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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is an honorary professor at UCL and former CEO of Digital Catapult
There has been much excitement at the UK government’s plan to invest in artificial intelligence. The country’s reputation as a global research and talent developer is proof of the immense contributions made by our leading universities. However, recent economic and social changes have put the business model of universities in crisis. This threatens their ability to maintain the country’s reputation for developing AI pioneers such as Alex Kendall of Wayve and Sir Demis Hassabis of Google DeepMind.
Funding PhDs is a cornerstone of our track record. Unfortunately, PhD students with UK Research and Innovation funding in the UK fell under the previous government from 6,835 in 2018-19 to 4,900 in 2022-23, according to Times Higher Education.
The flow of gifted researchers from around the world is a key revenue driver for our leading research universities. For one thing, UK universities are heavily reliant on these students to deliver teaching. The average stipend for a UK PhD student is around £20,000. These low-paid PhD candidates therefore bring enormous value to the UK. Quite simply, without a healthy PhD student population in this country, our capacity to deliver university teaching and carry out research will collapse.
Better still, talented PhD students and their start-ups are the hunting ground of global technology companies, attracting investment into the UK. The research that these individuals deliver under the tutelage of established academics is producing the foundational algorithms that play a key role in the global AI revolution.
If that hunting ground dries up because the flow of PhD students declines, big global tech players will look elsewhere. International academics will give up and move abroad. The economic value of our universities will decline in turn.
This is a challenge that UK universities have been facing since Brexit, which reduced the number of international students from the EU, and the new government’s industrial strategy, which risks diluting focus across multiple policy areas.
The truth is that the business model of universities is poorly understood by many in government, even those who fund the sector. The majority of the population tends to only think about universities as places that teach undergraduates. But the engine of their innovation, growth and value lies in the work that is delivered by postgraduates, both PhDs and postdoctoral researchers.
These two areas are rarely examined together. Their funding is divided. The Office for Students is an independent non-departmental public body that reports to the Department for Education. It manages the viability of undergraduate teaching programmes and certifies degree-awarding powers in England. It also distributes an average annual budget of about £1bn in grants. But research, development and innovation are funded by UKRI, a separate body overseen by the Department for Science, Innovation and Technology. Because they are split apart, it has been rare for anyone in government to look at the whole model.
Too often the disbursement of PhD funding is driven by the politics of levelling up — redistributing funds to underperforming and neglected regions. This leaves the powerhouses of research and innovation that have brought significant economic benefit to the UK struggling to remain viable. Indeed, the whole innovation landscape is littered with different kinds of institutions attempting to collaborate despite various layers of regulation and governance policies that in effect keep them apart.
Government tech adviser Matt Clifford’s excellent AI action plan references many of the technology’s opportunities for the country. But if we really want to build an AI growth programme for the UK over the long term, then we need to realise that the UK university business model is in urgent need of reform.
We can learn much from the way in which US universities such as MIT and Stanford fund their PhD programmes by encouraging greater numbers of external funders to offer scholarships and support. We also need to streamline the academic pipeline from research to development to innovation so that all those involved — from universities to technology centres known as “catapults” to start-ups to major industry — work together and not in competition.
If the UK is to capitalise on its existing institutions, we need a root-and-branch examination of PhD funding, including whether the current agencies are optimal for disbursing precious government resources. AI provides a catalyst for change. A new strategy cannot come soon enough.
