Future Ready: the Path to Growth
Strengthening university-business partnerships
Many businesses invest in R&D in the UK because they want to work closely with research-intensive universities and the innovation clusters they support. Universities provide access to cutting-edge research, a pipeline of highly-skilled people and access to state-of-the-art facilities and infrastructure.
"GSK is a global biopharma company headquartered in the UK, investing over £1.5bn last year in UK R&D. As a key component of our R&D work, we have multiple large-scale academic collaborations in the UK in our aim to do world-class research with world-class scientists at world-class universities."
Robert Scott, VP Genetics and Genomics, GSK
Creating a stable, coordinated policy environment to encourage investment
Members of our Expert Panel emphasised the importance of stability in funding streams and wider policy direction as a key factor informing R&D investment decisions.
Frequent shifts in government strategy and lack of predictability in funding has been cited as a deterrent, especially in a financially constrained environment where there is already less appetite to invest in new and rapidly evolving areas of technology.
Committing to a long-term strategy for industrial renewal will help provide a solid base on which to build new university-business collaborations and strengthen ongoing relationships. I
Using challenge-based funding to facilitate university-business collaboration
We welcome the new R&D Missions Programme which aims to turn scientific advancements into real-world benefits, improving public services and quality of life across the UK. University-business collaboration will be at the heart of this.
To maximise impact, we recommend that the funding mechanism builds on existing capability and experience from other challenge-based funding models. Members of our Expert Panel highlighted the Industrial Strategy Challenge Fund (ISCF) as a successful initiative for fostering collaboration between academia and industry in key strategic areas.
Scaling existing university funding mechanisms that are proven to drive growth
There are several funding mechanisms designed to support industry-university partnerships, each with a specific role.
Of these, HEIF has been particularly effective in fostering university-business collaboration thanks to its flexibility and stability which allows universities to adapt to local needs, invest in their unique strengths over the long-term, and attract and retain the right talent.
The Higher Education Innovation Fund (HEIF)
HEIF is one of the only funding streams that supports universities to deliver a range of innovation activities including university-business collaborations, licensing, creating opportunities for student entrepreneurs and supporting high-growth spinouts.
HEIF is flexible and long-term and as such is highly effective: every £1 invested in HEIF yields £14.80 in economic return for the UK. Large research-intensive universities deliver an even higher return on investment from their HEIF allocations, as much as 20:1 once spinout performance is accounted for.
Improving incentives for SME-university collaboration
In 2024, 99.8% of businesses in the UK were SMEs and accounted for 48% of business turnover. The last few years, however, have seen a rapid decline in SMEs’ interaction with universities.
Our panel members with experience of working with SMEs highlighted that the high costs, significant time investment, specific knowledge required, and perceived risks associated with R&D collaborations often discourage SMEs from undertaking R&D and partnering with universities. Similarly, universities have noted the challenges of high transactional costs and difficulties in identifying and engaging with SMEs – in particular those that might be relevant but out of their geographic area – as these partnerships require substantial resource to establish.
The main barriers to engagement are university and SME resource and a resource-intensive funding process, and we encourage government to consider ways to increase participation in the Knowledge Transfer Partnerships (KTP) scheme.
Solutions
What can research-intensive universities offer?
- Explore options for improving how accessible they are for businesses, especially SMEs.
- Work with local governments to help identify SMEs that might benefit from university expertise to drive regional growth in key industrial sectors.
- Engage with new challenge-based funds utilising partnerships with large and multinational companies to accelerate progress in helping to deliver the government’s missions on growth, opportunity, NHS reform, and more.
What can the government do?
- Develop challenge-funding linked to the Industrial Strategy and as part of the R&D Missions Programme that incentivises collaboration between
businesses and universities. - Significantly increase investment into the Higher Education Innovation Fund (HEIF), to maximise the impact of a scheme that already has a proven track record.
- Reform VAT rules to enable new university buildings to be used for collaborative R&D which would also incentivise more capital investment.
- When the government sets out its vision to support small businesses in its Small Business Strategy Command Paper, this should consider: tailoring initiatives to encourage SME engagement, providing support and training, actively promoting and simplifying access to existing schemes, and piloting new SCME-focused initiatives to overcome barriers of limited resource.
- Work with Innovate UK to consider how to increase engagement with KTPs, in particular from SMEs not currently able to participate in the scheme.