Research England proposes a HEIF overhaul

The current set-up of the Higher Education Innovation Fund (HEIF) formula can “lack agility,” Research England has concluded.

As it stands, higher education institutions in England receive HEIF funding (£284m in 2026–27) based on a formula which takes into account a variety of knowledge exchange indicators, in everything from IP to consultancy income to non-credit bearing teaching provision. The way the allocation formula works has developed somewhat organically over time – primarily through “supplements”, such as for commercialisation activity – rather than any wholesale reform.

This, the funder’s new consultation suggests, has created rigidity:

“The current architecture has become increasingly difficult to adapt, target and explain. Most importantly, it limits Research England’s ability to direct funding towards specific economic growth outcomes without creating unintended consequences elsewhere in the funding model.”

The observation that HEIF’s relatively complex design being hard to explain is notable. Research England’s ongoing transparency programme is designed to make its institutional funding more transparent to government – and in doing so strengthen the case for the future.

The new consultation, which runs until January, takes as its starting point the fact that the HEIF formula does not current serve as an “effective policy lever” – meaning that when UKRI or government priorities change, it is unwieldy to use HEIF as a tool to respond to these. The promotion of place-based growth is given as the example here, unsurprisingly in light of the Burnham administration’s recent emphasis on it.

In unpacking what’s being proposed, it’s probably worth flagging from the beginning what’s not changing. HEIF is going to continue to be a flexible block grant: “institutions will retain discretion over how they use their funding to deliver their own knowledge exchange objectives, informed by local opportunities, partner needs and organisational strategy.”

Most of the current metrics used will remain in place, Research England’s review and stakeholder engagement has concluded. Income-based measures will remain central to the formula: “no alternative set of metrics was identified that would provide a more robust, transparent and proportionate basis for allocating funding at a national scale.”

So this means that knowledge transfer partnership income will continue to be used, as opposed to wider Innovate UK funding (which was considered). Collaborative research income will continue to be excluded, as will income generated through the sale of shares in spin-outs. There’s plenty in the detail of the consultation that’s worth deeper unpacking, and we’ll return to particular aspects in future analysis.

The proposal

Research England is proposing to replace the system of separate supplements and allocations with one unified framework. That is to say, this would see the end of the current top-up allocation and the business and commercialisation supplement.

The new structure being consulted on is for all HEIF funding to be distributed through one formula, made up of four dimensions: partnerships, commercialisation, skills and entrepreneurship, and local growth. The current HEIF metrics would be assigned to one of these four elements.

And there’s even a suggested breakdown of how the currently planned £280m budget might break down across these, though this is heavily caveated as depending on both the budget being fully confirmed across future years, and the outcomes of the consultation:

Research England says that its intention is that each dimension’s budget would remain “relatively stable over time,” with changes corresponding to HEIF accountability periods – but that it would reserve the right to amend dimension budgets more frequently where there is a clear evidence-based rationale to do so,” for example when government priorities changed.

That said, the ability to vary the weighting of each dimension is presented as the solution to HEIF’s current inability to serve as an effective policy “lever”:

“A key feature of this approach is that it provides a clearer link between HEIF funding and the different growth outcomes that Research England seeks to support. Rather than introducing separate supplements or funding streams when new priorities emerge, Research England would be able to adjust the proportion of funding associated with each dimension, increasing incentives for particular growth outcomes and investment in institutions that are most effective in delivering them.”

The thinking appears to be that if a government wants to go big on local growth, for example, or entrepreneurship, then there’s a mechanism to achieve this – and crucially, one which is transparent to ministers and to Whitehall. This does not, however, mean that the allocations received by institutions would be ringfenced to specific kinds of activity.

Another part of the flexibility – though one which can imply further technical policy change in future – is that once the four dimensions are established, the metrics can be varied and/or improved.

The new local growth dimension is politically topical, evidently, even if as stands only attracting a relatively low share of the new HEIF. In 2027–28, an interim approach will be used, in which regeneration income will be used as the sole metric – but the development of “more sophisticated approaches to measuring and incentivising local growth” is said to be a priority for the future.

The one metric which is being overhauled is the use of income from non-credit bearing provision (drawn from Office for Students data) – this would be replaced by the continuing professional development and continuing education income data from the HESA HEBCI dataset. Research England’s review is said to have concluded that this “provides a stronger representation of the knowledge exchange activities that underpin the skills and entrepreneurship dimension” – though it is recognised that this could potentially reduce the HEIF allocations received by around 20 per cent of providers.

Changing the formula

While the mechanics of what HEIF rewards will be pored over, it’s arguably the formula used to then generate institutional allocations that will provoke the most thought within the sector.

The current set-up uses performance over three years, with weightings for recency, and annual modifiers limiting the increase or decrease which take place in any one year. There is a minimum threshold of £250,000 (temporarily higher for new entrants) as well as a maximum allocation cap.

All these aspects of the formula are being consulted on, though several of the exact thresholds are not – they will be a policy decision for Research England to take at a later point.

What’s proposed is using four years of data instead of three – equally weighted – and removing the modifiers which limit increases and decreases. This latter reform would reduce “the extent to which allocations become detached from underlying performance over time”:

“Research England’s modelling shows that a substantial proportion of providers’ allocations are now constrained by either the upward or downward modifier, due to repeated application of the modifiers.”

Said modelling also shows that four years of equally weighted data should deliver a “broadly similar level of stability” to the current method – though some institutions may experience “larger changes in allocation than would be possible under the current system.”

At the lower end, rather than a minimum cut-off to receive HEIF funding there would be two tests to fulfil (summarised in a flowchart on page 35). First, a “breadth test”, to provide “assurance of established and strategically intentional knowledge exchange activity across multiple areas.” The indicative example given would see an institution required to meet a threshold at two per cent of the sector’s mean across at least three qualifying income elements. This would be complemented by a “depth threshold” – similar to the current approach, but relative to overall sector performance rather than an absolute figure. The value of this threshold is not being consulted on – an example of eight per cent is given as an illustration.

In terms of maximum HEIF allocations for the largest and most research-intensive institutions, this would apply to overall award rather than by dimension. As above, the HEIF “top-up” for high performing institutions is being removed, so where the line is drawn will become a question of some importance for larger universities – but the exact cap is not being consulted on.

It’s your letters

The reforms are envisaged to be in place for 2027–28 allocations. The consultation is open until 15 January – English higher education institutions and sector groups will have lots to say.

As we’ve seen, it shouldn’t be underestimated how the desire for HEIF to work better as a “lever” comes in response to a perceived need for research funding to be more transparent to ministers and policymakers. This does, however, raise the spectre of HEIF becoming less predictable as government priorities change – local growth one day, entrepreneurship the next, and spinouts the political focus in the following period. The four dimensions do look set to make HEIF more easily understood at a glance; the formula then being open to more tinkering (especially as the metrics within each will be subject to revision) is the inevitable trade-off.

At the institutional level, issues around minimum and maximum caps and the potential for drops in allocation will loom large. While the consultation doesn’t cover exactly how these will play out, respondents will still be looking to make their case in a forthright way about how both smaller and larger institutions end up sharing out the HEIF pot.