Welsh Week: research and development in Wales: some thoughts for the next government
This is the second blog in HEPI’s Welsh Week. It was kindly authored by Professor Paul Boyle, Vice-Chancellor of Swansea University.
Read the first blog in the series here.
While party manifestos have not been published at the time of writing, it is clear that all political parties seeking control of the Senedd (Welsh Parliament) in May 2026 will be determined to provide a clear strategy for boosting economic growth and productivity, given the relatively weak performance in Wales compared to the rest of the UK. As of 2025, the Welsh Gross Value Added (GVA) per head, which is a measure of the value of goods produced, was only 72% of the UK average. Various structural features of the Welsh economy help explain this difference, including the relatively high reliance on manufacturing, the relatively small service and finance sectors, and a higher proportion of small and medium sized enterprises (SMEs).
A vital part of any such strategy will need to focus on the contribution of Research and Development (R&D), as there is a clear relationship between R&D investment (from both the public and private sectors) and future improved economic performance. The most recent estimates from DSIT suggest that, on average, £1 of civil public R&D investment generates £8 in net economic benefits for the UK over the long term. And this ignores the wider public benefits of R&D, which are more challenging to quantify, such as improvements in health outcomes or the environment. However, while Wales accounts for just under 5% of the total UK population, it has only about 2% of the UK R&D spend.
In Wales, close to 40% of R&D activity is conducted in universities, which represents a higher proportion than in the UK as a whole. However, this reflects the relatively low (and declining) R&D investment from the private sector in the nation, rather than unusually high public sector investment into our universities. Indeed, key investments into R&D through our universities have been proportionally lower than in the rest of the UK for many years.
This is despite the fact that Welsh universities punch above their weight and, through their collaboration both within and beyond our borders, play a critical role in shaping the reputation of Wales globally. The most recent data show that Wales’ share of the top 5% of most highly-cited publications is twice the global average, with the citation impact 80% above the global average and 13% above the UK average. Recent estimates produced by Universities Wales show that the economic impact associated with Welsh universities’ research and knowledge exchange activities in 2021-22 was around £2 billion; perhaps no surprise given the strong performance of Welsh Universities in the last Research Excellence Framework (REF) in relation to the impact of their work. But, with appropriate investment, this figure could grow further.
Despite the high quality of research conducted in Wales and the value it generates, public funding for R&D has fallen short in Wales. Pro rata to population size, in 2024-25, the funding allocations made by HEFCW (now Medr) for research and innovation in Wales were £57m lower than those allocated by Research England to England and £86m lower than in Scotland. More specifically, from 2021/22 to 2024/25 Wales’Quality-related Research (QR) funding shrank by 6.2% while England’s QR pot increased by 13.7%. In the same period, Wales’ Research Wales Innovation Fund (RWIF) funding for knowledge exchange activities (the equivalent of HEIF funding in England) also fell by 6% in the period. And, disappointingly, the SêrCymru funding managed by Welsh Government, which attracted a number of leading research chairs, ‘rising stars’ and PhD students, was ended in 2023. The Welsh Government has tough budget decisions to take, but if we are to drive future economic prosperity we need to invest competitively in R&D.
For Welsh universities, such shortfalls in foundational support make it difficult to compete in the UK- and European-wide funding systems and hence our grant capture performance is behind the rest of the UK. The UKRI figures for 2023-24 show that, on average, £134 was invested per person in the UK, but regionally that investment materialised as £183 per person in the South East of England, compared with only £53 per person for Wales and £101 for Scotland. Similarly, Wales received only around 2% of the UK’s receipts from Horizon Europe funding, despite having just under 5% of the UK population. Taking the UKRI example, the success rates for Welsh university bids are actually broadly equivalent to those from the rest of the UK, but the number of submissions is less than would be expected. Critical to future improvements on that ratio will be making sure that foundational resources in Wales match those for universities elsewhere in the UK. Foundational funding, including QR and RWIF should be increased to match proportionately to that in England, and Sêr Cymru funding should be reinstated to attract world-leading talent into Wales; these steps would help Welsh universities compete more effectively for UK and European funding.
As we align ourselves to the expectations of funders going forward, it is clear that we must come together across Wales to work more collaboratively at scale to attract the resources we need. We need to be attuned to the changing priorities of funders as UKRI segments its portfolio into ‘buckets’ and looks to support clusters of world-class strength, while the European Commission responds to the ‘competitiveness’ agenda that has proved compelling to many in their Parliament. Alongside this, universities themselves are grappling with funding shortfalls the likes of which have not been experienced in the past. These considerable changes require Welsh institutions to respond with agility and strategic forethought. Only by being able to articulate our worldclass strengths with one voice will we be able to harness the resources that will underpin a R&D transformation in Wales.
This supported our decision to establish the Wales Innovation Network (WIN) in 2021, which facilitates all Welsh universities to work together to help solve local and global challenges. Already we can see that the small sums invested into pump-priming projects through WIN, totalling just under just under £2.3m between 2021-2024, have generated nearly £40m in successful follow-on bids during that period. Acting as an engine for collaborative work across universities, the public, private and third sectors, WIN has helped to leverage funding at scale to support projects with impact across a wide range of themes: from advanced engineering and materials to the circular economy, and from health and wellbeing to cyber security.
R&D ecosystems vary considerably across the regions of the UK. I have argued elsewhere that the UK as a whole requires a more joined up skills and R&D ecosystem and that expert-led Regional R&I Investment Oversight boards (RRIIOs) could help better coordinate regional R&I and skills activities supported by the various innovation-led activities, including funding agencies, city deal investments, free ports, investment zones and prosperity funding. In Wales specifically, our innovation activity needs to be attuned to the fact that SMEs account for a higher proportion of business interests.
And we need this work to be aligned within Welsh government. A government that backs Welsh universities in areas such as advanced manufacturing, compound semi-conductors, data-driven life sciences and nuclear research. One way to signal such joined up purpose would be to appoint a Minister for Science, Research and Innovation in the next government, charged with aligning the R&D vision across government and working alongside private and public research establishments to drive even greater R&D investment and success.
Further investment in R&D in Wales is not a ‘nice to have’ for the higher education sector alone. It will underpin our future economic growth. We need a vibrant R&D ecosystem to stimulate spin-out companies; provide them with the resources to scale up; attract venture capital; encourage major companies to locate in Wales and to make them stay. Let’s not forget that many of the spin-out companies in Wales come from universities, and that between 2014-15 and 2022-23 there was a 100% increase in the number founded, compared to a growth rate of 70% in the UK as a whole. More than 3,000 companies emerged in that time, and by 2028 it is anticipated that a further 2,000 new start-ups, with a predicted turnover of £550 million, will likely be established through our universities. Wales even has the highest proportion of university student start-ups per capita in the UK.
The aim within Wales should be to work collaboratively to accelerate the journey from breakthrough to business, to support our innovators at every stage, and ensure that public investment in research delivers broad economic and societal benefit. The Scottish government has recognised the need to utilise public funds to stimulate spin-out activity, re-launching its £3m ‘proof-of-concept’ fund, which has been running as a pilot in 2025–26. The Scottish National Investment Bank, in collaboration with Scottish universities and the Scottish Government, is also developing a ‘dedicated investment initiative’ which will focus on university spinouts and early-stage start-ups.
There are lessons here for a new Welsh government who could direct the Development Bank of Wales to work with universities to develop a proof-of-concept, start-up and scale-up fund with a clear intention to generate matched venture capital funding from the UK and overseas. With appropriate support, we can do better. Within Wales, we need to be bold in identifying and backing our unique strengths, and we need this clarity to be owned collectively by the sector and the new Welsh Government. We know that our research sector is both a key driver of national prosperity and an internationally respected asset in its own right; one which inarguably enhances the reputation and status of our nation around the world. We also know that we have an opportunity to attract considerably more UK and European R&D funding than we currently achieve, which could enable us to supercharge those impacts.
A new government, focused on improving Wales’ economic fortunes, has an opportunity to reinstate the funding shortfalls that have held the nation’s universities back. To play their part in a brighter economic future, universities in Wales simply need to be able to compete on an even playing field.
Want to understand more about Wales and higher education?
Read HEPI and London Economics’ recent report on higher education funding in Wales, as well as a blog on Plan 2 student loans in Wales.
In 2024, to mark 25 years since the devolution of powers to Scotland, Wales and Northern Ireland, HEPI and The Education Group London published the collection of essays ‘Evolution of Devolution‘. It provides a comprehensive analysis of how higher education policies in England, Scotland, Wales and Northern Ireland have evolved over the past quarter of a century.
