Anyone visiting the Nobel Museum in Stockholm is confronted by a rather surprising object: an oar from the University of Cambridge. It is there to celebrate not its slight lead over the University of Oxford in the annual Boat Race but a far more significant achievement. Cambridge is the place that has snapped up most Nobel prizes in the sciences. From J. J. Thomson (physics, 1906) to Sydney Brenner, Robert Horvitz and John Sulston (physiology or medicine, 2002), the university has been at the top table ever since the prizes were first awarded in 1901. Judged by either numbers or longevity, it has clearly got what it takes.

No one, of course, has a reliable recipe for creativity. The displays at the museum also include a marvellous series of three-minute documentaries (the graduation projects of Swedish film students) paying tribute to eight different "creative milieux". Why did Parisian cafe society prove so fruitful for writers? What was it about those educated in Hungary but forced to flee in 1956 that made "Budapest in exile" so productive? When Danish physicist Niels Bohr set up his institute in Copenhagen, the atmosphere was so free and easy, according to one witness, that "scientists often slipped on half-rotten thoughts on the way to the toilet". At the Cold Spring Harbor Laboratory, by contrast, the atmosphere seems more notable for self-flagellating intensity and lack of social graces. Many different models have proved effective at delivering the scientific goods.

Since Cambridge tops the Nobel league table, it naturally forms the subject of one of the student films. The young director was clearly baffled by the place and put together a collage of vignettes and testimonies: clipped lawns, umbrellas and bicycles; a chef explaining how to make beef-and-swan pie; a fellow solemnly praising the role of playfulness in creativity; another describing his first time at high table, when his neighbours talked across him for most of the meal until one suddenly turned to him with the words "cricket or rugby?" A bold attempt to capture the university's unique selling point describes it as an institution melding the hierarchical base of a medieval church foundation with the collegiality that makes it feel like a family, albeit one with servants.

No one designing a university from scratch, one can't help reflecting, would ever have invented Cambridge. But, if we judge results in terms of Nobel prizes, it has clearly got the right formula or at least a better formula than anywhere else.

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This is obviously a huge achievement for British science. Yet, despite an impressive resurgence in physiology and medicine since the millennium, recent figures tell a more depressing story.

Physics is a particular disaster area. Anthony Leggett won the prize in 2003 for work on superfluidity that he had done at Sussex in 1972-73 (although he moved to the University of Illinois at Urbana-Champaign in 1983), but this was the first "British" award since the Pakistani-born Abdus Salam, who divided his time between Imperial College London and the International Centre for Theoretical Physics in Trieste, was honoured in 1979. Since there were three Cambridge physics laureates as well the Hungarian-born Dennis Gabor at Imperial in the early 1970s alone, this represents a pretty spectacular decline.

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The picture in chemistry is only slightly better. The late Sir John Pople and Michael Smith won Nobels in 1993 and 1998 but, although British born, they both spent over half their lives - and did their award-winning work - in North America. Pople reluctantly left England in 1964 because "the research environment for theoretical chemistry was clearly better in the US". For Smith and his classmates, completing their graduate studies in 1956, it seemed only natural to write to "various American professors seeking post-doctoral fellowships", although he eventually got wind of a suitable post in Vancouver in Canada. For a long time, talented scientists in Britain (and, of course, many other countries) have had little doubt about "where the action is". At some periods, the strength of particular institutions, presumably combined with cultural and personal factors, can keep people in this country. When funding and career opportunities are lacking, a brain drain is almost inevitable.

Sir Harry Kroto (1996) was honoured for work done at the University of Sussex, but after 37 years there he too crossed the Atlantic to Florida State University. Only John Walker (1997), long based at the Medical Research Council Laboratory of Molecular Biology in Cambridge, has spent virtually his whole productive career in Britain. That makes a total of two Nobels for British institutions in chemistry over the past quarter-century. For the 25 years up to 1982, by contrast, 11 Nobel chemistry laureates were native or foreign-born scientists working in Britain.

In physiology or medicine, there was also a fallow period in the two decades up to the year 2000, with only three scientists in British institutions winning Nobels and another Brit, Richard Roberts, picking up a prize for work done in the US. Since then, however, there has been a remarkable reversal, with British researchers honoured in four out of the past seven years.

There seems to be a general consensus that Nobels represent real achievement (despite inevitable claims that particular deserving candidates have been overlooked). And, to that extent, they also provide a rough indicator of the general "health" of British science, although it is obviously a retrospective indicator. Prizes are often given for work that dates back ten, 20 and even 30 years, both because of the inevitable logjam of potential deserving laureates and because the Nobel Committee tends to wait until it is absolutely sure that the research has opened up important new fields.

We should obviously be wary about reading too much into the limited data provided by Nobels alone. Nonetheless, it seems clear that British science went through a bad patch before, at least in some areas, it staged a remarkable recovery. The recent resurgence is itself evidence that it isn't simply a question of increased competition, with growing numbers of technologically advanced nations fighting for the same few prizes (although this is obviously one factor). The winners in physiology or medicine in the past few years, largely born in the 1940s, are enough to prove that world-class scientific talent was emerging from the British school system and that the institutions were in place to enable them to do great work in this country. So why the long dearth of Nobels? What exactly went wrong?

It is not easy to get a grip on these questions. Great science obviously depends on cultural, institutional, political and financial factors, but it is also influenced by chance, unusual career paths - and the quirks of highly atypical individuals. When Sulston won the Nobel Prize for Physiology or Medicine in 2002, he said to a journalist about his co-winner: "You must meet Bob Horvitz. He's spent 30 years of his life studying the 22 cells of a worm's vulva!" No parental encouragement, no education system, no government initiative can actually create or predict people with such strange and obscure passions.

As for the impact of luck and odd career tracks, Leggett studied Greats (Classics and philosophy) at Oxford before switching to physics, although, he has written, "in those days in Britain to do a second undergraduate degree in anything, let alone in a subject in which one had no secondary-school experience, was practically unheard of". He benefited from a brief moment of national panic when Soviet success in launching the first Sputnik satellite in 1957 led to desperate attempts to train up more scientific talent.

What we can track is some of the push factors that led much of the cream of British science to head for America to pursue the research that led to Nobels. The distinguished scientist Anthony Cheetham, who has recently returned after 16 years in the US to take up the post of Goldsmiths' professor of materials science at Cambridge, offers a good overview. "Britain went through a period of lean funding," he explains. "There was a very good period in molecular biology in the 1960s and 1970s, when we got more than our fair share of Nobel prizes, then a lean period in the 1980s when funding and morale were poor. When I left in 1991, the States was clearly the premier league."

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As his own career move suggests, Cheetham now believes the tide has turned and is even willing to put a rough date on this. "There is now a pan-European improvement, so Britain fits into a more general trend. There's been a turnaround since about 1998-99. Funding in the US has been more or less flat, with output flat as well, whereas European output has improved dramatically. Now Britain is doing pretty well. There's much more funding from the European Community, through framework programmes and the new European Research Council. Funding success rates are now very low in the US." All in all, he concludes, "the US has lost market share".

Cheetham even points to a measure that tracks what is happening more or less in real time. He has recently looked at publication trends in leading American journals in his own specialist areas, condensed-matter and materials physics. "Over the past ten years," he says, "America has gone from being dominant to being second to Western Europe." A more general survey published in the journal Nature last year confirms this picture in scientific publications across the board. Perhaps this will be reflected in the pattern of Nobel prize winners ten or 15 years down the line.

Most of the active British Nobel laureates agreed to be interviewed for this article - and they tended to be in broad agreement with Cheetham. Sir Tim Hunt (physiology or medicine, 2001), an expert on control of protein synthesis who now works for Cancer Research UK, also feels that things went badly wrong in the 1980s. "Mrs Thatcher didn't do much good", he recalls, "as she was so anti-intellectual. People felt pressure to go into industry or the financial sector rather than basic research. Everything had to be useful." While this was partly a question of funding, it was reflected in the general atmosphere and mood music of a time when his most talented students were aggressively recruited by banks or saw their future in management consultancy.

Money, morale and official attitudes were all closely linked. "Our lab (in the Cambridge department of biochemistry) was awfully run-down," Hunt explains, "so we felt a bit ashamed when distinguished visitors came by. Even now there is a good deal of make-do-and-mend, whereas Americans actually celebrate this kind of intellectual work." In times like that, it is easy to understand the lure of well-funded American universities.

Although Hunt and a number of other Nobel laureates decided to stick it out in Britain, few have fond memories of Thatcher and the 1980s. Sir Peter Mansfield (physiology or medicine, 2003), based in Nottingham since 1964, has written about "great uncertainty throughout the university" during the early 1980s, when "aspiring members of staff were being artificially held back because of arbitrary constraints introduced by the Government of the day and forced upon the vice-chancellor ... In the exodus that followed, the department of physics lost four members of staff to early retirement ... my group was the only one in MRI (magnetic resonance imaging) to survive in physics at Nottingham."

Despite three attractive American offers in 1984, he decided to remain there.

Sir John Walker, who worked from 1974 to 1998 at the MRC Laboratory of Molecular Biology in Cambridge, says he "never felt inclined to move, despite attractive offers. I had the facilities, long-term support and outstanding colleagues. Nowhere else had the same totality of approach." Yet he too remembers the demoralisation and lack of investment in the 1980s, when there were worries that Thatcher might sell off the laboratory, just as she did sell off the Plant Breeding Institute - a decision he regards as disastrous.

Sir Martin Evans, now director of the School of Biosciences and professor of mammalian genetics at Cardiff University, won last year's Nobel in Physiology or Medicine for his research at University College London and Cambridge on the isolation of embryonic stem cells. Although he says he "has never applied or been approached" and was "personally not tempted to go to America", he remembers a time in the mid-1980s when most of his best postdoctorate students did. "The money was very tight, the postdoc jobs were just not there in Britain," he says - and there were widespread anxieties about the future of their research programmes.

Leggett's decision to leave England for the University of Illinois in 1983 was motivated by "a very attractive offer from the department of physics and a general feeling of malaise in British universities at that time". He says: "It was not so much the prospect of drastic cuts in university funding itself that depressed me, but rather the effect this had on people's attitudes, eg (in some people) an extreme emphasis on 'turf', which seemed to me contrary to all the values that universities had historically stood for and that I had particularly enjoyed at Sussex until the early 1980s."

Leggett also makes a more general point. "I definitely think that not just in science," he argues, "but in any creative field of endeavour, it is an advantage to have been a 'minority' while growing up, be it through religion, ethnicity or even left-handedness." He still values the extra dimension to his thinking he gained from his philosophical training at Oxford and has wondered elsewhere about the impact of his Catholic background and "how far the experience, in childhood and adolescence, of maintaining and defending - sometimes in public and in the face of some ridicule - beliefs and attitudes not shared by the vast majority of my compatriots may have influenced my subsequent attitude to physics and indeed to life in general".

In this context, it is worth remembering that many of the great names of "British science" were from elsewhere, whether voluntary migrants from Australia, New Zealand or South Africa or enforced exiles from the Nazis. Quite apart from the sheer numbers, they may well have brought "outsider" perspectives that helped them cut through received wisdom.

Sydney Brenner, who came to the UK in 1952 after completing his South African medical degree, is a good example. "I had already decided that I would do research and that I needed to go abroad," he has written. He had been advised to try Cambridge and so "applied to the department of biochemistry and never even received a reply. I had decided that the subject I was interested in was molecular biology which, of course, did not exist at the time."

This kind of international reputation - as the best place for studying an exciting new area of science that is just coming into prominence - is ideal for a university keen to attract the best people from abroad. By the 1980s, when jobs were scarce and even prominent English scientists such as Leggett were being lured away to the US, there were clearly limited incentives for ambitious outsiders to head for Britain. Today, however, according to Hunt, his kind of biochemical research is again "a magnet for foreign talent". Despite a shortage of British post-graduates coming through, he explains, there are plenty of Germans and Japanese emerging from educational systems that offer excellent basic training but little freedom to young researchers wanting to strike out on their own.

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Many people speak of the 1980s as a particularly low point. Yet other factors, before and since, have affected Britain's performance in the Nobel league table. Take the case of Richard Roberts, who won his Nobel for work carried out at the Cold Spring Harbor Laboratory and who is now based at the New England Biolabs in Massachusetts. After doing a first degree and a PhD at the University of Sheffield, he spent four years from 1969 to 1972 as a postdoc at Harvard University. At the end of this period, he has written, he "wanted to return to the UK and applied for a job in Edinburgh".

While waiting for a response, he was headhunted by James Watson at Cold Spring Harbor, who "was looking for someone to sequence SV40 (DNA). I had not met Jim previously and I was overawed when he offered me the job after a 10-minute meeting, during which I mainly listened! It was a challenging project made all the more exciting by Jim's description and his offer of a good salary, money to support a lab and all necessary set-up money."

The dynamism of American recruitment methods had a decisive impact on where Roberts decided to build his career (he has still not heard back from the University of Edinburgh, although he knows for a fact that they received his application). In the UK, he explains, "people don't recruit individuals as hard as they could. You naturally go to the place where you really feel you are wanted."

Financial factors added an extra dimension. The problem, Roberts says now, is that "it was thought to be a privilege to be in Britain, and the money was not available. That led to a putty-and-string mentality, whereas research was gold-plated in the US. In England, you had to wash the apparatus, usually yourself; in the US, it was disposable and so you could make better use of your time". There used to be a kind of "pride in amateurishness" that had a debilitating impact on British science, although he suspects this it is now in retreat because of things such as the infusion of Wellcome money into biological research.

Looking ahead, Roberts feels that "America is where the action is, but there are also plenty of hotspots in Britain and Europe". He still worries that British official policy has "too much of an obsession with measuring practical utility. The future (as well as the Nobel prizes) comes from blue-skies research rather than applied. As soon as you say you know where you're going, you know what you're going to discover in advance. Funding mechanisms discourage people from digressing and following their noses."

There are worries about the quality of science teaching in secondary schools, the lack of funding for science students in universities - the unit of resource compared with arts students is currently 1.7:1, but Walker and Kroto both believe it should be around 4:1 - and whether the research assessment exercise really promotes innovation as well as publication. Despite all this, it is universally agreed that British science is far healthier than it was in the 1980s.

Yet Cheetham's broadly positive view, as reflected in his own decision to return home, has one major caveat. "The funding equation for university departments", he says, "doesn't or didn't work for large practical, lab-based work. It was a disastrous, ill-thought-out system. Each vice-chancellor looked at the figures, saw chemistry as a loss-making exercise and was tempted to shut it down. It is a structural problem, as I wrote to Dave King (former chief scientific adviser to the Government), so we should redeploy any funding released. He said he agreed, but that it was an issue for the ÖйúAƬ Council for England and the funding councils rather than him!"

This is a particular concern of Kroto. He spent 37 years at Sussex until he retired in 2000 and is outraged that the then vice-chancellor Alasdair Smith wanted to close down the chemistry department in 2006 (a plan abandoned after widespread protest). He too deplores funding regimes that led universities to promote cheaper and more popular subjects such as psychology over hard science. The Sussex chemistry department may be small, he argues, but it was and is "outstanding", and three Nobel laureates had worked there. Proposals to shut it sent precisely the wrong message to aspiring young British scientists.

Perhaps Kroto is on to something here. The ingredients for Nobel success may be many and varied, but if the prevailing environment is unsupportive we are unlikely to encourage academics to produce their finest work - and, if they do, it may not be at institutions in the UK.

SCIENCE: THE CRISIS AND THE CHALLENGES

- Nick Dusic, director of the Campaign for Science and Engineering (CaSE), writes:

Save British Science (SBS) was founded in 1986 because of a groundswell of frustration among the scientific community about the dismal state of science and engineering in the UK. It soon grew from an initial advert into a pressure group designed to stimulate public debate and lobby Government for greater funding and support.

In 2005, to reflect the increased commitment and investment in science of the Government, Save British Science changed its name to the Campaign for Science and Engineering. Yet there are still many obstacles to the true flourishing of British science.

The crisis

The crisis of the 1980s - still reflected in the poor British performance in winning Nobel prizes - was caused by severe underinvestment in the UK's science base and a lack of commitment by the Government to a long-term policy to improve this. Too few people were being educated in science and engineering, especially at university level.

The UK lagged behind competitor countries in investment in research and development. Civil R&D represented just 1.6 per cent of the gross domestic product in the mid-1980s.

As SBS often pointed out at the time, these factors had a number of dispiriting and damaging effects.

Many universities found it extremely difficult to fill academic positions, and the UK was losing talent overseas. Early-career researchers were particularly demoralised. Many highly rated research proposals were not being funded in the UK but would receive funding elsewhere.

Lack of investment in scientific infrastructure held research back. Funding cuts meant that equipment could not always be maintained, and there was a lack of technicians. All of this combined to make it extremely difficult for scientists to pursue original research.

The challenges

The good news is that there has been much greater political commitment and funding for science and engineering over the past decade, yet many challenges remain.

The UK still lags behind other G7 countries in terms of the amount of GDP it spends on R&D. The Government's ambition is to increase overall investment in R&D to 2.5 per cent of GDP. In 2004, it was only 1.8 per cent.

Although the Government has more than doubled the science budget since 1997, there are still many outstanding issues. The recent Science and Technology Facilities Council's budget and delivery plan has put the UK's standing in particle physics and astronomy in jeopardy. The repercussions for scientists' morale and international collaborations are already being felt. The situation has to be rectified before research is cut and highly skilled scientists are lost.

The Government's science policies are putting more pressure on research to have an economic or public-policy impact. It is critical that Government departments and industry finance this type of research while leaving more space for publicly funded basic research driven by a desire to answer fundamental questions.

We need to support scientists pursuing new ideas that can reshape our understanding of ourselves and the world around us.

We need to improve the education system if we are going to have the leading scientists of the future - and perhaps win a larger share of Nobel prizes. Yet there are still not enough trained science and mathematics teachers to enthuse the next generation.

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And we need an all-party consensus in support of science, so that the scientists of today and tomorrow know that the UK will enable them to compete at the highest levels.