Strategic Research Programme 2011-2016: economic impact

13 Core Economic Impacts

This section describes the economic impacts that the Scottish Government's SRP generates through its funding, as well considering funding that has been leveraged based on Strategic Research, including:

• the direct impact of the programme including the staff that are employed and the value it adds directly to the economy;
• the impact of expenditure on goods and services related to the funding;
• the impact of expenditure by staff supported; and
• the impact of capital investment related to the funding.

13.1 Direct Impact

The direct impact of any organisation or programme to the economy is the value it adds to the economy and the direct number of jobs it supports. Direct GVA is calculated by subtracting expenditure on goods and services from total income.

The total income of the MRPs from the SRP in the period between 2011/12 and 2015/16 was £246.0 million. This represents an average income of £49.2 million over the five year period and £47.5 million in 2015/16. Over the period the Scottish Government allocated £189.1 million funding to the strategic research programmes, £51.0 million to support the underpinning capacity of the MRPs and a further £5.9 million to support capital investment by the MRPs.

As can be seen in Figure 13.1, about half of the funding over the total period has gone to the James Hutton Institute (this includes the income of Biomathematics and Statistics Scotland, and its impact is included as part of the James Hutton Institute's throughout Chapter 4), followed by the Rowett Institute (18%), Scotland's Rural College (17%) and the Moredun Research Institute (14%). The Royal Botanic Garden did not receive any direct funding over this period.

Figure 13.1: Strategic research funding by institution

Source: Scottish Government

Based on supplier spending and SRP funding as a proportion of total income, which were either sourced from annual accounts or from the institutions directly, it was possible to estimate the supplier spending at each institution supported by the SRP. Over the period of the programme this supplier spending amounted to £91.8 million, and was equal to £17.7 million in the most recent year.

Over the period of the programme, the average level of employment supported by the SRP was 390 jobs, falling from 411 in 2011/12 to 374 in the most recent year. A break-down of the type of staff posts supported is provided in Table 13‑1. This shows that more than half the posts funded were associated with the Food Land and People Programme and around 18% related to underpinning capacity. It also shows that almost half of the posts funded (48%) were natural scientists, 44% were for technical and support staff and 8% were social scientists.

Table 13‑1: Staff posts supported

	Environmental Change Programme	Food, Land & People Programme	Underpinning Capacity	Total	% of Total
Natural scientists	54.5	82.9	37.3	174.7	48%
Social scientists	12.3	14.5	3.3	30.0	8%
Technical & support staff	42.8	93.5	24.3	160.6	44%
Average*	109.6	190.9	64.8	365.4
% of total	30%	52%	18%

The James Hutton institute was responsible for 45% of the average employment supported, while Scotland's Rural College and the Rowett Institute were responsible for 21% each, the Moredun Research Institute 12%, and the Royal Botanic Garden 1%.

Figure 13.2: Strategic research employment by institution

Source: Scottish Government

Therefore, it was estimated that over the period of the programme, GVA was equal to £154.2 million GVA and the average employment was 390 jobs supported annually, as shown in Table 13‑2.

Table 13‑2: Direct impact (2011-16)

	Scotland	UK
Direct GVA (£m)	154.2	154.2
Direct Jobs (average)	390	390

Source: BiGGAR Economics Calculations

13.2 Funding Leverage

Over the period 2011-2016 the MRPs used the funding they received through the SRP to leverage in £94.3 million of further research funding from other sources. This funding was either directly related to RESAS research or was provided to support research that built on research previously funded by the Scottish Government. A summary of the sources of this funding is provided in Table 13‑3.

Table 13‑3: External research funding leveraged

	2011/12	2012/13	2013/14	2014/15	2015/16	Total
Research Councils	2.2	3.0	4.0	5.2	5.1	19.4
EU	6.9	6.6	4.7	5.2	5.7	29.2
DEFRA	4.1	2.5	1.7	1.9	0.9	11.2
Other Scot. Gov.*	2.4	1.8	2.0	1.8	1.2	9.2
Other	4.3	4.5	5.4	5.9	5.2	25.3
Total	19.9	18.4	17.9	20.0	18.1	94.3

Source: Scottish Government * Includes RESAS Contract Research Fund

The MRPs also generated £54.2 million revenue from industry that was either directly related to RESAS research or was provided to support research that built on research previously funded by the Scottish Government. A summary of this revenue by source is provided in Table 13‑4.

Table 13‑4: Industry funding leveraged

	2011/12	2012/13	2013/14	2014/15	2015/16	Total
Contract Research	3.6	4.5	6.4	5.8	5.3	25.7
Intellectual property income	0.5	0.6	0.6	0.7	0.6	3.0
Innovate UK/ TSB and Link grants	3.5	2.4	1.9	1.6	2.3	11.7
Other commercial activity	3.5	2.5	3.2	2.5	2.1	13.8
Total	11.2	9.9	12.1	10.6	10.4	54.2

Source: Scottish Government

In total, over the period 2011 - 2016 the MRPs were able to leverage £148.5 million in additional research funding from industry and public sources as a result of the funding provided through the SRP. This implies that for every £1 that the MRPs received in SRP funding, they were able to leverage in a further 60p in additional research and industry funding. This is summarised in Table 13‑5.

Table 13‑5: Funding leverage

	Total 2011 - 2016
Total SRP funding	246.0
Total additional funding leveraged	148.5
Leverage ratio	0.60

Source: Scottish Government

By considering the income leveraged by each institution, and the respective funding/staff and funding/expenditure on goods and services ratios it was possible to estimate the direct impact of this additional income. This was estimated using the same method as outlined in Section 13.1.

In this way it was estimated the direct impact of this leveraged funding totalled £86.9 million GVA and supported an average of 220 jobs over the period 2011-16 (Table 13‑6).

Table 13‑6: Leveraged Funding Impact (2011-16)

	Scotland	UK
Direct GVA (£m)	86.9	86.9
Direct Jobs (average)	220	220

Source: BiGGAR Economics Calculations

13.3 Supply Chain Effect

The Scottish Government's programme funding also has an impact on the economy though the purchases of goods and services that the funding supports, as this generates turnover and employment in the companies that supply the MRPs. The level of supply expenditure was estimated based on the level of supply spending as a proportion of all income, then multiplied by the income MRPs received from the SRP.

In order to calculate the economic impact of this spending it was also necessary to establish from which sectors of the economy supplies were being purchased. Each industry has different levels of productivity and staffing requirements, therefore the same level of turnover can have different GVA and employment impacts. As BiGGAR Economics has recently undertaken studies for the James Hutton Institute and the Moredun Research Institute, and is currently undertaking an analysis of Scotland's Rural College, the average proportions of supply spending in each industry from these institutions were applied the level of supply spending supported. The average across all of the institutions was then applied to the Rowett Institute to provide an estimate of the impact of the Institute's spending on supplies.

Expenditure in each of these industries will then represent an increase in turnover of the businesses involved. The economic impact of this increased turnover was estimated by dividing total turnover in each industry by the appropriate turnover/ GVA and turnover/employee ratios.

The level of supplier spending in Scotland and the UK was also adapted from the previous and on-going economic impact studies undertaken. The indirect economic impact of this expenditure was then estimated by multiplying the GVA and employment supported by the appropriate GVA and employment multipliers.

Therefore, impact of supported expenditure on goods and services was estimated to have contributed £49.5 million GVA over the period of the programme and 157 jobs annually in Scotland, and £85.9 million GVA and 268 jobs annually in the UK.

In order to estimate the economic impact supported by the leveraged funding the GVA/income and jobs/income ratio were applied. In this way it was estimated that the leveraged impact would be £33.2 million GVA and 105 jobs in Scotland, and £57.6 million GVA and 180 jobs in the UK.

Table 13‑7: Supplier impact from MRP expenditure (2011-16)

	Scotland	UK
Direct Funding
Total GVA (£m)	49.5	85.9
Jobs (average)	157	268
Leveraged Funding
Total GVA (£m)	33.2	57.6
Jobs (average)	105	180

Source: BiGGAR Economics Calculations

13.4 Staff Spending Effects

In order to calculate the economic impact of staff expenditure it was first necessary to estimate the level of staff spending supported by the SRP. This was estimated by considering the ratio of staff costs to income at each institution and then multiplying this by the funding provided by the programme. At institutions where data on staff costs was not available, it was estimated based on the average percentage of income spent on staff salaries.

It was then assumed, based on previous BiGGAR Economics studies, that all members of staff would live in Scotland. Based on Scottish input-output multipliers, it was also assumed that staff would spend 74% of their salaries in Scotland and 93% in the UK, and that 8% of staff spending would go towards VAT. ^[37]

As staff spending would increase turnover in businesses across the economy, the economic impact was estimated by applying turnover/ GVA and turnover/employee ratios to staff spending, and the indirect impact was estimated by applying the appropriate GVA and employment multipliers. Over the period of the programme it was estimated that staff spending generated a total of £73.6 million GVA and, on average, supported 263 jobs annually in Scotland, and £104.1 million GVA and 368 jobs in the UK.

In order to estimate the impact from leveraged funding it was necessary to calculate the GVA/income and jobs/income ratio supported by the direct funding. After applying these ratios it was estimated that the leveraged funding generated £62.8 million GVA and supported 224 jobs in Scotland, and generated £88.8 million GVA and supported 314 jobs in the UK.

Table 13‑8: Staff Spending Impact (2011-16)

	Scotland	UK
Direct Funding
Total GVA (£m)	73.6	104.1
Jobs (average)	263	368
Leveraged Funding
Total GVA (£m)	62.8	88.8
Jobs (average)	224	314

Source: BiGGAR Economics Calculations

13.5 Impact of Capital Investment

Capital expenditure supported by the SRP also has an impact on the economy, generating additional turnover in the manufacturing and construction sectors. Capital expenditure support from the programme was estimated to average £1.7 million annually, based on the ratio of capital expenditure to income at the institutions for which there were data.

Based on information from the institutions, and the average where this was not available, it was estimated that 84% of capital spending occurred in Scotland and 93% occurred within the UK. It was also calculated that the 39% of capital spending is spent in the construction industry, and 61% is spent on equipment, of which half was assumed to be spent in the manufacturing industry and half in the wholesale industry.

In order to capture the direct effects of increased turnover in these industries, turnover/ GVA and turnover/employee were applied. It was then necessary to apply GVA and employment multipliers to capture the indirect effects.

In this way it was estimated that capital spending supported by the programme contributed £5.3 million GVA over the period of the programme and supported an average of 11 jobs annually in Scotland, and £6.1 million GVA and 14 jobs annually in the UK.

The leveraged funding made possible by the Scottish Government research also makes additional capital spending possible. By applying the ratio of GVA/income and jobs/income it was possible to estimate that over five years this funding supported £3.2 million GVA and an average of 7 jobs in Scotland, and £3.7 million GVA and an average of 8 jobs in the UK.

Table 13‑9: Capital Spending Impact (2011-16)

	Scotland	UK
Direct Funding
Total GVA (£m)	5.3	6.1
Jobs (average)	11	14
Leveraged Funding
Total GVA (£m)	3.2	3.7
Jobs (average)	7	8

Source: BiGGAR Economics Calculations

13.6 Summary

When the impact associated with the Scottish Government's direct funding, and the impact associated with the leveraged funding are summed, the total impact over five years is estimated to be £468.9 million GVA and an average of 1,377 jobs in Scotland, and £587.3 million GVA and an average of 1,763 jobs in the UK.

Table 13‑10: Core Impacts (2011-16)

	Scotland	UK
GVA (£m)
Direct Funding Impact	282.6	350.2
Leveraged Funding Impact	186.2	237.1
Total	468.9	587.3
Jobs (average)
Direct Funding Impact	821	1,040
Leveraged Funding Impact	556	722
Total	1,377	1,763

Source: BiGGAR Economics. Note, totals may not sum due to rounding