The bailout part II: new government schemes announced to stabilise university research

This morning brings a rare ray of sunshine for the sector, with two substantial new schemes launched to address the particular needs of research-intensive UK universities.

The first is money for funded extensions to UKRI-funded projects. Funds up to a value of around £280m are available, and underspends can also be reused. These are targeted to sustain research that may otherwise have been lost due to Covid-19 and lockdown. The idea is that the allocations will allow for grant outcomes to be delivered, and so their value to be realised despite the wider crisis.

The second scheme is wider in scope and involves the reimbursement to institutions of some “lost” international student income that has historically been used to support industrial and charitable research.

International students, and industry

Research intensive universities receive a fair amount of funding from non-government sources, usually charities and industry. In the past this funding has seldom covered the full economic costs of carrying out the research, so some providers have chosen to allocate income from other sources – most notably international student fees – to bridge the gap.

In 2020, the supply of international students is likely to be lower. Nobody knows by how much, but it is very possible it will be lower to an extent that makes a lot of research unviable – both specific activities and in general capacity terms.

Into this gap steps the Department for Business, Energy, and the Industrial Strategy (BEIS). It has offered to cover up to 80 per cent of the value of the missing international income that would otherwise be spent on research for each provider, up to the value of the amount of charity and industry income.

This will flow in the form of a mixture of grants and loans (75:25 in favour of loans) available until April 2021. The loan component will be at very good rates of interest (comparable to the “cheap money” available to providers elsewhere) over a period of up to 10 years. Unlike the Coronavirus Business Interruption Loan Scheme (CBILS) and similar schemes, the money comes directly from government.

Hard sums

How will government know how much international fee income is spent on research? It’s pretty clear that TRAC (transparent approach to costing) data will play a major role – and (like the forecasts used to calculate the recruitment cap) it is not public data. Spending on research includes decisions that a provider has made to support research that does not attract external funding, and it is for the provider to strategically allocate these funds where they can best be made use of.

The government will have opinions on this too, however. Universities are expected to make efficiencies, and there is an assumption that early career researchers will see a particular benefit. There’s a stated interest to support high quality research capacity, with a particular emphasis on STEM research.

This isn’t a matter of directly picking winners – more a recognition that the majority of non-government research income (and, indeed, research costs) is linked to STEM. Institutions with large numbers of international students historically and negligible non-government research income will likely see very little benefit from this scheme, as the income cap will kick in.

So as we’ve talked about before – the mere act of choosing to support high quality research makes for an uneven playing field. It should be noted that even for those providers with a significant international student income and qualifying research income, only a fraction of the former is spent on research. The government is also aware that charities, in particular, have historically not paid the full economic costs in research – and as part of the efficiencies that are expected from the sector, universities will need to be more insistent in recouping research costs from these sources in particular.

You’ll note also the use of the words “up to” next to the 80 per cent figure – the amount of funding available is not determined by metrics only, and discretion may well be used in designing allocations.

Value and legacy

How much are we talking about? You may recall that one of the original Universities UK “stabilisation” proposals was to double the value of QR income from Research England. This scheme is available UK-wide (as befits its genesis in the University Research Sustainability Ministerial Taskforce), but it could be calculated as being in a similar ballpark (the low billions) to the sums discussed at that point. Of course, the fact that not all providers may choose to apply to the scheme, the use of non-public TRAC data, and the use of international recruitment numbers for 2020 means that we can’t know for sure what the value will end up being.

Although this government intervention is designed to be affordable, and will be unlikely to save every researcher job that is currently at risk, it represents a substantial vote of confidence in research in UK higher education. You’d be right to ask about the potential for strings to be attached – what is expected in return?

Perhaps it would surprise you to know that, other than the preservation of key research capacity with a particular emphasis on researchers themselves, there has been no real quid pro quo announced along with the package. But that isn’t to say that one will not arrive in the weeks and months ahead.

We asked Research England Chief Executive and Ministerial Group member David Sweeney about the package and he told us that:

Universities have risen to the challenge in redirecting research efforts to tackle the Covid-19 pandemic. This support recognises that the nation’s future research efforts are a shared responsibility of government, funders and universities. We need to work hard over the next few weeks and months to make the most of the support and ensure that the university research and knowledge exchange strengths are at the heart of national recovery and global research breakthroughs.

One last thing

All of this funding is based on a need to stabilise the sector. It does not address longer-term financial stability issues that may arise as a combination of the Covid-19 effect and historic financial weaknesses. But a plan is under development.

Tucked away at the bottom of the government announcement, as it was with the first stabilisation package, there’s a reminder that DfE, BEIS, Treasury, and devolved governments are working together to develop a restructuring regime for providers that get into serious financial trouble. It’s not yet been activated, but we can expect it to be the part of government stabilisation policy to carry serious strings if it ever is needed by providers in peril.