Interactions between research capital and other research resources in UK Higher Education Institutions

Mariell Juhlin, Katharine Barker, Chiara Marzocchi, Thordis Sveinsdottir

Research output: Book/ReportCommissioned report

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Executive summary Purpose and AimsThis report was commissioned by BIS to Policy Impact Ltd in cooperation with the Manchester Institute of Innovation Research, University of Manchester. It analyses public funding for research capital in UK Higher Education Institutions (HEIs) and, in particular, how the funding streams support and interact with decision-making at the level of individual HEIs, including the interactions between research capital and other resources and performance over time. In order to provide BIS with baseline evidence, and to understand what the impact of cuts in Formula Research Capital (FRC) funding associated with the 2010 Spending Review (SR) are, the study covers the following:1. Longitudinal analysis of the structure of public research capital funding, 2. Cross-sectional analysis of the structure of discretionary research capital funding, and 3. Understanding complementarities between research capital funds and other resources. Approach, method and main definitionsThe study has used different methods for data collection and analysis, including a review of literature, comparative analysis of international evidence, a survey and interviews. Interviews with 27 stakeholders, including the higher education funding councils and several HEIs, were complemented by a review of secondary data sources and policy documents such as evaluations of past funding. An online survey aimed at Finance Directors in HEIs provided bespoke data to answer the central research questions. The 25 survey responses from some of the main recipients of public research capital funding, were combined with HESA and funding council data to construct a database and generate analyses. The definition of research capital used in this report includes facilities and equipment funded wholly or partially through UK public funds and facilities and/or equipment owned and managed by the HEIs.Research capital funding, funding strategies and HEI processesThere have been around ten years of a relatively stable funding environment for HEIs since the first research capital block-funding scheme (SRIF) was put in place. BIS and its partners have allocated just under £5 billion in research capital funding to UK HEIs between 2002 and 2015 through the formula-based funding stream. There is ample evidence of achieving benefits to UK research and industry from this funding. Meanwhile average allocations of public block funding for research (QR) have remained fairly level between 2005-2015 and amounting to around £15 billion in total over this 10-year period .After the 2010 CSR, the average drop in available funds for formula-based research capital across the four funding councils was 58 percent, largest in Wales (a 64 percent drop) and the smallest in Scotland (49 percent less). This large reduction in formula funding can be viewed as a major policy shift and change in the funding environment. All HEIs have seen their Formula Research Capital funding heavily cut or extinguished. The mean FRC allocation to the most research-intensive HEIs (in TRAC peer group A) has fallen by £10 million between the CSR 2004 allocations and the 2010 CSR amounting to a 67 percent decrease. For the second most research-intensive group of HEIs (TRAC peer group B), the mean reduction in FRC allocations per HEI is £2.7 million. The overall number of institutions receiving allocations has dropped over time. In 2005/06, 149 HEIs received FRC compared to 119 in 2011/12.Lessons from the international comparison are that the UK is the only country found in the comparison group (DE, DK, SE, NO, IS, US) that has reduced research capital funding. At the same time, it is the only country that earmarks funding for capital expenditure. No comparative figures on research capital funding or expenditure were available.Formula-based capital funding has become more concentrated in the largest, most research-intensive institutions simply because of the funding conditionality, part of which is based on having secured other competitive project funding and part in proportion to levels of HEFCE QR funding and other external research income.This concentration is more apparent in the devolved regions due to Wales and Scotland applying thresholds that eliminated 6 Welsh and 10 Scottish HEIs from receiving the FRC in 2011/12. The most research-intensive HEIs (TRAC peer group A) has a much larger research capital spend than the other groups and report a mean research capital expenditure on small items of around £20 million per year in 2011/12, following the latest CSR, but are expecting to more or less recover to 2005/06 spending levels by 2015/16. Average annual expenditure among HEIs the second most research-intensive group (TRAC peer group B) amounted to just over £6 million in 2011/12. Although the average drop was not significant from 2005/06 levels, HEIs in this group remain less optimistic about the future and expect spending levels to drop to £5 million by 2015. Larger capital expenditure is limited to a handful of TRAC Peer Group A institutions and despite a sharp drop in 2011/12; it shows an upward rising trend from £14 million per year on average in 2005 to £19 million in 2015.Over time, HEIs have relied more heavily on their own sources (some of which are from other public funding schemes) to fund ongoing capital expenditure: on average, the proportion covered by own sources of funding more than doubled to just over 48 per cent in 2011/12 from just under 20 per cent in 2005/06. Some of this will be from other public funding streams. The short-term effect has been particularly dramatic for HEIs in the second most research-intensive group (TRAC peer group B) with a research income of 22 percent or more of total income (excluding the Russell Group that are mainly in TRAC peer group A), where we see a small rise in the proportion of funding from other public sources and a larger rise in funding from own sources. The larger-income, top research performers show more ability to generate alternative funds both public and private to sustain capital expenditure and this started before the present cuts in formula funding. TRAC peer group A members are also deliberately pursuing private sources of funding and appointing dedicated resources to secure investment. TRAC peer group B members have attracted less external funding and show a more varied response to sustaining expenditure. They report the importance of retaining central funds to a greater extent than HEIs in TRAC peer group A.Research capital expenditure Among the surveyed HEIs, there are differences between HEIs of different scale and research intensity, which relate to planning processes and motivations for research capital investments. The small HEIs devote more effort to internal planning and allocation of smaller capital investments in order to maintain standing and retain top researchers. The larger ones have central planning but more devolved powers for larger sums, and report recruitment of top researchers and improving research standing as the most important motivations for spending. The top areas for research capital investment include the most resource-intensive ones including Medicine, Dentistry and Health, Engineering and Technology, and Biological, Mathematical and Physical Sciences. HEIs are more likely to invest in already strong areas than weaker, but potentially strategic, areas. Growing demands for capital investment from hitherto equipment-light disciplines (e.g. social science and humanities) will increase pressures on HEI budgets and prioritisation may become a larger issue than it is now. HEIs are spending on research capital from private and other sources and these have partly replaced the formula funding. Although a source of optimism, there is a growing discrepancy between those institutions that find external funding and those that use their own sources of funding to sustain investment. Medium-income HEIs appear to be particularly dependent on the formula-based block grants. This is a worrying trend for these medium-income HEIs in the medium to long-term and may require consolidation, particularly if funding levels remain at similar levels to the present.Wider impacts and the links between capital expenditure and research standingOur findings suggest that, in the big picture, capital follows research excellence in the sense that the highest research performers not only manage to win a bigger proportion of public funding, they are also better able to access substantial sources of private funding on the basis of reputation. This in turn bolsters the reputation of the high performers through outputs and development of expertise.Future outlookThere is currently no requirement for HEIs to report to HESA on their actual or planned research capital expenditure. This hinders effective and on-going monitoring of the health of the research capital base in UK HEIs. The funding councils have adopted varying strategies in relation to funding allocations. In Scotland and Wales funding is directed to the highest research performers. In England, HEFCE has adopted an approach aimed at ensuring stability and minimising perturbation. The consequences of these strategies are not yet known. Evidence on the link between research capital investment and capacity for excellent research is only just emerging; our research highlights a vacuum in terms of the data available to monitor long-term outcomes associated with different funding approaches. More systematic monitoring would allow Funding Council to assess differential impacts of their funding strategies on HEIs of different sizes and research intensities. Although it would make financial sense for many HEIs to share equipment and facilities, examples of this occurring are few and far between (except in Scotland). There are barriers such as competition between HEIs. There are also costs to sharing that need to be met. Also, no funding scheme (outside Scotland) incentivises equipment sharing between HEIs at present and there is no concrete evidence of increasing efficiency.
Original languageEnglish
Place of PublicationLondon
PublisherDepartment for Business, Innovation and Skills
Number of pages92
Publication statusPublished - Jun 2013

Publication series

NameInvesting in Research Development and Innovation Making the Higher Education System More Efficient and Diverse
PublisherDepartment forf Business Innovation and Skills


  • research capital expenditure, higher education establishements, research capital funding, RCIF, RPIF, research capital investment


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