate, more technical fight about ensuring Wales receives the correct share of consequential funding from rail projects such as HS2 which have been spuriously labelled as benefitting both England and Wales)
• the devolving of powers to set “made-in-Wales income tax bands”
• devolution of the Crown Estate
• plans to “formally request” that the right to decide on matters relating to an independence referendum be devolved
• devolution of social security.

Plus the party observes that “with devolved powers over migration we could deliver a fair, rules-based system of controlled migration that works for Wales, reflects our needs, and upholds our values.”

It’s not easy to see a path by which the struggling Labour government in Westminster gets into a serious conversation about more powers for Wales in the medium-term. Some of Plaid’s list overlaps with what Welsh Labour themselves had called for, and made no headway with since the 2024 general election. Plus the language around devolving research funding is milder than many of the other asks in the manifesto, and would surely be nowhere near the top of the wishlist – even in the event that circumstances conspired to put further national devolution on the Westminster agenda.

The path forward

On paper, the rational system response to UKRI’s developing agenda – allied with the need to continue the “pivot” away from EU investment – would be to embrace the opportunities offered by the overall growth in industrial strategy-linked research funds. This was an easy enough proposition for the outgoing government to (gently) set out in the Five Challenges paper.

In practice – and in particular in the context of a new government which (on current polling) will be one that wants universities to play a significant role in nation-building, rather than imitate English reforms – the situation is much less clear.

But it should be understood as a clear risk that a Plaid government will be unable to put deeper policy thinking, to say nothing of genuine investment, behind a concerted effort to solve issues in the research system – and in such a situation, it would be relatively straightforward for politicians to fall back on blaming Wales’ lack of devolved powers and own control of funds.

Equally, the Welsh higher education sector can make a persuasive case that the root issue is a worse deal on QR and other block grants than elsewhere in the UK and, in the absence of change here, resist much change elsewhere.

This would be a recipe for things to continue as they are – the thing about being at a crossroads is that inertia often keeps you going straight ahead. More fundamental improvement to the research system will need the next government to ensure that a review of higher education in Wales takes a serious look at all of its component parts.