The Government's obsession with privatisation is in danger of seriously undermining research, including research into BSE, scientists warned this week. More than 40 establishments - many of them attached to research councils - are being reviewed under the Department of Trade and Industry's "prior options" initiative, a study into the possibility of privatising the laboratories.

Concern over the impact of the prior options review was discussed at a Royal Society conference on Tuesday attended by research council chief executives, chief scientists to the Government and heads of research establishments.

Fears have been heightened by a Treasury document leaked to The THES. The document outlines how financial liabilities, such as pension transfers and the restructuring costs associated with the privatisation of facilities, should be handled. It says that departments should not count on making a claim on the Treasury contingency reserve to meet these liabilities which, in a worst case scenario, could amount to hundreds of millions of pounds.

The policy set out in the document is little different from that applied to privatisation in other sectors. Under the prior options review establishments are being scrutinised in three batches with the first group due to report at the end of this month. One of the establishments in the second batch is the Biotechnology and Biological Sciences Research Council's Institute of Animal Health whose Neuropathogenesis Unit is at the forefront of research into "mad cow disease" or bovine spongiform encephalopathy (BSE).

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John Bourne, its director, echoes the fears of many research council officials and scientists when he says that he is "seriously concerned" about the impact the review may have on his insititute. He says: "While I see prior options as an opportunity for rationalising the United Kingdom's research capability, my concern is that in the long term, strategically focused research carried out in the national interest at the IAH is not compromised."

Professor Bourne said that the IAH was Europe's top facility for multidisciplinary research on infectious disease pathogenesis. "We know of no arm of the private sector that is going to fund this kind of work," he said. The flow of scientific information could even be restricted if the institute were to fall into the hands of the private sector.

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Transfer of establishments to universities can also count as "privatisation". But Professor Bourne believes that while the IAH networks extensively with researchers in universities, it would be "impossible" for institutions to support the kind of long-term work and costly infrastructure it needs.

Strong support for retaining the IAH and the Norwich-based John Innes Institute (which is also allied to the BBSRC) in the public sector has come from Sir Richard Sykes, deputy chairman and chief executive of Glaxo Wellcome. The firm has its Edward Jenner Vaccine Institute at the IAH's Compton Laboratory in Newbury, Berkshire. In a letter to the BBSRC, Sir Richard says that the institutes have an important place in the public sector. Arguments that their work could be taken over by universities should be "treated with caution" because of important cultural and organisational differences.

Sir Richard says that most of the research being undertaken in institutes makes it "inappropriate for them to be placed in the private sector" and the temptation to make radical change to effect short-term savings should be resisted. He says: "There seems to be little likelihood of developing a private sector customer-base that would be adequate for continued existence of most of these institutions. If they were placed in the private sector there is a serious risk that they would wither and die . . . Once lost they will be difficult if not impossible to rebuild."