Report

UK Research and Innovation’s management of the Industrial Strategy Challenge Fund

The Department for Business, Energy & Industrial Strategy  has overall responsibility for the government’s spending on science, research and innovation. One of its objectives is to deliver the UK’s Industrial Strategy by, among other things, promoting investment in science, research and innovation to make sure the government’s ambition of the UK becoming the ‘most innovative country’ is fulfilled.

The Industrial Strategy Challenge Fund – the responsibility of UK Research and Innovation (UKRI) – supports the Industrial Strategy’s objective to raise long-term productivity and living standards by supporting four ‘grand challenges’ (future mobility; clean growth; artificial intelligence and data; and the ageing society). UKRI invites bids from business and academia to identify important ‘challenges’ faced by the UK that might merit financial support from the Fund. Once a challenge is approved by ministers, organisations are invited to bid for projects that will contribute to that challenge. By January 2021 the Fund was supporting 1,613 projects, contributing to one of the 24 approved challenges. To date, UKRI has spent around £1.2 billion of the Fund’s eight-year budget of £3 billion.

Scope of the report

This report examines whether the Fund has been set up in a way likely to optimise value for money. The report examines:

• the establishment of the Fund, in particular whether it has attracted sufficient good-quality bids, whether the selection processes have been efficient and whether the budget is managed effectively (Parts One and Two); and
• the approach to monitoring and evaluating the Fund’s performance, as well as its performance to date (Part Three).

Report conclusions

In the three years since the Fund – £3.0 billion of support to industry and academia to help solve the economy’s and society’s most complex issues – was introduced, UKRI and the Department have worked well to generate interest from industry and academia. Over that period, government has enhanced its engagement with industry to seek out challenges which might benefit most from taxpayer support.

UKRI’s own assessment shows that the Fund’s key components – challenges and projects – are broadly performing well. To sustain this position, the Department and HM Treasury, working with UKRI, need to place more emphasis on the outcomes and impact its funding secures at the Fund level. The increasing number of challenges supported by the Fund, each with their own objectives, and range of different objectives at Fund level risk obscuring priorities and will make the assessment of value for money in the longer term more difficult. UKRI, the Department and HM Treasury need to look again at the drawn-out process for selecting and approving challenges and projects, to ensure that good applicants are not deterred from putting forward bids.