Next Wednesday’s Spending Review could be the defining fiscal moment of this government. But what will it mean for London’s higher education institutions and their role in delivering national growth?
As the government prepares to set out its three-year spending plans, the decisions made on 11 June will directly shape higher education funding, research investment, and the capital infrastructure that supports our institutions. While the move towards longer term spending plans is a positive step for national governance, the wider fiscal context means that many departmental budgets are likely to see little or no growth. Both Chancellor Rachel Reeves and ministers across government have been clear that they are operating within extremely tight constraints.
The London context
For London’s universities, the stakes are particularly high. The capital’s higher education institutions generate £27 billion in economic output and support 125,800 jobs across the capital. Each year, London produces 140,000 skilled graduates—the highest number of any city in the world. Our institutions are well placed to contribute through research, innovation and skills development, and could play a central role in delivering on national ambitions. As our Powering London report highlights, the sector already delivers substantial impact.
The capital could face specific challenges within tight fiscal constraints and the sharp end of a regional agenda. The Chancellor’s commitment to £15 billion in transport investment ring-fenced for outside London signals a concerning trend. If this regional prioritisation extends to innovation funding and other policy areas, London institutions will need to advocate strongly for the capital’s role as an engine of growth for the entire UK. Rather than viewing London as competing with other regions, the evidence shows our universities generate benefits that extend far beyond the capital. London Higher’s Capital Gains map demonstrates the extent to which research and development in London’s institutions benefit the rest of the UK.
Opportunities and risks
The publication of the industrial strategy white paper alongside the Spending Review could be reason for cautious optimism. This alignment offers an opportunity to shape and support growth in areas where the capital’s higher education sector already has significant strengths, such as life sciences, digital technologies and the creative industries.
London is already a leading centre for university spinouts and student entrepreneurship, with Camden and Westminster alone producing as many spinouts as Belfast and Manchester combined. Four in ten of all UK student start-ups are founded at London universities.
Furthermore, London’s medical schools and research institutions are uniquely positioned to support NHS workforce development and advance research in health and artificial intelligence—both government priorities. This alignment could create opportunities for targeted investment in London.
However, the government’s emphasis on mission-led research could threaten quality-related (QR) funding—a crucial support for the curiosity-led research that underpins long-term innovation. For London’s world-class research-intensive institutions, any tightening of this funding stream would be particularly damaging.
Looking ahead
The scale and concentration of talent, research and enterprise places London’s higher education sector at the heart of the capital’s growth and its contribution to national prosperity. However, this will require meaningful investment and clear long-term planning. It will also be important to look closely at the numbers. There is a pattern of reannouncing or repackaging existing funding, and without genuine new resources or clarity on delivery, there is a risk that the strategy’s impact will be more limited than the rhetoric suggests.
The Prime Minister’s commitment to increase defence spending is a clear signal of where additional investment will be prioritised. At the same time, recent shifts such as the more flexible approach to the Winter Fuel Payment and growing speculation about lifting the two-child benefit cap will place further strain on the available fiscal headroom for the Chancellor.
Given the constrained fiscal environment and the possibility of a growing regional agenda, we await to see whether the government will harness London’s capacity to deliver national objectives in Wednesday’s announcements. For London’s higher education institutions, this means advocating not only for what we need, but for all we can contribute to the UK’s economic future.
Mark Corbett, Head of Policy and Networks at London Higher
