Universities, R&D, business innovation and meeting employer skills needs

Universities play a vital role in the UK’s business and innovation ecosystem; their network of labour, skills, research and commercial activity is an important part of efforts to kickstart growth across the UK.

The exceptional capability of UK university research and innovation is a genuine national asset. It happens in all parts of the UK, and in universities of many different types – from large universities with broad subject areas to small, specialist institutions. Health discoveries often make the headlines, but research brings so much more, including new technology, jobs, economic growth, and a better understanding of the world we live in.

University research and innovation

University research and innovation attracts investment and makes world-leading discoveries, generating knowledge and creating and nurturing new, innovative businesses and jobs across the UK.

High-quality research is happening throughout the UK, with more than 80% of research emerging from each nation and region rated as ‘world-leading’ or ‘excellent’. Universities in every part of the UK are supporting innovation through the creation of new businesses and partnering with large and small companies.

As inherently global, as well as national and local institutions, universities leverage their international connections to attract major foreign direct investment into R&D programmes that catalyse innovation-led growth and create skilled jobs across the economy.

Investment in research and innovation delivers high returns and creates economic benefit, with proven returns on investment from public funding – every £1 of public R&D spending stimulates between £1.96 and £2.34 of private R&D spending.

University research accelerators are found across the country and provide intensive support for businesses to grow, providing business, financial and technological advice to new or existing companies. Universities often have accelerators for current students, staff, alumni and local businesses to make use of.

Evidence shows university-led accelerators are associated with faster sales and job growth in participating businesses than those not connected to a university. Being connected to a university also has a positive effect on business survival.

In 2020–21, combined graduate start-up and university spin-out activity in local areas generated nearly £5 billion in turnover across the UK. University spin-outs attracted £2.54 billion in equity investment in 2021.

Universities UK (UUK) research suggests that universities have the potential to provide even more support to businesses, worth more than £11.6 billion over the next five years and creating 21,650 new businesses attracting around £21.7 billion in research funding across the UK.

To achieve this aim, the Government needs to ensure public funding for research and innovation supports this important activity. The Chancellor set out a clear commitment to protect funding for research and innovation in the 2022 Autumn Statement, a strong vote of confidence in UK universities, amongst tough choices.

However, issues remain that risk hampering university contributions. There is continued uncertainty over the UK’s association to Horizon Europe, and many vital research and innovation projects face a cliff-edge as EU Structural funding comes to an end in 2023.

UUK urges government to secure association to Horizon Europe and protect the budget set aside to fund alternatives, alongside urgent action to avoid the loss of hundreds of vital growth-boosting university research innovation projects which are at risk, as EU funding ends this year.

Supporting local productivity and jobs

SMEs are key employers and sources of potential jobs growth and are particularly important in regions where there are fewer large employers. Universities support these businesses through sharing of their infrastructure, facilities and expertise to drive local collaboration leading to greater innovation, boosting productivity across the UK.

One of the success stories of cooperation between universities and businesses is the University Enterprise Zone (UEZ) initiative. Launched in 2014, UEZs encourage universities to strengthen their roles as strategic partners in local growth and to stimulate development of incubator or ‘grow-on’ space for small businesses. A 2020 evaluation of UEZs found that for every £1 of UEZ funding provided by government, they generated £4.50 of additional public and private funding.

Universities also play a strong role in upskilling UK entrepreneurs through the Government’s Help to Grow scheme, which provides skills training to help SME business leaders to increase productivity, seize investment opportunities and grow their business. As of March 2022, 38 UK universities were offering management courses as part of the scheme.

Meeting the skills needs of businesses to deliver innovation

A 2020 report by the National Centre for Entrepreneurship in Education (NCEE) showed that 89% of university leaders across the UK reported an increase in entrepreneurship activity provided by their university over the previous three years. The same report outlined that 98.3% of universities provide extra-curricular support for enterprise and entrepreneurship, and over 80% of universities run ideas competitions, enterprise awareness events and festivals, careers service events and workshops and provide mentoring for start-ups.

According to the UK Innovation Survey 2021, science, technology, engineering and maths (STEM) graduates make up a greater share of the workforce in highly innovative businesses compared to less innovative businesses.

Recommendation 1

Given the high returns on investment to public Research and Innovation funding, and the economic benefit this creates, we urge government to continue protection of this funding. This includes securing association to Horizon Europe and protecting the budget set aside to fund alternatives; and taking urgent action to avoid the loss of hundreds of vital innovation projects that are at risk due to the ending of EU structural funding this year.

Recommendation 2

Given the success of UEZs, we recommend that the government rapidly expand the UEZ programme across England and for devolved administrations. There should be such an initiative in every university across the UK, raising the profile of what universities are already doing, supporting the scaling up of engagement between universities and businesses and driving local opportunities and growth.

Recommendation 3

We recommend that the government build on the excellent Help to Grow scheme to enable SMEs to recruit the talent to deliver growth. The Government should set up a follow up ‘Make it Grow’ programme, focusing on recruiting students to support specific projects, internships and apprentices.

By Jovan Luzajic, Acting Assistant Director of Policy, Universities UK

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This article is part of Campaign for Learning’s series: ‘Driving-up employer investment in training – pressing the right buttons’.

Part One: Employer investment in context

1. Louise Murphy, Economist, Resolution Foundation: Investment in the round
2. Dr Vicki Belt, Deputy Director, Enterprise Research Centre, Warwick Business School: UK enterprises and investment in capital and training
3. Becci Newton, Director, Public Policy Research, Institute of Employment Studies: Employer investment in training in England

Part Two: Drivers of employer investment in training

4. Neil Carberry, Chief Executive, Recruitment and Employment Confederation: Derived demand, British management and employer investment in training
5. Ewart Keep, Professor Emeritus, Education Department, University of Oxford: Strategies to drive-up employer investment in training
6. Sam Alvis, Head of Economy, Green Alliance: Transitioning to net zero, green skills and employer investment in training
7. Dan Lucy, Director of HR, Institute of Employment Studies: Job quality, job design and driving-up employer investment in training
8. Natasha Waller, Policy Manager, LEP Network: Local inward investment, business support and employer demand for training
9. Jovan Luzajic, Acting Assistant Director of Policy, Universities UK: Universities, R&D, business innovation and meeting employer skills needs
10. David Hughes, Chief Executive, Association of Colleges: FE colleges, business innovation and meeting employer skills needs

Part Three: Increasing employer investment in training

11. Paul Bivand, Labour Market Consultant: Why should employers invest in training in a flexible labour market?
12. Aidan Relf, Skills Consultant: Why should employers invest in training with large net worker migration into the UK?
13. Stephen Evans, Chief Executive, Learning and Work Institute: Raising employer investment in training
14. Robert West, Head of Education and Skills, CBI: Increasing employer investment in training
15. Lizzie Crowley, Skills Policy Adviser, CIPD: Encouraging employer demand for training
16. Anthony Painter, Director and Daisy Hooper, Head of Policy and Innovation Chartered Management Institute: Increasing employer demand for management training

Part Four: Raising employer demand for publicly funded post-16 education and skills

17. Jane Hickie, Chief Executive, AELP: Increasing employer demand for post-16 apprenticeships in England
18. Mandy Crawford-Lee, Chief Executive, UVAC: Increasing employer demand for level 4-5 technical education in England
19. Ian Pryce, Principal, The Bedford College Group: Increasing employer demand for higher technical education in England

Part Five: Raising employer demand for work placements

20. John Widdowson, Board Member, NCG: Increasing employer demand for work placements for level 3-5 vocational courses in England
21. Stephen Isherwood, Joint Chief Executive, Institute of Student Employers: Increasing employer demand for undergraduate work placements in England