UKRI is committed to improving the financial sustainability and long-term resilience of research and innovation (R&I) in organisations that it funds across the UK. The resilience and sustainability of our R&I system is critical to maintaining the UK’s global position and ensuring it delivers new ideas that lead to economic growth, as described in our five-year strategy transforming tomorrow together.
A sustainable research system is one that meets today’s R&I needs without reducing its ability to meet them in the future. A resilient system also maintains the capability and flexibility needed to withstand shocks, achieve long-term goals and capture new opportunities.
We are working to better understand factors affecting the costs of research and cost recovery on research-related activities, so that we can support more sustainable investment into R&I across the UK and enhance the resilience of the UK’s R&I system.
In 2023, we published a Research financial sustainability: issues paper that presented some of our data and analysis alongside a set of data visualisations. In 2024, we published an updated set of Sankey diagrams that visualise the funding flows for research, teaching and other activities in UK universities.
This paper summarises insights, from our latest data analysis and sector engagement, around the costs of doing research and training postgraduate research students.
Insights from our work will help to incentivise more financially sustainable ways of working by providing clearer guidance for research organisations, sharing good practice, and encouraging everyone in the system to work together to support and improve the financial sustainability and resilience of the UK’s R&I endeavour.
Investing in research activities
UKRI is the UK’s largest public funder of R&I, investing more than £8 billion per year across all sectors and disciplines. More information about this can be found in our investment portfolio explainer. We balance project funding with strategic long-term investment so that research organisations can plan and deliver internationally competitive R&I. Information about how we manage this balance of funding for universities can be found in our dual support explainer.
The UK’s R&I system is also supported by other funders including: the higher education funding bodies in Scotland, Wales and Northern Ireland, government departments, universities, business, charities and philanthropists, who invest in R&I activities in a variety of ways.
However, over the past decade, the amount of funding going into our R&I system has fallen short of the full economic cost of undertaking world-leading research activities. This is creating a ‘sustainability gap’ that could lead to:
- a reduction in the volume of research undertaken
- lower quality of research
- fewer outputs from research activities
- project delays or alterations to the scope of research programmes
- less investment into long-term R&I capability (including a talented workforce and infrastructure)
To better understand issues influencing the financial sustainability of research, we have looked at how UKRI funding goes into the R&I system and gathered information about factors affecting how the costs of research activities are determined.
Supporting the full economic costs of research
UKRI funds research projects through a competitive process that involves the assessment of research projects based on their excellence and impact. Find out more about How we make decisions.
We ask that the amount requested for projects is based on the full economic costs (FEC) of the proposed research activities. This helps to ensure transparency and enables us to take the FEC into account when funding research activities.
For an overview of how determining the FEC of research projects is supported by Transparent Approach to Costing (TRAC) methodology, see our Quick Guide to TRAC. Further information about the TRAC methodology can be found in the TRAC guidance.
UKRI’s policy is to pay 80% of the eligible costs on a successful standard research grant application. There are some exceptions to this policy, and we are working to ensure greater consistency and transparency around specific costs that are supported at other rates. Information about how we fund research projects can be found in UK Research and Innovation FEC grants: standard terms and conditions of grant guidance.
Factors affecting the valuation of research activities
We have been working with the Innovation and Research Caucus to find out what factors may affect the valuation of research activities for project applications. This research has indicated a range of incentives and judgements that may result in the amount requested on an application being less than the FEC of delivering the project.
On the basis of the report, we have identified three key factors that are currently influencing the valuation of research projects for grant applications.
Valuation judgements
Applicants may make judgements about whether the amount requested on a project application looks appropriate for the proposed research activities. For example, if certain elements (such as facilities) are perceived as expensive, the application might be adjusted to make the project look more competitive.
There may also be perceived incentives to adjust aspects of the proposal (for example by reducing the amount of staff time allocated), rather than the project scope, to fit the application within the budgetary limit of a funding opportunity. Such judgements and incentives may lead to under-costing that results in the amount requested on an application being less than the actual FEC of delivering the project.
Shared resources
Where resources are shared between projects or between research and other activities (such as teaching), it can be difficult to work out the exact FEC of those resources for a specific project. For example, where equipment, overheads, and administration and support are shared between projects, the estimated cost of these for a specific project may not match the FEC.
Inflation
Inflation may rise above the indexation rate set by the funder at the start of the project. It may also increase some research-specific costs (for example, energy and chemicals) during the lifetime of the project.
Since indexation rates are set in advance, it can be difficult for universities and funders to predict how costs (such as staff costs) might change during the lifetime of a research project.
Inflationary effects between funding application and project start date can also result in the amount requested at the time of application being lower than the final FEC of the research activities.
Other cost factors
There are also some project-related costs that have to be covered by the research organisation itself. For example, some audit costs and costs related to the management of awards before application may not be eligible for external funding, or they may be funded at less than 80% FEC.
There may also be unanticipated changes during a project that cannot be accounted for at the point of application, which must also be covered by the research organisation. For example, additional staff costs, such as pay awards and promotions, or project extensions without additional funding.
Matched funding
Matched funding is an additional financial contribution (either provided by the research organisation or by a third-party organisation) that is added to a project proposal. Matched funding may be included because it is requested by the funder, or as a judgement by the applicant to make the project proposal look more competitive.
The inclusion of matched funding from a third-party partner organisation is considered to be additional to the FEC of the project. However, the inclusion of matched funding from the research organisation that will host the project lead reduces the proportion of the FEC that would be covered by a funder.
Supporting financial sustainability
Our findings show that the amount requested on a research project may not equal the FEC of delivering research activities throughout a project’s lifetime. With a better understanding of the FEC of research, funders and research organisations can work together to improve the financial sustainability of our R&I system.
We are considering how UKRI could support financial sustainability by:
- providing clearer guidance on how staff time, facilities and equipment should be costed and how these costs should be included in research bids
- reviewing our equipment and capital cost thresholds
- providing clearer guidance around matched funding
- improving guidance to support our assessment processes
- annually reviewing our indexation approach
Improving cost recovery on research
Universities provide annual reports on the costs of their research, teaching and other activities as part of their accounting and assurance processes. The Office for Students collects these reports (which are known as TRAC annual returns) and publishes this data annually.
The TRAC methodology for producing annual returns is different to the methodology for determining the FEC of research projects at the application stage. This makes it difficult to compare the FEC of research projects with the aggregated institution-level annual accounting of income and expenditure. However, using data from TRAC annual returns, we can look at the research income received by universities and their expenditure on research activities, and calculate a ‘cost recovery’ rate as a percentage of that income.
We are particularly interested in data reported under the ‘Research’ category, which includes the cost of undertaking:
- research
- fieldwork, laboratory, studio and desk or library work
- management of projects
- recruitment and supervision of research staff
- attendance at conferences, seminars and society meetings
- production of research reports, papers and books
- training and support of postgraduate research students
- collaboration with other academic departments or institutions
- outreach where research is the underlying activity
We are also interested in data reported under ‘Research Council’ sponsors, which includes:
- Arts and Humanities Research Council
- Biotechnology and Biological Sciences Research Council
- Economic and Social Research Council
- Engineering and Physical Sciences Research Council
- Medical Research Council
- Natural Environment Research Council
- Science and Technology Facilities Council
- UK Research and Innovation
- Royal Society
- British Academy
- Royal Society of Edinburgh
Analysis of TRAC annual returns data shows that the aggregate cost recovery rate (at sector level) on ‘Research’ activity funded by ‘Research Councils’ has ranged between 74% and 69% over the past five academic years.
Cost recovery on research
Working with the Innovation and Research Caucus, we have sought to understand what factors may affect cost recovery on research and their impact on financial sustainability. Insights from this work suggest that research organisations could do more to develop and share good practice around the dual uses of TRAC data for calculating the FEC for research projects and providing annual assurance reporting. For example:
- ensuring more join-up between the teams who lead on project bids and the teams who lead on annual assurance and accounting, to improve effective management of project budgets
- using TRAC data for benchmarking to help make strategic choices that support financial sustainability
- sharing good practice within and between research organisations to improve the financial sustainability and resilience of the whole R&I system
We are also considering how UKRI can support research organisations to improve their financial sustainability and resilience by:
- working with the other UK higher education funding bodies to provide clear guidance on how to use TRAC for annual reporting and assurance
- seeking to understand the incentives in the R&I system that influence good practice
Understanding the costs of doctoral training
Sustainable investment in people and skills is critical to the UK’s continued success in R&I. To help us consider how UKRI can continue to support sustainable talent development for R&I, we have been looking at the costs of doctoral training and supervision in UK universities.
Doctoral training and supervision may be supported through a variety of sources, including:
- training grants from UKRI
- strategic block-grant funding from the UK higher education funding bodies
- industry and charity funding
- university-own resources
- self-funded students
- surplus generated from non-publicly funded sources, including international student tuition fees
UKRI supports around 20% of doctoral students in the UK through competitive training grants. Through Research England we also provide flexible funding to support university research environments and doctoral training. More information can be found in:
We have been working with Pye Tait Consulting to better understand how universities invest in and support doctoral training and supervision.
Universities investment in doctoral students
Universities invest heavily in training, supervision and the postgraduate research environment to provide a high-quality experience for doctoral students, but there is no ‘one size fits all’ approach across the higher education sector. This investment underpins a variety of strategic drivers in keeping with universities’ missions and values, such as:
- nurturing and training the next generation of researchers
- supporting doctoral students to contribute to a high-quality R&I system, as researchers and teachers
- expanding doctoral training to build capacity in strategically important areas
- creating a thriving research environment that fosters innovation and delivers a range of impacts for research, society and our economy
These investments in doctoral training and supervision may cover:
- supervisor time
- other staff time (such as technicians, tutors, administrative support)
- estates and facilities
- consumables and travel to conferences
- skills and professional development training
- wider student support services (for example, wellbeing and mental health)
- administrative support
Universities make this investment using a range of income sources, including:
- tuition fees and training grants
- surpluses generated on other teaching activities (including international student fees)
- strategic flexible funding
- partnerships with industry, charities and other funders
- surpluses from other non-commercial activities
Supporting doctoral training
Our work has highlighted a strong link between universities’ research ambitions and their investment into doctoral training. We found that universities are keen to increase their doctoral training provision, and increasing expectations of what is needed to ensure a high-quality student experience are leading universities to invest even more of their own funds into enriching the postgraduate research environment.
We understand that this strategic desire for growth and increased demand for investment in doctoral training and supervision may have knock-on impacts on the financial sustainability for supporting the overall R&I workforce. For example:
- over-reliance on any single income source, or a reduction in the flexibility of funding flows to cross-subsidise doctoral training and supervision could affect the financial sustainability of early career talent development
- cohort-based training can provide a beneficial student experience by building and nurturing a positive research culture by giving students the space to grow and learn from each other
- collaborations with industry or charity funders can also expand research opportunities in the long run through knowledge exchange across sectors
We are using insights from our work on doctoral training and supervision to consider how UKRI can better support and improve the financial sustainability and resilience of a talented R&I workforce for the UK.
UKRI will be increasing the minimum stipend that UKRI doctoral students are paid to be at least equivalent to the take-home income from the national living wage’ and the minimum fee for a UKRI student (drawn by the student’s research organisation from the UKRI grant) will increase by 4.6% to £5,006. We are also updating our doctoral training grant terms and conditions to reflect a commitment to widening access to careers in R&I. Work continues in this area and more information can be found in the New deal for postgraduate research.
Working together to improve financial sustainability and resilience
We believe that everyone in the R&I system needs to work together to support and improve the financial sustainability and resilience of the UK’s research endeavour. The UK needs a R&I system that is fit for the future and able to respond to social, environmental, technological and economic change on a global scale.
Our engagement with universities has highlighted the importance of working together to better understand the FEC of research activities and doctoral training and collectively taking steps to address the factors affecting cost recovery.
UKRI will use insights from this work to support more sustainable investment into R&I across the UK and enhance the resilience of the UK’s R&I system by:
- working with research organisations to enable more accurate valuation of research projects prior to funding, and incentivise financially sustainable ways of working
- working with other funders and sector bodies to provide guidance, share good practice and support the sector to be more resilient
- working with government to create the right conditions for research and invest public money sustainably in research-related activities
- streamlining UKRI processes to reduce bureaucracy in the funding system
Ask a question about our work on research financial sustainability
To find out more about our programme of work on research financial sustainability, email us at researchsustainability@ukri.org