Impact Study: University Research Contributes Billions to UK Economy

A new economic impact assessment of university research suggests that the £3.5 billion a year currently spent on publicly funded research generates an additional annual output of £45 billion in UK companies. The data, which was presented at a British Academy / Economic Sciences Research Council innovation seminar held on 16 March, also suggest that benefits of research spending in higher education are greater than those from other areas of governmentsupported research and development (R&D).

"£45 billion a year is a good return on £3.5 billion," said economist Professor Haskel, co-author of the study from 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."

The authors used 20 years’ worth of figures from the Department for Business, Innovation and Skills to construct a new measure called private sector total factor productivity (TFP), which is the change in output not accounted for by typical forms of spending, such as labour and machinery investment. The TFP figures calculated in this study capture the contribution of ’intangible’ activities such as new technology, knowledge, skills and design, for the first time. The study shows a strong correlation between public spend on research (through the research councils) and increased TFP over 21 years (1986-2007).

There are two main challenges to 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," explained Professor Haskel. "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."

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

This research was funded by the COINVEST project from the European Commission Seventh Framework Programme (Theme 9: Socio-economic Science and Humanities).

A full copy of the discussion paper Public support for innovation, intangible investment and productivity growth in the UK market sector by Jonathan Haskel (Imperial College Business School) and Gavin Wallis (University College London and HM Treasury) is available for download from http://www3.imperial.ac.uk/businessschool/ research/publications/discussion_papers/public_support