For example, between 1993 and 2008, the UK market sector grew by 3% a year. Three-quarters of this growth was driven by capital investment, new technologies and innovation.
So it was great to see innovation at the heart of the Prime Minister's recent speech to the CBI conference, as well as several positive measures to support innovation in the recent Autumn Statement, including a re-commitment to increase public R&D spending to £20bn by 2024/25. Read more about the Autumn Statement and the positive and negative implications for innovation here.
But how much are we investing in R&D in the UK? Well the Prime Minister’s speech happened to coincide with the publication of the most recent Office for National Statistics (ONS) data on R&D investment in the UK – the Gross Expenditure on R&D (GERD) stats for 2020 as well as Business Expenditure on R&D (BERD) stats for 2021. Here we set out a brief summary of the key figures from the release.
Highlights from GERD statistics (2020)
- Total UK R&D spend increased by around 4% between 2019 and 2020 to almost £62bn.
- However, in constant prices (i.e. adjusted for inflation), this is a small 3% decrease, which is perhaps unsurprising given the impact of the pandemic in 2020.
- Businesses performed £44bn of this investment, 71% of the overall spend.
Highlights from BERD statistics (2021)
- Businesses performed almost £47bn worth of R&D in 2021, a 7% increase on 2020.
- This increase was funded almost entirely by businesses’ own funds.
- 52% of R&D investment was by SMEs (businesses with under 250 employees), with 48% by larger businesses. The estimate of investment by SMEs has increased significantly since previous data publications due to changes in ONS methodology (see note below).
- There were notable increases in R&D investment in chemical and pharmaceutical products, telecoms, software, and construction products compared to previous years.
- There were also some sectoral changes in R&D employment, with a 20,000 FTE decrease in people employed in manufacturing R&D since 2020 but an increase of around 100,000 FTE employed in services R&D between 2020 and 2021.
- R&D investment was most heavily concentrated in England, particularly London, the Southeast and East regions, accounting for around half of total business R&D investment. This has not changed significantly in recent years.
Changes in ONS methodology
As mentioned above and explored in our article here, the ONS have updated their methodology this year for estimating R&D investment. Notably, their new approach better accounts for SME investment in R&D. This has led to a significant uplift in estimates of total business R&D spend (it has increased by over £15bn increase) and SMEs are now estimated to account for over 50% of total business R&D spend. Other changes to approach have also been made, such as a change in data source for R&D funded by the higher education sector, but the impact of these on the overall figures is much smaller than the change in approach to SMEs.
If you are interested in finding out more about the updated ONS methodology for R&D statistics and what it means, join the ONS webinar, Measurement of Research and Development (R&D), Importance and Challenges, on 6th December.
How can we ensure continued growth in business R&D investment in the UK?
In 2023, the CBI innovation team will continue to work with government to strengthen the environment for business R&D investment in the UK. A key priority will be to work with BEIS and UKRI to shape the development of Horizon Europe alternative programmes to ensure they effectively support business innovation, in case we are unable to associate to Horizon Europe. Please contact Charlotte to find out more or to join our R&D working group.
We’re also scoping a project to understand more about how Boards make innovation investment decisions, particularly how they integrate risk into these decisions, and use this information to support businesses to invest more in innovation in the UK. Contact Nicola to find out more or to get involved.