Universities should save about ?80 million a year on research costs in an efficiency drive that could be boosted by greater research concentration, a report advises.

The report by Sir Bill Wakeham, former vice-chancellor of the University of Southampton, recommends that institutions make annual efficiency savings of 5 per cent from the indirect costs of research - covering areas such as libraries and administration - for the next three years.

That would add up to savings of ?40 million a year for the research councils by 2013-14, along with a potential ?40 million for other research funders.

Funding constraints mean higher education must find "economies in the overall costs of research", Sir Bill says in the report, which was published on 24 June.

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Full economic costing (FEC) was introduced by the government in 2006 because about a third of the costs universities attributed to research were not covered by research income, leaving a ?2 billion "research deficit".

The Labour government commissioned Sir Bill's review in November 2009. Concerns were raised in the sector that it could pose a threat to FEC.

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Research Councils UK said that it, Universities UK and the funding councils would now discuss the report with the government to "determine the way forward".

The report, Financial Sustainability and Efficiency in Full Economic Costing of Research in UK Higher Education Institutions, notes that research deficits vary across institutions, and that indirect costs are generally lower as a percentage of total research income in institutions with more research income.

"We recommend that the funding councils and research councils keep under review their policies with respect to research selectivity and concentration in the light of the gains in efficiency that might be made," it says.

The estates costs associated with research are not included in the report's recommendations for savings.

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It notes: "The increase in indirect costs is not surprising, given that about 55 per cent of indirect costs are staff-related and recent increases in salaries and associated pension costs have been significant in the sector."

Sir Bill said: "Whether institutions decide to reduce staff depends on how they respond to this requirement."

He added that institutions may choose to switch support from research to teaching rather than cutting back on staff numbers.

john.morgan@tsleducation.com