Research and development funding policy, 2019-2024

The governance of, and funding for, research and development (R&D) underwent significant changes over the last decade. This briefing paper focuses on UK R&D funding policy under the Conservative Government for the period 2019-2024.

Research and development funding

R&D funding is defined as expenditure on research, mostly in science and technology, that results in new products, processes and understanding. It includes research undertaken by, and funding from, public, private and charitable sectors.

Total UK R&D spending reached £72.6 billion in 2023, with businesses funding the majority (£41.1 billion, representing 57% of the total UK R&D spend). Over the same period, public sector bodies funded £21.2 billion and charitable spending totalled £2 billion. Most R&D activity took place in London, the South East, and East of England, which together accounted for more than half of total spending.

The 2.4% target

The government’s 2017 Industrial Strategy committed to spending 2.4% of GDP on R&D by 2027. In Budget 2020, the Chancellor announced that public R&D expenditure would rise from its 2017 level of roughly £9 billion to £22 billion by 2024/25, taking public spending on R&D to 0.8% of GDP. In the 2021 Autumn Budget and Spending Review the date to reach the £22 billion target was pushed back to 2026/27. However, changes in 2022 to the methodology used by the Office for National Statistics to calculate Business Enterprise Research and Development statistics led the government to estimate that total spending on R&D in the UK was between 2.8% and 2.9% of GDP for 2021.

R&D strategies

To support its 2.4% ambitions, the government published an R&D roadmap in July 2020, detailing how it would enhance the UK’s science, research and innovation capabilities. In March 2021, the government replaced its 2017 Industrial Strategy with Build Back Better: our plan for growth, and set out its plan to support economic growth through “significant investment in infrastructure, skills and innovation”.

A new Innovation Strategy followed in July 2021, while the Levelling Up White Paper, published in February 2022, set a target for the Department for Business, Energy & Industrial Strategy (BEIS) to invest "at least 55% of its total domestic R&D funding outside the Greater South East by 2024-25". The government also published a Science and Technology Framework in March 2023 which it described as a "strategic vision", setting out ten key actions to achieve its "Science and Technology Superpower agenda" by 2030.

As well as publishing new strategies, the government created new bodies in the centre of government to take its science, technology and research agendas forward. Most notably, it established the Department for Science, Innovation & Technology (DSIT) in February 2023, marking the first time that science had a dedicated secretary of state since 1994.

A new funding body: Advanced Research and Invention Agency (ARIA)

In the March 2020 Budget, the Chancellor announced that the UK Government would invest “at least £800 million” in a new research funding agency aimed at providing long-term support for “high-risk, high-reward” “blue-skies research” (for which immediate applications are not always apparent). A year later, the UK Government published a Bill to create the Advanced Research and Invention Agency (ARIA). The Bill became an Act in February 2022. Ilan Gur and Matt Clifford were appointed as the founding CEO and Chair, respectively, in July 2022 and the Agency was formally launched in late January 2023.

International outlook

The UK agreed to participate in the Horizon Europe programme – the EU’s flagship funding programme for research and innovation – as an 'associated country' and to pay a yearly fee for this purpose. Finalising participation, however, was delayed due to wider disagreements about the Northern Ireland Protocol following the UK’s exit from the EU. An agreement between the UK and EU Commission, in February 2023, to change the way the protocol operates (the Windsor Framework) helped to pave the way to the UK reaching an agreement, in late 2023, on participation in Horizon Europe and Copernicus, the EU’s earth observation programme. The UK became an associate member of Horizon Europe and Copernicus on 1 January 2024.