Flexible funding for universities drives research excellence, new analysis shows
The Russell Group, with funding from Wellcome, commissioned PwC to conduct comparisons between international R&D systems. From this analysis the Russell Group has identified common policy features that best contribute to excellence in research and innovation.
The independent comparative study looked at Canada, Germany, the Netherlands and South Korea, analysing the countries’ performance in research and innovation and the design of the funding systems across five criteria: strategic alignment to government priorities, efficiency, stability and sustainability, autonomy, and leveraging external investment.
Findings suggest a key strength of the UK system is the use of performance-based block grant funding and its balance with expert-driven, project grant funding, which the Russell Group says is likely contributing to the UK’s research excellence. Meanwhile innovation excellence is found where there are targeted incentives to support industry engagement, including university-business collaborations.
The report also points to the need to avoid prioritising innovation activity at the expense of discovery research.
The Russell Group has drawn on PwC’s analysis to identify the following key trends:
Block grant funding plays an important role in research quality, complementing project-based funding
- Block grant funding provides stability and autonomy to pursue both long-term strategic priorities and emerging research areas. This complements project grant funding, which enables alignment to government and industry priorities.
- For example, the Netherlands has a high level of block-grant funding (68%) and scores medium-high for research excellence.
Incentivising university-industry engagement helps drive innovation excellence
- The analysis suggests that long-term, stable government incentives are needed to leverage industry investment in R&D, including support for industry-university collaboration.
- This is seen in South Korea, where strength in innovation is likely driven by a very high proportion of industry-funded R&D and a funding system designed to encourage industry-university collaboration through generous, long-term industry incentives.
Streamlining funding mechanisms helps to improve efficiency and reduce bureaucracy
- Excessive administrative burdens slow down funding processes, hinder collaboration, and divert time away from activities that drive progress.
- Nations like Canada, where funding is managed largely through one central body – the Tri-Agency – were scored medium-high for efficiency, while Germany’s highly decentralised system, with overlap and duplication, could drive its low efficiency rating.
The analysis demonstrates the unique strengths of the UK’s dual support system and its targeted funding streams that support a balance between discovery research and innovation, both equally important in an R&D-driven economy.
The comparison of funding allocation mechanisms highlights the effectiveness of the UK’s quality-related research (QR) funding, which is allocated via a rigorous assessment of research excellence and impact. Meanwhile innovation-focused streams like the Higher Education Innovation Fund (HEIF) retain flexibility so universities can tailor investments to their particular strengths and regional ecosystems. However, declining value and caps on these funding streams are putting their efficacy at risk and limiting their potential.
The Russell Group has responded to the report findings with a series of recommendations for the UK’s R&D funding system to:
- Drive research excellence through performance-based block grant funding, including by addressing the declining value of QR funding and equivalents across the UK, which has dropped by 16% since 2010, and preventing future erosion by linking to inflation.
- Scale up funding schemes with a proven impact on innovation, such as HEIF, and use the new R&D Missions Programme to incentivise business-university partnerships.
- Continue efforts to improve co-ordination in the UK system, building on the work by UKRI to reduce inefficiency and duplication. This could include increasing opportunities for cross-council co-operation, and taking forward the recommendations of the Tickell and Grant Reviews to streamline the funding application process. This would make the system easier to navigate and free up time for grant holders to focus on research.
Commenting on the findings Dr Tim Bradshaw, Chief Executive of the Russell Group, said:
“Different countries will inevitably face trade-offs in their funding approaches, and no system can prioritise everything. However, the analysis highlights some consistent themes that could have implications for the design of our UK R&D funding system.
“We can learn a lot from the range of approaches to industry incentives, which appear to have a significant impact on innovation excellence and leadership. The link we’re seeing between research excellence and flexible funding streams such as QR also underlines why we are so keen to address the decline in this funding stream, a vital part of the UK’s successful dual support system.
“If we want the UK to maintain its position as a global R&D leader, restoring the value of block grant funding and investing in funding streams that encourage university-business collaboration will both be crucial in raising the UK’s research and innovation excellence.”
Dr Beth Thompson, Executive Director Policy and Partnerships at Wellcome, commented:
“We can gain valuable insight through comparing the approaches taken by other countries to support R&D. This analysis makes the case for continuing to fund UK research through the dual support system.
“Wellcome supports the Russell Group’s recommendation to reverse the erosion of QR funding, while increasing overall funding, which will help to ensure that discovery research – which underpins the UK research sector – is given the support needed to enable researchers to generate transformative new insights.”
Damien Ashford, education sector leader at PwC, said:
“From our comparative analysis, it became clear how important it is to balance competing objectives when designing a government R&D funding system. On the one hand it is imperative to protect academic freedom and the independence of researchers, universities and other organisations, on the other hand the system should also allow for a degree of targeted funding towards government priority areas.
“Similarly, each country needs to decide to what extent the funding system is designed to build broad-based capacity as opposed to driving and incentivising research excellence. Each country needs to find their own balance and choose how to prioritise these objectives within their own unique context.”
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