"Well-managed risk taking key to boosting pioneering research and innovation" – NAO report

The UK's largest single public funder of scientific and technological research and innovation (R&I) should strengthen its approach to taking bolder decisions, address data challenges and more clearly define desired outcomes for its high-level priorities to ensure delivery of maximum value for money for the British taxpayer, according to a new National Audit Office (NAO) report.^1,2

UK Research and Innovation (UKRI) has helped to shape and support a successful and internationally-renowned R&I system in the UK.^3,4 In 2023-24, it assessed 28,866 applications for competitive grant funding, ultimately spending £6 billion on R&I grants.⁵ Recently funded projects have included the development of bone stem cell and biomaterial technology to reduce infection rates and the cost of hip repairs.

Government sees R&I as vital to achieving its long-term policy goals of growing the economy and achieving net zero.

However, there is a lack of coordination in how government expects UKRI to support the delivery of a range of objectives. Due to the broad nature of UKRI's activity, government departments indicate their policy priorities to UKRI through a variety of means, including ad hoc and routine meetings, government strategies and mission statements, and spending review budgets. But these are not consolidated or ranked, which means the overall picture of what government is asking UKRI to do is unclear.

Meanwhile, none of the objectives outlined in UKRI's first five-year strategy are specific, measurable or time-bound, making it difficult to understand what it is seeking to achieve.⁶

When deciding what to fund through R&I grants, UKRI has indicated it intends to take high risks where there is a potential for high rewards. This requires well-managed risk taking, accepting that many projects will carry a higher degree of uncertainty and potentially lead to different discoveries, or not deliver the intended outcomes.

But data limitations in its systems – caused in part by difficulties in unifying the systems of multiple predecessor organisations – are restricting UKRI's ability to efficiently manage its investments in a strategic way.

UKRI is not currently in full compliance with government's standards for counter-fraud. Its own counter-fraud team has been under-staffed, experiencing a backlog of cases and limited capacity for preventative work.^7,8

Although UKRI follows good practice in programme evaluations, it does not consistently draw together its learning by theme (meaning in a specific research area). As a result, there are potentially many grants where the cumulative learning or impact is not effectively captured.

To prevent it from missing out on high-reward opportunities, the NAO recommends that UKRI:

• better describes its risk appetite for funding decisions;
• identifies the barriers and incentives to taking bolder decisions in designing and awarding grants;
• ensures the work it is doing on funding assurance is sufficient to address the deficiencies identified in NAO financial audits;
• takes stock of whether its systems are providing the necessary data for good portfolio management; and
• works with the Department for Science, Innovation and Technology (DSIT) to map out the government priorities and objectives it is expected to support in delivering.

Gareth Davies, head of the NAO, said:

“Providing effective support for research and innovation that secures value from public sector investment is a complex challenge: new ideas will not have a track record of delivery and innovative projects inevitably carry a higher degree of uncertainty.

“Although UKRI has played a key role in supporting a globally respected R&I system, there is more it could do to maximise value for money.

“Our recommendations are designed to help UKRI ensure its culture supports well-managed risk taking; develop better data to support decision making; and work with DSIT to define more clearly the overarching outcomes sought from its research and innovation spending.”

ENDS

Notes to editors

1. The report will be available on the NAO website via the following link from 00:01 Wednesday 14 May: https://www.nao.org.uk/reports/uk-research-and-innovation-providing-support-through-grants/  
2. The report looks at the extent to which UKRI has considered the principles and conditions for effective support for R&I and applied those principles in practice. It does not conclude on the overall effectiveness of UKRI as an organisation.
3. Established in 2018, UKRI is a non-departmental public body formed of seven disciplinary research councils, Research England (which supports research and knowledge exchange at higher education institutions in England), and the UK's innovation agency, Innovate UK. The Department for Science, Innovation and Technology (DSIT) is the sponsoring department for UKRI, setting its budget and objectives, and approving its strategy. UKRI had a budget of £9.6 billion in 2023-24.
4. The UK ranked fifth in the 2024 global innovation index, comparing well to other countries on market sophistication and creative outputs but less favourably on business sophistication and institutions.
5. Excluding block grants to higher educational institutions in England.
6. In 2018, when UKRI was formed, DSIT set ten strategic objectives for UKRI related to the health of the UK's R&I system. It published them in a framework document which defines its relationship with UKRI. In 2022, UKRI published its first five-year strategy, with six strategic objectives covering similar ground to the 2018 objectives
7. In 2023-24, UKRI investigated suspected fraud on £42.6 million of grants; identified £4.6 million of fraud; prevented £13.5 million; and recovered £80,000.
8. UKRI recognises there are issues with its approach and is in the process of reorganising its risk, assurance, counter-fraud and corporate governance team. It is working on a new counter-fraud strategy and a new approach to funding assurance. Its actions to date include recruiting new staff, efforts to improve team culture, and updates to fraud risk assessments. It told the NAO it expects to see improvements by September 2025.