Guidance

Explainer: how we’re funded and how we allocate our funding

From:
UKRI
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UK Research and Innovation (UKRI) is the largest investor of taxpayers’ money in research and innovation (R&I). We have a dynamic portfolio of investments that supports a creative and agile R&I system. This helps to create economic, social, environmental and cultural benefits, with opportunities for everyone.

Money coming in to UKRI

UKRI is a non-departmental public body sponsored by the Department for Science, Innovation and Technology (DSIT).

HM Treasury, which receives its money primarily through taxes, allocates funding to government departments, including DSIT, through spending reviews and budgets.

Read an overview of the UKRI allocation process.

Spending review process

During a spending review, DSIT submits its proposed spending plan to the Treasury, which then advises the Cabinet. The Cabinet, including the Prime Minister and Chancellor, decide how to allocate funding in line with government priorities.

Any conditions associated with the funding, such as ringfenced budget categories, are established in a spending review.

To prepare a spending plan, DSIT requests information from UKRI on how it plans to spend the money.

UKRI responds with the aim of demonstrating how investment in R&I can help meet national priorities and create value for money to taxpayers.

Annual government budget

In addition to spending reviews, the Treasury also designates funding for R&I in the annual budget, which typically takes place in the autumn, and sometimes in the spring statement or other ad hoc announcements.

As well as our DSIT-allocated budget, UKRI also manages programmes on behalf of DSIT and delivers additional funding across government and beyond.

In the 2022 to 2023 financial year, UKRI’s budget of over £8 billion represented around half of total UK public spend on research and development (R&D).

The UKRI spending review process

  • step 1: UKRI councils consultation
  • step 2: UKRI board recommendation
  • step 3: DSIT proposal
  • step 4: HM Treasury advice
  • step 5: Cabinet decision
  • step 6: DSIT allocation
  • step 7: UKRI allocation
  • step 8: UKRI monitoring and evaluation

This is a circular process, the output from step 8 feeds back into step 1 when the process starts again.

Money that UKRI invests

From blue skies research to business-led innovation, UKRI investments underpin the UK’s world-class R&I system, so it is vital to get the right balance of funding across and within our organisation.

This requires building greater connectivity across what we do, recognising that each pound we spend addresses multiple objectives.

Cross-council and cross-community collaboration

We work collaboratively across our councils and communities to recommend investments that support the delivery of ambitions set out in our first five-year strategy, UKRI strategy 2022 to 2027: transforming tomorrow together.

This strategy establishes our long-term, high-level priorities for an outstanding research and innovation system in the UK.

For the first time since UKRI was created, we now have a multi-year settlement across all areas of our budget.

The DSIT allocation process

UKRI’s strategy and investment committees aim to establish the best mix of investments.

They put their recommendations to the UKRI Executive Committee, which then advises the UKRI Board, which in turn advises the DSIT Secretary of State on the distribution of funding across UKRI.

Executive Committee considerations

UKRI’s Executive Committee considers a balance of and interplay between:

  • research grants, including responsive, investigator-led research and the targeted research that addresses specific opportunities, such as national priority areas
  • research and innovation funding to higher education providers, providing strategic and flexible support to create the conditions for excellent research activity
  • skills and training for the next generation of researchers, innovators and technicians
  • infrastructure required to support world-leading R&I
  • institutes, centres, facilities and catapults that deliver a wide range of key national capabilities from cutting-edge research and innovation to the provision of expertise, knowhow and equipment
  • challenge-led funding that supports collaboration, including between the public and private sector, to address specific national and global priorities
  • responsive innovation that supports innovative small and medium-sized enterprises
  • international partnerships to enable UK researchers and innovators to collaborate with the best in the world
  • public engagement to share our research with a wider audience

All these categories cut across disciplines.

We provide the funding through a combination of council-specific activity, collaboration between councils and pan-UKRI programmes.

The UKRI allocation process

We allocate funding for collective programmes and to the seven disciplinary research councils, Research England, and Innovate UK.

Together, the UKRI corporate plan and the strategic delivery plans from our councils set out how we will use funding to achieve our five-year strategy.

Council and collective programmes have multiple funding rounds in their annual budgets for different types of investment, including:

  • responsive and strategic research funding opportunities
  • responsive and strategic innovation funding opportunities
  • studentships
  • fellowships

Some of UKRI’s DSIT funding is restricted to a specific purpose. For example, the core Innovate UK budget is separate from the core budget for research councils and Research England.

Investment duration

R&I almost always require investments longer than a year, such as funding for institutes which typically run on five-year or longer cycles.

So while there is responsiveness built into the system, a proportion of UKRI’s annual budget is committed to ongoing projects before the year starts.

How UKRI ensures maximum value for money from its investments

Across UKRI we use insight, expertise and knowledge to inform our investments to help ensure we provide:

  • value for money to the UK taxpayer
  • a research and innovation system that drives economic, environmental and social benefits
  • opportunities for all

We continually monitor and evaluate our investments so that we can understand our impact and learn from what works.

Investment controls

As a public body, UKRI is subject to various controls.

We must consider, for example, the requirement to spend money in line with need, and not ahead of it. This means we have to spend within 1% of total annual budgets, and not a penny over, each financial year.

Other controls include limiting the movement of funding between financial years and some budget lines, and following a business case process for investments above certain thresholds.

We must also consider whether any funding could give an unfair advantage to a business.

Competitive funding

We typically provide our funding through competitive mechanisms such as funding opportunities for research, which include independent evaluations by relevant experts.

On average £1 of public R&D investment generates at least £7 of net benefit to the UK through the development of new and better goods, services and processes. Learn more about the relationship between public and private funding (GOV.UK).

The UKRI portfolio

Inputs

In the financial year 2022 to 2023 we spent:

  • £2,204 million institutional block funding to higher education providers in England for research and knowledge exchange (26% of our budget)
  • £1,514 million in research and development grants, including fully open funding opportunities and targeted opportunities focused on specific priorities (18%)
  • £1,340 million towards specialist institutes, centres, facilities and Catapults that provide national capabilities in specific R&I areas, including specialist equipment, expertise and knowledge (16%)
  • £1,120 million in infrastructure, from laboratory equipment to major international research facilities (13%)
  • £647 million in skills and training for the next generation of researchers, innovators and technicians (8%)
  • £580 million in international partnerships to collaborate with leaders in their fields worldwide (7%)
  • £523 million in innovation project grants that support innovative small and medium-sized enterprises (6%)
  • £472 million in collaborative challenge-led funding to address specific national and global priorities (6%)

The funding of higher education institutions in Scotland, Wales and Northern Ireland is provided by their respective governments or executives. For more information see our explainer on dual support funding for research and innovation.

For more details about our inputs, see our annual reports and accounts.

Outputs

Our investments support:

  • funding for over 57,000 researchers and innovators
  • funding for more than 300 nationally significant infrastructures
  • training for over 27,000 PhD students
  • training for over 2,000 fellows
  • R&D in 3,661 organisations, including 2,750 of the UK’s most innovative businesses
  • government priorities such as net zero, public health, strategic technologies

We are investing in all regions of the UK and building partnerships overseas. Over one third of our grant funding includes an international partner.

For more detail about our outputs, see our investment and outputs publication.

Impacts

UKRI invests in people, places, ideas, innovation and impacts across society and the economy. For more information see our research outcomes and impacts and browse our evaluation reports.

Impact highlights

New breakthroughs and discoveries

The success of the Oxford-AstraZeneca vaccine was built on decades of in-depth research, underpinned by UKRI funding. Learn more about the story behind the Oxford-AstraZeneca COVID-19 vaccine success.

Attracting private investment

For each public £1 invested, UKRI’s Challenge Fund portfolio is forecast to attract over £2 of leveraged co-investment from industry and other partners.

Creating new business

Since 2004, UKRI grants have generated over 1,000 spin-outs such as Oxford Nanopore, a biotech success story commercialising DNA sequencing technology. It is now valued at £4.8 billion. Read more about how Oxford Nanopore is transforming diagnostics and virus tracking with nanopore sequencing.

Unleashing innovation and economic growth

Firms participating in research and innovation projects funded by UKRI experienced 22.5% to 28% faster turnover and employment growth in the six years following the project. Our Higher Education Innovation Fund connects university research to businesses and society, achieving a return on investment of £8.30 per £1 invested.

Improving lives across society

UKRI-funded research outlining the science behind how children learn to read is transforming the way reading is taught in classrooms around the world, helping potentially millions of children improve their life chances through better literacy skills. This project was awarded for Outstanding International Impact at the ESRC impact awards.

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