Fixing the gap in research funding

Black and white image collage or books and city landscape

UK Research and Innovation (UKRI) can play its part in overcoming the barriers to creating a more financially sustainable research system.

Research organisations are struggling to cover the cost of their work. The gap between total income and the cost of research, teaching and other activities in the sector rose to £1.7 billion in 2018 to 2019. The deficit between just research income and the cost of research is substantially higher at around £4 billion in 2019 to 2020.

The COVID-19 pandemic led to speculation in the sector and the media about the very sustainability of research funding. Research organisations lost income, projects were delayed, research careers disrupted and the university sector worried about the potential loss of international student fees.

We are worrying about it again due to rising inflation and energy prices.

Can UKRI still deliver its strategy as these financial pressures grow? Why is it such a challenge to fund research sustainably, and why is it so hard to fix?

This is nothing new. I’ve been talking to the community about this topic since I first started working on research policy for the Department for Business Energy and Industrial Strategy (BEIS) over 10 years ago and have seen the signs of strain in all the work I’ve done since at UKRI.

What is a sustainable system?

A sustainable research system is one that can meet present research and development needs without depleting its ability to meet future needs. We at UKRI define a financially sustainable research system as one with efficient operations and a culture of sustainable financial management. Net public funding covers the full costs of the research, and major changes to a single non-public stream of income would not threaten its viability.​

The data we have, largely on UK universities, suggests collectively we are probably not funding research sustainably.

The ‘sustainability gap’ I mentioned above appears to close in 2020 to 2021, but this is most likely down to the impacts of the COVID-19 pandemic. Research activity reduced, teaching moved online and institutions took pre-emptive action to manage their finances.

Data on other research organisations, such as UKRI’s facilities and institutes, is not collected in a way that allows us to compare, but still reveals financial pressures built up over years of flat cash budgets.

In practice, this means difficult choices. Scaling back fruitful research, organisations unable to bid for grants because they cannot meet their full cost, greater uncertainty for researchers’ careers, underinvestment in underpinning equipment and infrastructure and less agility to grab new opportunities or meet unexpected challenges.

Of course, we will never have all the resources we would like, but there is a growing consensus among those we have consulted that the balance has tipped, and something needs to change.

What makes it so difficult to ‘fix’?

The research system has evolved over many decades. This has created a complex web of policies, governments, funders, research organisations and often conflicting incentives.

System sustainability is a product of the policies we set, the level of funding available and the behaviour of all the people involved, including researchers themselves.

Our funding policy illustrates this well. Research councils pay up to 80% of the total costs for most of our project-specific grants, but expenditure data shows that universities’ cost recovery rates have hovered around 72 to 74% since 2010.

Why is this? Our work suggests it is probably a combination of the drive for efficiency, errors in the way things are costed, an increased ask for match funding from funders (or a perception among applicants that this is needed) and system incentives that lead researchers and institutions to underplay costs to increase their chances of success.

Reaching a sustainable balance is everyone’s problem and therefore no-one’s responsibility.

Wider factors come into play

The research system doesn’t operate in a bubble. The financial position and behaviour of the organisations we fund depends on the wider economy, international markets, performance of key pension funds and interconnected policy choices such as those on international relations and higher education.

It is now widely appreciated that research in UK universities is heavily dependent on cross subsidy from international student fees to the extent of £3 to £4 billion a year.

The teaching and research missions of universities are strategically as well as financially intertwined. UK universities are successful in attracting globally mobile talent and funding because they are both highly international and produce quality research. It is notable that domestic teaching in England increasingly requires cross subsidy from the same potentially volatile international fee income.

The diversity of research organisations in the UK also means changes to the balance of funding will have wide-ranging impacts.

What might work for one organisation or discipline will not help another and may even make the position worse. This can either lead to policy paralysis (‘it’s all too hard!’) or to so many tailored, small-scale changes we build in additional cost and confusion through bureaucracy.

How can UKRI play its part?

There is no simple fix, so this requires sector-wide awareness and effort. UKRI can play its part in how we allocate our budgets, how we design programmes including expectations of matched funding, how we assess the costs of grants, the charge-out rates we use, the level of institutional funding we provide, and the freedom we (and government) give our institutes to operate.

This might mean facing up to difficult choices, such as ultimately funding fewer projects but at a more sustainable level.

Kick starting the work of the UKRI financial sustainability team has been a real privilege, but it can also feel really gloomy. Witnessing how the research system has been amazingly resilient to shocks such as COVID-19 and the ever-changing policy environment gives me confidence we can continue to adapt.

Top image:  Credit: UK Research and Innovation

This is the integrated website of the seven research councils, Research England and Innovate UK.
Let us know if you have feedback or would like to help us test new developments.