UKRI pinpoints £11.6bn of higher education cross-subsidy

UKRI has published its annual analysis of Transparent Approach to Costing (TRAC) data, using Sankey diagrams to visualise how different higher education funding streams did, or did not, cover their costs in 2024–25.

The publication is essentially the same data (with some minor differences) as the Office for Students’ TRAC release from August – see Research Agenda coverage here.

UKRI’s analysis does highlight the overall cross-subsidy between different areas of activity – that is to say, how funding streams which cover their costs, particularly international student tuition, is used to make up for shortfalls in areas which do not, in particular research.

The sector aggregate cross-subsidy required for 2024–25 is put at £11.6bn, largely flowing to research – in particular, postgraduate training and institution-funded research – but also supporting the teaching of domestic students as well. UKRI’s way of calculating total cross-subsidy includes the almost £2.5bn in QR funding for the year, which is then allocated to different areas of activity by institutions.

The report also contains a short key findings section, in which UKRI considers the reason for the gap between total research income and the associated costs of performing it:

“The gap between the income received for research and the costs of undertaking research activities arises from a number of factors, including strategic decisions made by HEPs regarding their research portfolios and the various funding flows that combine to make up the full economic costs of grant-funded activity, support for postgraduate research training, and institution-own funded research.”

The report also notes that the sector-level analysis can only approximate institution-level practices in mapping income to costs – and that the TRAC data includes an additional element which measures the funding required to sustain future levels of investment (known as MSI – see our original TRAC coverage for further detail).