Alex Favier and Alexis Brown explore universities’ role in attracting inward investment
Culminating in Wednesday’s budget, March has seen a tidal wave of developments, announcements and initiatives that, collectively, begin to put flesh on the bones of the government’s ‘science superpower’ rhetoric.
The Research Professional News team has been wading through the myriad accompanying policy documents, technical documents and weird diagrams covering the Science and Technology Framework, the integrated strategic review, tax credit reforms, artificial intelligence regulation and everything else. One of the golden threads glinting in the policy blanket has been the recognition of links between universities, place and inward investment.
Last week, the Higher Education Policy Institute, Universities UK International, the National Centre for Universities and Business and Midlands Innovation published a report exploring the role of universities and overseas investment in UK R&D.
Science minister George Freeman and investment minister Dominic Johnson wrote in their joint ministerial foreword: “We must bring universities, businesses, investors and others together to ensure everyone in the UK can benefit from the opportunities, careers and prosperity that innovation can deliver…We need to make it much easier for international and domestic investors hungry for opportunities to invest in world-class research, infrastructure, science parks, incubators, spinouts and funds to find and access opportunities.”
Our report was also linked to the announcement of a small amount of government funding for a proof-of-concept pilot now underway in the Midlands.
Investment zones
The budget saw the government announce an intention to create 12 investment zones aimed at catalysing growth and inward investment and delivering levelling up in places outside London and the south-east. Each zone is linked to a combined authority and nominally has access to £80 million in funding. As an insight into Treasury thinking, both the policy offer and the methodology for selection are well worth a read.
At the centre of these 12 new sites will be research institutes—Catapults and universities. Government thinking has apparently been influenced by the Brookings Institution growth centres model. The documentation states confidently: “We know knowledge-intensive clusters are driven by research-intensive institutions.” The investment zones are targeted at places with those “strong research-intensive institutions”.
The move signals a welcome commitment to cultivating clusters of research and innovation excellence with universities at their heart. However, this funding will not be enough to tackle the UK’s ongoing productivity and growth issues. As these investment zones progress, their focus must include strategies to attract and retain overseas investment—not least because UK private sector investment in R&D lags behind that of its international competitors.
Universities’ dual role
Investment zones join myriad different mechanisms and initiatives to support inward investment into the UK and regions (our report tries to list most of these). When you visit Germany or Australia to see how they approach foreign direct investment in R&D, the stability of subnational government and economic development is always cited as being of fundamental importance. In England at least, the current picture is a bit of a mess, so what should universities do to navigate such a complex landscape?
The report we launched last week is underpinned by the acknowledgment that, through their global connections and links to the local innovation ecosystem, universities have the capability to make a meaningful contribution to foreign direct investment when working with government and local economic organisations. It outlines two primary ways that universities might want to approach this agenda.
The first is as generators of foreign direct investment, helping to attract, retain and maximise it, thereby increasing the ‘stickiness’ of investment into local and regional economies—in particular R&D-intensive companies.
The second is as direct beneficiaries of foreign direct investment, via international industry investment in contract research, innovation and knowledge exchange activities.
Intentional approach
Interestingly, an analysis of the past five years of data from the Higher Education Statistics Agency shows that foreign direct investment accounted for 45 per cent (£1.25 billion) of all industry investment in research activity in English universities. As with wider inward investment into the UK, recent trends show that the university sector cannot take this funding for granted.
The 2022 State of the Relationship report from the National Centre for Universities and Business showed that overseas investment in university R&D declined by 6 per cent between 2020 and 2021—the first decline in over two decades.
It is worth saying that there doesn’t seem to be any systematic national tracking of foreign direct investment beyond what’s sent to the Higher Education Statistics Agency (and that only looks at ‘EU’ and ‘rest of the world’), including commercialisation activity such as equity investment, exits or even science park tenants.
However, the primary recommendation to the sector in our report was that universities should take a more strategically intentional approach to foreign direct investment. This should include considering their dual role—as generators and beneficiaries—and ultimately deciding as individual institutions what they have the capacity to do, what they want to do and what they don’t.
Principles for success
As Karen Holford, vice-chancellor of Cranfield University, set out in a recent blogpost, institutions might also see this as the other side of the research security agenda.
And universities in other countries are a source of inspiration, as Aston University vice-chancellor Aleks Subic explains in a piece on lessons to learn from the Australian approach. Collaboration between institutions, a long-term approach and alignment with meaningful incentives are all principles for success.
Ultimately, as the budget has shown, this agenda doesn’t seem to be going away. We suggest that universities should build on the excellent practice already underway across the UK (highlighted in our report) and continue to be on the front foot in shaping this nascent area of policy, be it for this government or the next.
Alex Favier is director of global reputation and relations for the University of Nottingham and programme director for a Midlands Innovation-hosted pilot on universities as drivers of trade investment.
Alexis Brown is head of global insights at the British Council and author of a report from the Higher Education Policy Institute called The Role of Universities in Driving Overseas Investment into UK Research and Development.