Funding

The funding system for UK research and innovation relies on a mixture of public funding, income from organisations such as businesses or charities, and income from elsewhere in the university.

UK research is funded from multiple sources

Income for university research comes from many sources including; public funding, industry, charities and from outside of the UK. The largest proportion of funding is UK public funding, the majority of which is delivered through what is known as the ‘dual-funding system’.

This consists of two types:

formula-allocated funding which can be spent on any research, and
funds that universities competitively bid for, which are then tied to the research outlined in that bid.

Now more than ever, it is vital that the government does all it can to support the UK’s researchers and innovators. Failure to support one of the UK’s most rewarding assets would have a devastating impact on its efforts to deliver growth, wellbeing and prosperity.

Professor Paul Boyle

Vice-Chancellor of Swansea University and Chair of the Universities UK Research and Innovation Policy Network

Universities spend more on research than they recover

Universities spend substantially more on delivering research than they receive from public, private, or other sources. For example, in 2020–21, UK universities spent £15.1bn delivering research and received £10.9bn. This equates to a £4.2bn deficit which universities make up from other sources such as international student fees and commercial income.

Innovation funding is interconnected

The funding of innovation activity is interconnected with the dual-funding model (ie some research funded by formula-allocated funding or the research councils will contribute to the innovation ecosystem). However, in simplistic terms, university innovation is funded by:

some public funds (eg HEIF and the equivalent funds in the devolved administrations, Innovate UK funding)
external investment (eg businesses funding contract research)

universities re-investing income from knowledge exchange or commercialisation activity

The main sources of public innovation funding are:

Higher Education Innovation Fund (HEIF) in England
Scottish Innovation Fund (SIF) in Scotland
Research Wales Innovation Fund (RWIF) in Wales

These funds are allocated through formula funding on a formula-basis, using calculations such as the size of an institution and the quality of its outputs.

The HEIF has grown in recent years thanks to a long-term commitment from UKRI. SIF and RWIF have been less stable. These funds have a proven track record of delivering a high return on investment. The most recent evaluation of HEIF showed that every £1 allocated resulted in around £10 of value. Innovation funding requires consistent, stable funding, allowing providers to build capacity.

of value for every £1 allocated from HEIF

1.4

value of contract research delivered by universities (2020–21)

But universities do not solely rely on public investment to fund their innovation activities:

Businesses directly fund some research at universities to help them develop new technologies or to solve business challenges. In 2020–21, universities delivered contract research worth £1.4bn.
Universities re-invest income from income-generating innovation activity such as licensing, selling shares in spin-outs, and letting businesses use their state of the art facilities. This income is often used to support new innovative research.