The National Centre for Universities and Business (NCUB), along with other research and commercialisation organisations, has been giving a lot of thought to the government’s target to raise investment in research and development.
This commitment – to haul UK performance to the OECD average of 2.4%, from our present torpid 1.67% has been exercising minds from Whitehall to Wisbech. It represents an increase in funding of around 50%, from around £30 billion per annum at present, from both public and private sources.
From early, breezy predictions of surpassing 2.4% and scaling to the heights of 3%, the general tenor of the discussion is now rather gloomier. Some are understandably questioning where the money will come from to make this happen, particularly given the present condition of public finances. As we’ve seen in this week’s Budget announcements, with extensions of current interventions in the research and innovation space, but several of them on the somewhat marginal side.
No further help
NCUB has been bringing together universities and businesses around this issue over the autumn. After all, it seems logical to assume that the intellectual and practical heavy lifting on this will fall to those at the junction of research and its commercial application. The government has said that we can expect the ratio of public to private investment to remain roughly the same – it has made most of its interventions, including an extra £2.3bn per annum added to its R&D budgets, along with tax incentives, and does not seemingly plan to plug the gap with another big slug of public money. This ratio currently stands at around 2:1 towards private investment. So how does the UK drive that up, and what role can universities play?
Our discussions with industry and HE resolved the private sector contribution into two discrete parts:
- investment by and in largely domestic small and growing businesses, towards which we need to build national confidence and improved prevailing conditions
- larger-scale foreign direct investment.
We focus on foreign direct investment here – after all, a few very big deals could move the needle very significantly in the short to medium term.
The UK is, according to the World Economic Forum, currently 7th globally for knowledge exchange and foreign direct investment. The truly excellent research in UK universities is a powerful draw to corporate R&D investors. Around half of the business R&D in this country is done by firms based elsewhere – a significantly higher proportion than other major economies.
In softer terms, they also represent a sort of cultural accessibility. With large cohorts of international students and researchers and a determinedly global outlook, our universities present themselves as accessible. (And the government will need to ensure that immigration regimes post-Brexit don’t devalue these characteristics).
This is true both of our renowned research intensives and those institutions with world-leading specialisations for which they enjoy great reputations. It’s perhaps simplistic to talk of brands, but our universities tend to have strong ones; and that will be critical to the UK’s own brand as an intellectually rich and diverse destination for both people and ideas. A brand we must seek to preserve in the context of some of the rhetoric around our departure from the EU.
But there is another potent attribute that can be unlocked by universities as collectives. We see the example of SETSquared, among others, acting as university and business networks, curating investable opportunities. This collective asserts to have already made a cumulative impact of £8.6bn to the UK economy leading up to 2017. This approach to creating a flow of deals delivers a degree of confidence in the quality of the propositions – and a real link between institutions.
In a broader sense, universities can play a huge role in creating and nurturing ecosystems that can create an environment for investment to flourish. Of course, funding streams will need to align with this curation process; and a pool of risk capital to invest in high-growth propositions could also draw in greater foreign investment. The patient capital remit of the British Business Bank, more clearly articulated in the Budget, has potential.
Funding models and fiscal incentives, if properly weighted, can also help universities play their role to the fullest and pull in confident FDI. But occasionally a focus on the field of research or innovation that these measures support, rather than the outcomes that should be accomplished, can be constraining. QR funding is allocated on the basis of excellent research; HEIF, in support of business-university collaboration; and R&D tax credits simply in support of business investment in R&D. Replication of this simplicity in other government-led offers and activity will offer real clarity to potential foreign and domestic investors.
Can the SETsquared model be replicated elsewhere? What can the government and others do to empower networks to act, and universities to continue to entice invaluable foreign capital? There is more to do, and we look forward to playing into the debate further.