Levelling up or levelling down?

Despite early warnings, the UK government’s blind spot in relation to research and innovation projects funded through EU structural funds risks levelling down just when it is championing a levelling up agenda.

The chancellor has delivered his Autumn Statement, making clear the challenges the country faces. In a strong vote of confidence in the sector, in the midst of tough choices, there has been a clear commitment to protect funding for research and innovation. It was also reassuring to see government commit to spreading opportunity across all areas of the UK.

The chancellor recognised the central role universities play, putting them at the heart of the government’s “investment zones”, building on the sector’s research strengths to drive economic growth in left-behind areas.

This is a more positive outcome for the sector than many were anticipating, and an endorsement of university research, innovation and skills in driving tomorrow’s economy, creating new products and high-skilled, high-paying jobs.

On the brink

However, there remain issues that may hamper the sector’s ability to support levelling up. First, changes to R&D tax credits could lead to a dampening of innovation potential of research-intensive SMEs, and it is well known that northern England and the devolved administrations are more reliant on SMEs than many parts of southeast England.

Second, and even more concerning for levelling up, there was no reference to the risks for many university projects, currently funded through European Regional Development Funds (ERDF), that drive innovation and skills growth in some of the most left-behind areas in the UK.

Universities UK has already warned that over 100 of these local projects are teetering on the brink as European Union structural funding comes to an end. This is a UK government “blind spot” which could do more to undermine levelling up than appears to have been realised.

Alternatives to EU funding

Most research and innovation funding from the EU has been supported through the framework programmes, the most recent of which is Horizon Europe. Following Brexit, the UK is not automatically entitled to participate and, unless progress can be made on the Northern Ireland protocol discussions, UK association remains out of reach.

Hence the UK government has put considerable effort into a bold set of new programmes that aim to stimulate international collaboration and attract some of the world’s leading researchers to the UK.

The sector remains committed to associating with Horizon Europe but, if that proves impossible, will rally behind the UK alternative. There is also support for the government’s decision last week to release part of the funds set aside for association, given the delays that mean the UK has not been able to participate fully for nearly two years, and the consequent need to move on to new opportunities.

Yet while the thinking going into Plan B is impressive, ironically it makes more jarring the lack of planning to support the numerous research and innovation projects that are currently funded through structural funds.

Distributing the UK alternative

Of the £2.696bn ERDF funds allocated in England between 2014 and 2023, £556m were for university led projects. In Wales 30 per cent of the projects were led by universities. These projects tend to be at the higher Technology Readiness Levels, where products and services are ready for commercialisation, typical of the types of innovation the UK government is championing.

The UK Shared Prosperity Fund (UKSPF), which is the UK replacement for the ERDF, sits in the Department for Levelling Up, Housing and Communities – a department which has no experience in managing research and innovation. The planned distribution of the UKSPF is much more evenly spread across the UK than was the case with the EU funds, which were more proactively targeted towards the most deprived areas – arguably a Europe-wide levelling up.

Frustratingly, this issue was highlighted early on, when Adrian Smith and Graeme Reid recommended that a proportion of the UK alternative to ERDF should be allocated through Innovate UK to continue the support for research and innovation projects. This advice was not heeded.

Local impact

The current situation cuts across the stated R&I agenda laid out by the new UK government. As many of these projects come to an end in early 2023, we will see a swath of projects cut off in their prime, many of which are focused on government priority areas, such as digital transformation and net zero.

These projects provide high quality skills training and support local employment and productivity growth, with many focussed on working with SMEs. Hundreds of experienced researchers will lose their jobs through what seems to be oversight, rather than determined policy making.

If levelling up is to mean anything then it is crucial that this work, and the skilled jobs that support it, are protected. These projects are found across all regions and nations of the UK, and across all types of universities – from supporting businesses to create new products and services in Newcastle to creating 1,100 jobs in Gloucestershire, from commercialising graphene in Manchester to providing bespoke support at no cost to 350 SMEs in Sheffield.

Take just one example from my own institution, Swansea University. SPECIFIC is a leading energy technology research and innovation centre funded through the ERDF which is creating buildings that store and release their own heat and electricity from solar energy. They are developing technologies such as printable solar cells and material that stores summer heat to use in winter. Seven companies have been spun out and they work closely with hundreds of businesses and partners.

Here comes the cliff edge

We are approaching a cliff edge, and in March 2023 44 jobs are at risk for SPECIFIC alone. These are the people that are leading the charge to net zero, and we’re at risk of losing them – and 15 years’ worth of innovations – just when we’ve never needed them more.

The transition from EU funding must be supported across all of government. In the short term, bridging funding will be needed to ensure the UK doesn’t lose hundreds of jobs, huge talent, and local innovation and skills capability.

A simple approach which would have helped to a small degree would have been to take ERDF receipts into account in the formulas used to allocate the welcomed announcement of £100m for quality-related research and £200m for research infrastructure.

Without a more joined-up approach, the UK government will inadvertently “level down” rather than level up.