Renegotiated Horizon deal: How can the UK get more bang for the taxpayers’ buck?

21 September 2023

UK academics are relieved that the UK will be participating in Horizon Europe as an Associated Country. In this blog post, Chris Warkup asks whether UK taxpayers should be similarly pleased?

There was an outpouring of positive commentary from the UK academic base, especially from universities, when it was finally confirmed that the UK will be an ‘Associated Country’ to the EU Horizon Europe research programme. This reaction is no surprise as association will restore research funding available in the UK close to pre-Brexit levels. If historical trends are repeated, the bulk of this money will go to UK universities.

This money is also focussed on collaboration, and we know collaboration produces better research outcomes, more quickly. So why should there be any question about this being good news for taxpayers whose money will be spent by the Government on UK participation in this programme? The uncertainty in my mind is all about where the value from this spending will be captured. What I mean by ‘where is the value captured?’ is where are the profits, employment and taxation generated from new or improved products, processes or services enabled by the outcomes of EU research projects?

There are many ‘good things’ that governments can spend taxation income on; the pursuit of new knowledge is clearly one of these, but governments are persuaded that it is the impacts from research spending — better policies, innovative technologies and processes, and ultimately societal progress (improved lives and livelihoods) — that justify spending far more on science than say the arts, which also enrich people’s lives.

Indeed, this impact driver is clearly recognised in the EU’s own legal basis for the Horizon Europe programme and some of its predecessors:  'the Union shall have the objective of strengthening its scientific and technological bases by achieving a European research area in which researchers, scientific knowledge and technology circulate freely, and encouraging it to become more competitive, including in its industry, while promoting all the research activities deemed necessary by virtue of other Chapters of the Treaties.’ Article 179 of the Treaty on the Functioning of the European Union, 2009 (Lisbon Treaty) (my highlights).

In most ways, Associated Countries in the Horizon Europe programme are considered a full part of the ERA (European Research Area), and so UK industry would be seen as benefitting along with EU industry from this free circulation of researchers, scientific knowledge and technology. So, being back in the EU research community has not created major new challenges for the UK in terms of where the value is captured, but nor has it solved the old ones.   

An analysis we did last year confirmed the suspicion that whilst the UK academic base did exceptionally well out of past EU research programmes, UK research-active larger businesses did very poorly. Coming 6th overall in income received from the EU Framework 7 Programmes and an even worse 8th when measured in terms of the total consortium size (total spend in €) in which they participated. This more generous measure uses total consortium size as a proxy for the activity with potential to yield intellectual property (IP) to which these businesses would have access.

Arguably, UK industry did poorly in previous programmes as a direct result of the significant success of UK universities (see a previous blog post). Bids led by UK universities are unlikely to be selected for funding if the main industrial partners in the consortium are also UK based.

Becoming an Associated Country of Horizon Europe does nothing that is likely to improve the position of UK research active businesses. The consortia in which UK universities take the lead (and that is the way they access the most money) are more likely to have large business members from say Germany, France, Italy or The Netherlands than from the UK. So, there is a danger our science outcomes from these consortia are preferentially accessible by non-UK businesses (due of course to the consortia agreements that specify access to IP).  If the bulk of the money once again goes to UK universities, then where will the value of UK spending be captured? I’m sure the intention of the UK Government spend is not for the outcomes to be a charitable donation of science to our competitors.

There are, in addition, some clear downsides to ‘Associated’ status that should be noted. The main one is that we can no longer be a net recipient of research funds, receiving more from the EU than the UK contributes to funding. Now our books will have to (approximately) balance, and UK taxation will pay the entire bill of funding the public contribution to UK research participation, whether that be in academia, industry or the third sector. The second downside is that, outside of the EU, we will no longer have an equal voice in setting priorities and defining the work programmes that will form the funding competitions. These programmes might be less well aligned to UK plc priorities than they might have been before. There are other, more narrow issues for UK participants, for example UK businesses will not be eligible for equity funding under the European Innovation Council Accelerator Programme.  

Clearly couching UK participation in Horizon Europe as a charitable donation of science to our competitors is provocative oversimplification. Just a few of the positives from UK Association are:

  • This money available to UK participants will avoid the worst-case scenario of significant post-Brexit shrinkage of the UK research base. This has a direct UK economic benefit in terms of employment (albeit largely taxation-funded employment)
  • EU money is positioned to fund science closer to the market than much of UKRI Research Council funding, so this helps sustain more ‘applied’ UK research capacity relevant to the de-risking of innovative technologies
  • Collaboration on the big challenges facing society and our planet is undoubtedly a good thing — irrespective of which businesses in which countries capture most profit from the delivered solutions
  • Participation will hopefully help attract overseas researchers and students and help make the UK attractive for inward technology investment
  • Irrespective of project consortia agreements there will be spill overs of research staff, know-how and technologies into UK businesses by virtue of proximity

Despite all these reasons to be cheerful about Association, I still have reservations about where the value of the research outcomes will be captured. What more can we do to avoid UK taxation preferentially providing new IP to competitor businesses in our nearest and most important trading partners? 

Would the alternative ‘Pioneer’ programme proposed by the UK Department for Science Innovation and Technology (DSIT) have been better overall than association to Horizon Europe? Bluntly, no. But just because the question of UK participation is thankfully settled, does not mean we should ignore the lessons learnt from our past participation.

The UK Government should look to incentivise and facilitate UK R&D intensive businesses to make more use of Horizon Europe and its successors than it did of previous European programmes — one example incentive might be preferential rates of R&D tax credits for spending via Horizon Europe. And yes, success at this would likely mean less money for UK Universities, but this would be a better balance of funding — closer to that seen in our main competitors.

We can see in some EU Member States mechanisms that help businesses participate in, or even better, take a lead in applications, and just as importantly lighten the administrative load of participation. The Scottish Government used to have grants to support businesses in bid preparation, but the funds were only available to SMEs and were not enough to motivate change.

I know from conversations with UK R&D intensive businesses that it is the administrative burden and the challenges of herding cats (sorry, consortium partners, I have managed three large EU consortia, so forgive my jaundiced view) that is a major barrier to justifying participation to senior management. The projects I led on were managed by the Faraday Partnership that the UK and Scottish Governments funded. Could we have more of this approach; perhaps with Catapults (and similar research and technology organisations) specifically funded to lead and manage bids that prioritise UK R&D intensive businesses? The key here would be brownie points for getting money for in-house UK business R&D, not just more money for Catapult activity.

Perhaps through REF and other mechanisms, Government could also motivate UK Universities to ensure their Horizon Europe funded research is accessible to and accessed by relevant UK businesses.   

DSIT is open to finding new ways of working. Take, for example, the recent announcement of a £50m pilot Research Venture Catalyst Fund. So please can the same enthusiasm for innovation in support structures be applied by Government and UKRI to get more bang for the UK taxpayers’ buck out of the agreement to Associate with Horizon Europe. We should not ignore the question of where the value of science impacts is captured. The taxation to fund the research is only possible through prosperity. A blindingly obvious statement I know, but I have met many academics who seem to just assume funding will always be there.