Taxpayers ‘being short-changed’ when research commercialised

UK Research and Innovation (UKRI) is not doing enough to get value for British taxpayers from public investment in research and development, according to an influential group of MPs who warn that the UK risks falling behind on the global stage as a result. 

A report published by the Public Accounts Committee on 21 October, titled UK Research and Innovation: Investment in research infrastructure, argues that UKRI should be “much shrewder” in managing intellectual property (IP) and “much bolder” in taking stakes in promising companies backed with grants.

While UK universities generally perform well in commercialising their research and patenting new products and technologies, generating a similar number of spin-off companies to those in the US, the PAC said that the main challenge in the UK is ensuring IP is monetised.

The PAC’s inquiry has found that British companies find it harder to obtain the capital investment needed to scale while based in the UK than their US counterparts. They also received evidence that small businesses find publicly funded research infrastructure “opaque”, “slow” and “expensive to access”.

While the PAC welcomed a strengthening of ties between UKRI’s grant recipients and public sources of capital, the report argued that attempts to bring in more investment from pension funds have been realised too slowly. 

Currently the British Business Bank is acting as a “cornerstone investor” in innovative UK companies alongside pension funds, which means that the UK taxpayer shares in the benefits of any successful investment. But the PAC has urged the Department for Business, Innovation, Science and Trade (DBIST) to “do much more to recover taxpayers’ money” when a successful company exploits research that the taxpayer has paid for via UKRI.

One suggestion in the report is that UKRI take more equity stakes where it is providing funding. However, UKRI responded to the inquiry by saying it wants to “strike a balance” with the design of its IP controls to not limit companies’ growth.

Geoffrey Clifton-Brown, chair of the PAC, said: “The nations currently leading the global tech race did not achieve their positions by avoiding more entrepreneurial policies. This is a simple case for the government of nothing ventured, nothing gained.”

The new report has also highlighted a strategic problem in how funding decisions affect researchers differently across the country.

While the PAC recognises the increase in the distribution of UKRI funding to the north over the past five years from 12 per cent to about 20 per cent, it has said that geographical imbalance of research infrastructure has accentuated a north-south divide among UK researchers.

In 2023-24, half of UKRI funding went to the “greater south-east”, which includes London, the south-east and east of England.

Clifton-Brown said: “UKRI’s spending in the north seems to be going in the right direction, but without a dedicated focus on rebalancing the scales, there is every possibility of slipping back to the previous status quo.

“Further, if the UK doesn’t protect its ownership of innovative ideas, this intellectual property is then exploited by countries around the world who are then better able to compete with us.

“Only a healthy and rich ecosystem of research across the country, supplied through our world-beating higher education system, can provide the fertile ground for innovative companies to grow and thrive in the UK, and repay the taxpayer for their support in the process.”

There are several recommendations contained in the report, including that the DBIST should develop quantitative metrics covering support mechanisms for business that are reported on an annual basis to allow for comparisons year-on-year.

The PAC has also recommended that UKRI set clear thresholds for determining whether it should continue to fund research infrastructure projects and consider what more it could do to identify existing research infrastructure reliant on longer-term funding.

A government spokesperson said: “We are already taking bold steps to support innovation across the UK. Through our approach, we are ensuring the British public and our scientific community feel the maximum impact of our support for R&D projects across the country - all backed by a record £86 billion investment.

“UKRI are focused on ensuring their £38.6 billion share of that support is delivering maximum value for money for taxpayers, while ensuring innovative firms can attract investment and access international markets as they grow."

rosalind.skillen@timeshighereducation.com