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Policy and funding

Autumn Budget and Spending Review 2021 – IOP analysis

29 October 2021

The package of government spending will go some of the way to supporting physics-based industries, but any delay in meeting STEM investment targets threatens the progress of UK innovation. 

The Autumn Budget and Spending Review 2021 (SR) was an opportunity to accelerate the UK’s economic recovery, supercharge its progress to becoming a science superpower, level up the nation and invest in the education, skills, research and development (R&D) and green technologies required to meet the nation’s net-zero targets.

Presenting the economic forecast, the chancellor announced that the economy is in the process of recovering from the COVID-19 pandemic, and announced that Overseas Development Assistance (ODA) spending will return to 0.7% by 2024-25. This will be a welcome return to pre-pandemic levels of ODA, which supports life-changing international science and innovation partnerships around the world.

The package of government spending will go some of the way to supporting economic recovery and achieving the UK’s national goals. The IOP has welcomed HM Treasury’s continued commitment to achieving annual investment of 2.4% of GDP in R&D by 2027, whilst expressing disappointment about the target being delayed from 2024-25 to 2026-27.

As the physics-based industry sector alone accounts for 10% of GDP in the UK, any delay in meeting STEM investment targets will slow the progress of UK innovation. This will directly impact nationwide economic performance and harm the Levelling Up agenda through limiting regional investment in skills, local business growth, and productivity, restricting the economic potential of target areas.

The £20bn committed to R&D includes funding to uplift core Innovate UK programmes by around £1bn per year by 2024-25. This investment will support late-stage development of research, which will remove barriers to the scale-up and commercialisation of next-generation tech and innovation. These investments will bolster R&D in the sector, as findings from the IOP’s Innovation Survey show that 67% of physics innovators in the UK say long-term funding schemes could encourage more R&D/innovation activity in the next five years.

This investment must not displace funding for early stage, blue-skies discovery research.

UK membership to Horizon Europe, and other EU science programmes, will be fielded from the science budget. The impact of this on the domestic budget remains a concern for the sector, and the IOP continues to call for association to be secured immediately, to enable the continuation of ongoing projects now facing financial risk.

The chancellor also announced investment in areas of cutting-edge STEM innovation, such as in the aerospace sector, quantum computing, AI, bioinformatics and space technologies; and a core funding increase for the UK’s world-leading universities and research institutions of £1.1bn per year more by 2024-25 compared to 2021-22.

The SR launched the £2.6bn UK Shared Prosperity Fund (UKSPF) and the £1.4bn Global Britain Investment Fund, designed to level up the UK and spread economic opportunities more evenly across the country by supporting investment in the life sciences, offshore wind and automotive manufacturing sectors. Both these funds have the potential to create new opportunities for current and future STEM workers around the nations.

The UK’s economic recovery and future prosperity are dependent upon people in all parts of the country having the opportunities, knowledge and skills needed to realise their full potential in productive employment. The Plan for Jobs, the Lifetime Skills Guarantee, and £3.8bn committed to developing skills by 2024-25 show the importance the government places on equipping the population for the significant skills demands our nation will face in coming years, as we navigate our way towards a net-zero economy and progress through the Fourth Industrial Revolution.

However, there is a skills gap within the STEM sector. Around one in 20 jobs in the UK make use of physics-related knowledge and skills, and skills shortages threaten to derail plans to increase investment in physics-based R&D/innovation, causing delays to projects, missed targets and missed opportunities.

For the UK to fully seize the opportunities offered by increased investment in R&D, and build a more innovative economy, we need an equally significant increase in the scale of investment in the skills revolution, and emphasis to be placed on improving diversity within the STEM workforce such as tackling the conscious and unconscious biases which exist that put off underrepresented groups from studying physics post-16 as highlighted in IOP’s Limit Less campaign.

Additional investment in science education and training is needed to boost students’ attainment and progression at school and upskill those already in employment.

Read the reaction of IOP group CEO Paul Hardaker.

Read the IOP’s submission to the 2021 Comprehensive Spending Review.

Find out more about IOP Policy.