UK universities’ research funding deficit soars to £3.9 billion

The extent to which research in UK universities is being underfunded has jumped by more than a fifth in a year, according to the latest estimates of the “full economic costs” faced by higher education institutions.

According to a report from the Office for Students, research activity in UK universities in 2016-17 was in “deficit” by almost £3.9 billion, compared with £3.2 billion the year before.

This meant that UK universities recovered 71.5 per cent of the full economic costs of research based on the amount of income specifically received for research rather than teaching.

The figures are based on data collected as part of the Transparent Approach to Costing (Trac) exercise, which attempts to estimate the full costs of different university activities such as teaching and research when factors such as staff time and use of buildings are taken into account. Research grants normally cover only a certain amount of the costs associated with projects, with the shortfall being made up by other university income.

For universities in England and Northern Ireland, research was in deficit by almost £3.4 billion and recovered 70.7 per cent of its full economic costs, a deterioration from 74.1 per cent in 2015-16.

This was “notably lower than in 2010-11, when the recovery rate on research peaked at 77.8 per cent”, adds the report – which focuses on England and Northern Ireland, with figures for the UK published in an annex.

Research sponsored by UK charities continued to be among the most underfunded; the report estimates that just 60.7 per cent of the full costs of such research were recovered in 2016-17. For European Union-funded research, the figure was 65.2 per cent and for UK research councils it was 71.8 per cent.

The deficit in research funding is in essence covered by using a large surplus made from the teaching of overseas students.

A report published last year by the Higher Education Policy Institute analysed Trac data from 2014-15 and found that overseas students were through their tuition fees in effect subsidising UK research to the tune of £8,000 each over the length of an average course.

The latest Trac data suggest that there was a slight fall of 5.6 per cent in the surplus made from non-publicly funded teaching – which represents primarily non-EU students – in England and Northern Ireland.

Overseas students still in effect generated a surplus of £1.2 billion for the sector in 2016-17, but the growth in the research deficit meant that universities recovered only about 97 per cent of their full economic costs overall, a potentially unsustainable position in the long term.

Nick Hillman, the director of Hepi, said that the OfS report was “very important” and had implications for the government’s current review of post-18 education funding being led by Philip Augar.

“Universities are under unprecedented pressure to show where their different income streams go, and that is unlikely to reduce,” he said. “These figures are at least helpful in showing why cross-subsidies are essential if you want to be good at research as well as good at teaching.”

Mr Hillman said it was therefore “bizarre” that universities were being restricted from expanding recruitment of overseas students to help stem the research deficit.

“When you put all that together, you have to cross your fingers to hope it will be reflected in the thinking of the Augar review and the government’s response to it,” he said.

simon.baker@timeshighereducation.com