Leader: Struggling in a global market

Virtually every university has a well-resourced research office whose aim is to bring in cash from the Government, charities, companies and overseas funders. They seem to be a success: UK higher education earned more than £4.5 billion in research funds in 2003-04, with income rising steadily from charities and from Europe.

But as we report, there is a serious exception to this positive picture. Industry is spending less on research in British universities.

Even this might not matter if companies were lavishing money on their own labs but, despite Government subsidies, spending on industrial research is barely above 1 per cent of gross domestic product. Like its transport system, the UK's low research spending is regarded by economists as a drag on national competitiveness.

The Government recognises companies' lack of enthusiasm for research as a problem and has taken steps to encourage them to spend more. But this week's report suggests that the trend remains in the opposite direction to that intended by Chancellor Gordon Brown. Nottingham University believes that the source of the problem may lie in government moves to make institutions charge for the full costs of research. If so, the drop in income may be for the best; it is not in universities' interests to do business at a loss. But the broader picture suggests a more threatening explanation, rooted in the globalisation of the world economy. The companies most likely to spend heavily on research are in fields such as aerospace and pharmaceuticals, where even those with a substantial presence in the UK are global and can buy research across the world. All the signs are that the UK contains the world-class researchers that such firms want to do business with. But in Asia especially, talent is available much more cheaply than in Europe.

One additional problem is that many academics are yet to adjust to the demands of industrial customers, who are motivated by very different considerations from those that drive research councils. Firms guard their intellectual property jealously, and want academic partners who are willing to work collaboratively and can react quickly to changing demands. Many US academics are used to operating this way. Academic integrity must not be compromised, but there ought to be ways of coming to terms with such new ways of working. Otherwise, there is a danger of being upstaged by new competitors when universities and the British economy can least afford it.