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Effects of Covid-19 on research funding

29 May 2020

We outline some of the key issues faced by research-intensive organisations in the current pandemic.

We are continuing to work closely with our members to highlight the needs of the research community during this unprecedented time. We have written to the Science Minister Amanda Solloway to highlight some key issues we have been hearing about over the past few weeks, with a particular focus on supporting the breadth of research-intensive organisations across the UK. I’ve taken some time to review some of the known, and probable, financial ramifications for the research base and the consequences this could have on research and innovation in the short and medium term.

Threats to viability of research projects

Academic institutions are witnessing immediate financial effects from the pandemic, and face even larger drops in income for the next academic year. Universities UK estimate the financial impacts in academic year 2019-20 including the loss of income from accommodation, catering and conference in the final term and Easter and summer vacations amount to £790million. This would be a drop of roughly 2% of UK universities’ total income. UUK also predict significant falls in income from international students and a rise in deferrals from domestic students. 

The primary source of research funding for universities is the UK Government, either through UKRI or other research contracts. The majority of these research grants are not funded at 100% of the full economic cost, meaning universities have to top up these grants to make them viable. Therefore, if university revenue falls it could make it difficult for the them to make up the full economic cost of all the research grants they receive. It may also be increasingly difficult to foster new research partnerships with businesses and charities.

The pioneering research undertaken by charities in the UK plays a hugely significant role in the UK’s medical research portfolio and the charities sector in the UK is the strongest of any country across the globe. Medical research charities invested £1.3bn of their own income on research in 2018. This income is often reliant on donations from the public and the current pandemic has forced charity shops to close and economic hardship may lead to a cut back on charity donations. Three-quarters of the Association of Medical Research Charities’ members anticipate a reduction of 25% or more in fundraising income, with over a third of charities expecting a reduction of 40% or more. With a 25% decrease in income being a cautious estimate, that could take ~£325m from medical research budgets. Tough decisions undoubtedly lie ahead for charities, balancing research expenditure against scaling back staff numbers or fundraising activities.

The raft of problems posed to different organisations also causes issues for the collaborative work that goes on between businesses, research charities, universities and others that co-fund research projects. The interconnectedness of the research base adds strength and diversity to the UK’s research portfolio, addressing challenges of mutual interest for organisations who seek to work together to tackle them. The difficult decisions faced by organisations on the future of their respective research investments are also most likely to occur in different timeframes and with different factors to consider. These co-investments are also often made across different countries and spanning disciplines, adding to the complexity of when different organisations will be faced with decisions about continuing to fund these collaborative projects. We have written to the Science Minister highlighting the importance of these collaborative interface and that they should command focus from the Government in addition to supporting individual sectors.

Difficult decisions ahead for businesses

It’s really difficult to know exactly how decisions on current and future R&D investments are being made in private businesses. Perhaps understandably, businesses will be keeping plans under wraps on commercially sensitive ventures. There will of course be differences across sectors, many have taken more work in the efforts to combat the global pandemic whilst others may have ground to a halt in step with day-to-day life across the world.

Something that remains unquestionable is the importance of private investment in driving the UK forward, both in terms of improving people’s lives and in meeting the Government’s R&D investment target. The UK also boasts a diverse range of research-intensive businesses who invest in R&D, from thousands of small innovative companies to giant multinational organisations. Indeed, £13.3bn of research investment in the UK in 2017 was made by companies who are headquartered overseas, either through foreign direct investment or in their own satellite premises in the UK. That collective investment made up 35% of the total research expenditure in the UK in 2018 but the current pandemic poses a severe threat to these commitments. In the wake of any cost cutting exercises made by these businesses, some of the first questions will be about where and how to scale back investments. It will be crucial to ensure that the UK remains the most attractive place to invest in R&D, both by protecting the academic research base and by the Government scaling up research expenditure as pledged.

Public investment more important than ever

The 2020 Budget, which I can scarcely believe was only two months ago, outlined the largest public commitment to UK R&D in history. Over the past couple of years before this budget, the running joke in the research policy community (niche, I know) was that the UK could reach a research intensity of 2.4% by greatly increasing research investment or the economy crashing and getting there by default. The latter would clearly be disastrous, but is unsettlingly closer to occurring than we could have predicted. Perhaps the focus of the investments pledged in the budgets will have to shift but it is vital that these sums are still used to support UK R&D.

Research and innovation can be the key driver of economic recovery and progress from the pandemic. What will be crucial in the next few months is that the Government’s endeavour to support R&D translates into ensuring that those research-intensive organisations are not forced in to making damaging long-term decisions. CaSE will remain at the forefront of these discussions with Ministers and government departments to protect UK R&D.

In researching this piece, we reviewed statements from our members AMRCATIBIA, additional confidential comments from our members and from other sector bodies such as UUK.