18 February 2021: The National Audit Office has given UK Research and Innovation a broadly positive report on its engagement with industry and academia on projects advancing future mobility, clean growth, artificial intelligence and data.

The National Audit Office (NAO) recently issued a report on how UK Research and Innovation (UKRI) is managing the Industrial Strategy Challenge Fund, a key part of the UK’s Industrial Strategy. UKRI is an arms-length agency of the Department for Business, Energy & Industrial Strategy (BEIS).

The Industrial Strategy Challenge Fund was established to raise long-term productivity and living standards in the areas of future mobility, clean growth, artificial intelligence and data. UKRI invites academics and businesses to make suggestions on particular challenges that might contribute to these objectives and provide a worthwhile use of taxpayer financial support.

BEIS has set out five key objectives for UKRI to follow in running the Fund, which are to:

• increase UK business investment in R&D and R&D capabilities, capacity and technology adoption;
• increase multi- and inter-disciplinary research;
• increase engagement between industry and academia;
• increase collaboration between new small companies and those that are established; and
• increase overseas investment in R&D in the UK.

The Fund has a budget of £3bn to spend over eight years and to date has spent £1.2bn on 24 challenges involving a total of 1,613 individual projects. Industry has contributed £567m to these projects, increasing the resources available. 

Those who have applied for funding were successful in about every 1 in 4 bids and were positive about the support provided to industry through the Fund.

Different size companies have been successful in applying for funds, but awards have been distributed unevenly across the country. Just over 63% of the funding to date has gone to organisations registered in London, the South East and the West Midlands and more work is required on how the Fund can contribute to the Government’s levelling up agenda by improving the regional balance of approved bids.

Despite a generally positive report, the NAO criticises the UKRI, BEIS and HM Treasury for taking too long in the process to approve funding requests, with an average of 72 weeks taken to approve bids in the third wave of applications. Some bids took more than 100 weeks to move from an expression of interest to an offer of funding. The lengthy process for approving bids deters prospective applicants from applying, resulting in a budget that was underspent by 11% as of March 2020. 

No doubt contributing to the elongated approval process is the fact that UKRI has faced difficulty recruiting staff with the right mix of science and industry experience, with recent staffing levels at 60%. 

Another issue raised by the NAO is that the lack of a clear link between the objectives set for the Fund and the performance of individual projects makes it difficult for UKRI to assess the long-term impact of investments made. UKRI is now piloting an approach to collect more extensive performance data, establishing ‘benefit maps’ to link outcomes to objectives.

The pandemic has had an adverse impact on performance, with some organisations affected by restrictions on their ability to operate. However, the NAO was positive about how BEIS and UKRI have reacted quickly to get COVID-19 related projects underway.

Only 16 out of the 24 challenges are currently progressing broadly in line with expectations, although the NAO raises some concerns as to the quality of this assessment of performance given out-of-date systems, and incomplete and untimely management information. 

Alison Ring, Director, Public Sector for ICAEW, commented: “UK Research and Innovation will be pleased that they have received a relatively positive report from the NAO about their management of the UK Industrial Strategy Challenge Fund. Despite that, the NAO makes it clear that UKRI needs to make a number of improvements if it is to be able to demonstrate how it is using hundreds of millions of pounds of taxpayer’s money each year to the best effect.

“Ultimately it is too early to say if these projects are going to deliver the hoped-for improvements in productivity and living standards aspired to in the UK’s Industrial Strategy. However, if we don’t try, we definitely won’t find out.”