University research contributes £45B a year to UK output says study

The £3.5 billion a year currently spent on publicly-funded research generates an additional annual output of £45 billion in UK companies, according to a new economic impact assessment of university research.

The data also suggest that benefits of research spending in higher education are greater than those from other areas of government-supported research and development (R&D).

“£45 billion a year is a good return on £3.5 billion,” says the co-author of the report Jonathan Haskel, professor of economics in the Healthcare Management and Innovation and Enterprise Group at Imperial College Business School. “It’s important to be able to put a proper figure on how public investment in university research correlates with private sector productivity for the first time.”

With cuts in public sector spending due after the UK General Election (most likely date 6 May) the report appears to provide ample ammunition for all those fighting to preserve the science budget.

The authors are not saying that current spending is responsible for this huge amount of current industrial output.  Rather, they used 20 years of figures from the Department for Business, Innovation and Skills to construct a new measure they call private sector total factor productivity (TFP). This is the change in output not accounted for by typical forms of spending, such as labour and machinery investment.

The TFP figures in the study are claimed to capture the contribution of intangible activities such as new technology, knowledge, skills and design, for the first time.  

And it turns out that the study shows a strong correlation between public spending on research (through the UK research councils) and increased TFP over the 21 years from 1986-2007.

Haskel says there are two main challenges in working out how university research contributes to productivity. “First, universities openly publish new findings and make them freely available for use anywhere in the economy, so it’s hard to follow a payment trail from idea to application.

“Second, the private sector also invests in developing new knowledge, so we also need to account for these investments before looking at effects from universities,” says Haskel.

The study also shows that the benefits of public spending on research in higher education are greater than those from other areas of R&D that are funded by the government, such as defence R&D, which show no such correlations with private sector growth.

The research was funded by the COINVEST project which is funded by the European Commission’s Seventh Framework Programme.

The report can be accessed at http://www3.imperial.ac.uk/business-school/research/publications/discussion papers/public_support