Rhodes, Chris

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 www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | papers@parliament.uk | @commonslibrary     BRIEFING PAPER   Number SN04223, 21 December 2018   Research & Development spending By Chris Rhodes   Contents: 1. Introduction 2. Total R&D funding 3. R&D performance and funding 4. R&D by region 5. R&D by sector 6. Employment in R&D 7. R&D: international comparisons  2 Research & Development spending  Contents Summary 3 1. Introduction 4 1.1 Defining Research & Development 4 1.2 Key concepts in R&D spending 4 2. Total R&D funding 5 3. R&D performance and funding 7 3.1 Sectors performing R&D 8 3.2 Sectors funding R&D 9 4. R&D by region 10 5. R&D by sector 11 6. Employment in R&D 12 7. R&D: international comparisons 13       Cover page image copyright: Blue Fiber by Michael Wyszomierski.  Licensed under CC BY 2.0 / image cropped.  3 Commons Library Briefing, 21 December 2018 Summary Research and development (R&D) is systematic work undertaken to increase the stock of knowledge. Total R&D In the UK in 2016, total expenditure on R&D was £33.1 billion, £505 per head, or the equivalent of 1.7% of GDP. R&D investment has risen steadily over the past few decades, from £17.8 billion in 1981 to the current total of £33.1 billion (in 2016 prices). This is a real terms increase of 86%. But as a proportion of GDP, R&D expenditure has fallen over this period (it was the equivalent of 2.0% of GDP in 1981). The government have a target for R&D investment to reach 2.4% of GDP by 2027. Sectors performing R&D R&D performed by businesses accounted for 67% of all R&D expenditure in 2016  (£22.2 billion). The higher education sector performed R&D worth £8.0 billion or 24% of the total. The government sector (including the funding councils) performed £1.1 billion of R&D, 7% of the total. R&D by region R&D performed in the South East of England in 2016 totalled £6.7 billion, 20.1% of the total. R&D performed in the South East, the East of England and London accounted for 52.0% of all UK R&D. Per head, R&D expenditure in the East of England is the highest: £924 per head. The figure for the whole UK is £505 per head. In Wales, per head R&D expenditure is £230. R&D by sector The pharmaceuticals sector performs by far the most on R&D of any industry in the UK: £4.3 billion in 2017, compared to £3.6 billion in the automotive sector which is the second highest total. These two sectors also employ the most people in R&D related roles of any industries: 24,000 in the pharmaceuticals sector and 21,000 in the automotive sector. In the whole of the UK, 231,000 people are employed in R&D related roles. International comparisons The UK figure for R&D investment of 1.7% of GDP is below the OECD average of 2.3%. R&D expenditure in Germany is the equivalent of 2.9% of GDP, in the US it is 2.7% and in France it is 2.2%.    4 Research & Development spending 1. Introduction 1.1 Defining Research & Development Research and Development (R&D) spending is analysed according to the internationally agreed “Frascarti method” for collecting and reporting on research and experimental development, named after the town in Italy where the original Organisation for Economic Cooperation and Development (OECD) guidelines were first proposed in 1963.1 The Frascati Manual uses the following definition of R&D:2 …creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge.  For an activity to count as an R&D activity under the Frascati definition, it must be “novel, creative, uncertain [about what the final outcome will be], systematic and transferable/reproducible.”3  1.2 Key concepts in R&D spending R&D is measured by the amount spent performing R&D by an organisation, or the funding provided to perform R&D. These are not always the same – for example, the higher education sector in the UK performs R&D worth around £8 billion, but the sector only provides direct funding for R&D worth £450 million.  These two ways of measuring R&D spending are different ways of analysing the same overall total for R&D, known as Gross Expenditure on R&D (GERD). GERD is the preferred way of measuring R&D spending in the UK, and for comparing R&D spending in different countries. R&D is performed and funded by the following sectors: business, higher education, government (including the research councils in the UK) and private non-profit. Some funding for R&D in the UK also comes from overseas sources.   Box 1: Sources for statistics on R&D spending  The key source for information of GERD is ONS, Gross domestic expenditure on R&D. This is published each year in March. R&D performed by businesses is further analysed in ONS, Business enterprise research and development which is published in November each year. The best source for international comparisons of R&D spending is OECD, Main science and technology indicators.                                                                                              1  OECD, Frascati Manual, 2015 2  Ibid, p44 3  Ibid, p45 5 Commons Library Briefing, 21 December 2018 2. Total R&D funding In the UK in 2016, total R&D (gross expenditure on research and development) was £33.1 billion, the equivalent of 1.7% of GDP. This was £505 per head.4  R&D investment in the UK has risen steadily over the past thirty years, from £17.8 billion in 1981 to the current total of £33.1 billion (in 2016 prices). This is a real terms increase of 86% over the period.                                                                                               4  Unless otherwise stated, the data in this briefing paper is from ONS, Gross expenditure on Research and Development, 2018 Total R&D spending in the UK£ billion (current)£ billion (2016 prices) % of GDP £ per head2000 24.4 17.7 1.6% 3012001 25.2 18.5 1.6% 3142002 25.6 19.2 1.6% 3242003 25.6 19.7 1.6% 3312004 25.6 20.2 1.5% 3382005 27.2 22.1 1.6% 3662006 27.5 23.0 1.6% 3782007 28.8 24.7 1.6% 4032008 28.8 25.3 1.6% 4102009 28.7 25.6 1.7% 4122010 28.8 26.2 1.6% 4172011 29.8 27.5 1.7% 4342012 29.0 27.3 1.6% 4282013 30.3 29.0 1.6% 4532014 31.5 30.6 1.7% 4732015 32.5 31.8 1.7% 4882016 33.1 33.1 1.7% 505Source: ONS, GERD statistics, 2018; Series GLBA, GLBD, GLBDGross expenditure on research and developmentPer head data uses ONS population estimates and current price dataGross expenditure on research and development, 1981 to 2016UK, £ billion, 2016 constant pricesSource: ONS, Series GLBD051015202530351981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 20146 Research & Development spending However, over the same period, R&D expenditure has fallen as a proportion of GDP. R&D expenditure was the equivalent of 2.0% of GDP in 1981, compared to the 2016 figure of 1.7% of GDP.   Box 2: Government target for R&D expenditure to be 2.4% of GDP by 2027 In its Industrial Strategy (published in November 2017), the government set a target to “…raise total R&D investment to 2.4% of GDP by 2027” (page 11).  In 2016, R&D expenditure was the equivalent of 1.7% of GDP.    Increasing expenditure on R&D to the equivalent of 2.4% of GDP would lead to a record level of R&D investment in the UK. At 2.4% of GDP, R&D expenditure in the UK would be above the current OECD average.   Gross expenditure on research and development, 1981 to 2016UK, as a % of GDPSource: ONS, Series GLBH0.0%0.5%1.0%1.5%2.0%2.5%3.0%1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014Gross expenditure on research and developmentUK, as a % of GDPSource: ONS, Series GLBH, and Commons Library calculations0.0%0.5%1.0%1.5%2.0%2.5%3.0%1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 2025Government target:R&D expenditure of 2.4% of GDP in 20277 Commons Library Briefing, 21 December 2018 3. R&D performance and funding The following table breaks down R&D funding/performing expenditure data for 2016. It shows not only the totals for the funding and performing sectors, but also the amount of that total performed or funded by the other sectors. For example, £1.7 billion of government funded R&D was performed by the business sector. £1.2 billion of private non-profit funded R&D was performed by the higher education sector.     Total expenditure on R&D, by performing and funding sectors£ million, 2016, UKGovernmentResearch CouncilsHigherEducationBusinessEnterprise PrivateNon-Profit Total OverseasSector funding R&DGovernment 1,136 137 483 1,730 98 3,584 542Research Councils 47 554 2,107 5 197 2,909 292HE Funding Councils  -  - 2,207  -  - 2,207  -Higher Education 2 17 299  - 131 449  -Business Enterprise 15 25 350 16,742 18 17,151 6,658Private Non-Profit 13 42 1,242 188 170 1,655  -Overseas 122 60 1,346 3,560 85 5,174  -Total 1,335 837 8,035 22,224 699 33,130  -of which:Civil 1,178 837 7,994 20,658 688 31,354  -Defence 156  - 42 1,567 11 1,776  -Source: ONS, Gross expenditure on R&D, 2018, Data table 1Sector performing R&D8 Research & Development spending 3.1 Sectors performing R&D The biggest R&D performing sector in 2016 was the business sector which performed R&D worth £22.2 billion, 67% of all total R&D. The higher education sector performed R&D worth £8.0 billion, 24% of the total.  The government sector, including the research councils, performed  £1.1 billion of R&D, 7% of the total. The following chart illustrates the amount of R&D expenditure performed by different sectors.   The proportion of R&D performed by each sector has remained largely the same over this whole period.  In 1981, R&D performed by the business sector was worth £17.8 billion (in 2016 prices), 63% of the total. Government performed 21% of the total in 1981.    Sectors performing R&D in the UK, 1985-2016, constant £ billionSource: ONS, Gross expenditure on R&D, 2018, Dataset051015202530351985 1990 1995 2000 2005 2010 2015Higher EducationResearch CouncilsGovernmentPrivate non-profitBusiness9 Commons Library Briefing, 21 December 2018 3.2 Sectors funding R&D The business sector is also the largest sector funding R&D:  £17.2 billion, 52% of the total.  The government (including the research councils, which were only created in the mid-1990s, a change clearly visible in the chart), funded £8.7 billion R&D, 26% of the total.    The proportion of R&D funded by government has fallen from 49% in 1981 to the 2016 figure of 26% (including the research councils).  The proportion of R&D funded by business has increased from 41% in 1981 to the 2016 total of 52%.  Sectors funding R&D in the UK, 1985-2016, constant £ billionSource: ONS, Gross expenditure on R&D, 2018, Dataset051015202530351985 1990 1995 2000 2005 2010 2015Higher EducationHE ResearchcouncilsResearch CouncilsGovernmentPrivate non-profitBusinessOverseas10 Research & Development spending 4. R&D by region Total R&D expenditure is available broken down by the region or country of the UK in which it is performed. In 2016, R&D expenditure performed in the South East totalled  £6.7 billion, 20.1% of the total. R&D investment performed in the South East, the East of England and London was worth £17.2 billion, 52.0% of the UK total. The North East and Northern Ireland saw only £0.6 billion worth of R&D investment each.  Per head R&D expenditure was £505 in the UK as a whole in 2016. In the East of England it was substantially higher – £924 per head. At the other end of the scale, Yorkshire and Humberside, the North East and Wales had R&D investment per head of between £260 and £230.  Total R&D performance regional and country breakdown£ billions, 2016Source: ONS, Gross expenditure on R&D, 2018, Regional tables6.75.74.93.22.82.3 2.2 2.11.40.7 0.6 0.601234567Per head R&D performance regional and country breakdown£ per head, 2016Source: ONS, Gross expenditure on R&D, 2018, Regional tables, and House of Commons Library calculations924738559505 479439 438 431391347258 239 2300100200300400500600700800900100011 Commons Library Briefing, 21 December 2018 5. R&D by sector Expenditure on R&D performed by businesses is available broken down by sector.5 In 2017, the pharmaceutical industry performed the most R&D – worth £4.3 billion. The automotive manufacturing industry had the second highest R&D investment: £3.6 billion.                                                                                                 5  ONS, Business enterprise R&D, 2018 Expenditure on R&D performed by businesses, by sector, UK£ billion, 2017Source: ONS, Business enterprise R&D, 2018, Data table 20.00.00.10.10.10.10.10.10.10.10.10.20.20.20.20.20.30.30.30.40.40.50.60.80.80.91.01.11.41.51.51.93.64.30 1 2 3 4 5 Textiles, clothing and leather products Transport and storage services Casting of iron and steelWood&paper products Sewerage & waste management Non-ferrous metals Other non-metallic mineral products Other transport equipment Electricity, gas and water supply Refined petroleum products Agriculture, hunting and forestry; Fishing Rubber and plastic products Extractive Industries Public administration Fabricated metal products Other manufactured goods Wholesale and retail trade Construction Shipbuilding Computers and peripheral equipment Food & beverages Electrical equipment Precision instruments Telecommunications Consumer electronics and… Chemicals and chemical products Machinery and equipment Research and development services Software development Miscellaneous business activities Aerospace Computer programming Motor vehicles and parts Pharmaceuticals12 Research & Development spending 6. Employment in R&D In 2017, there were 231,000 people working in R&D related roles in the UK. Most of these people (49%) work as researchers. Technicians made up 29% of all R&D employment.6 The following chart shows the number of R&D roles in the ten largest R&D employing sectors. The pharmaceuticals sector employs the most people in R&D related roles: 24,000. The automotive manufacturing sector employs the next highest number: 21,000.                                                                                                6  ONS, Business enterprise R&D, 2018 Employment in R&D by sector, 2017, UK, thousandsSource: ONS, Business enterprise R&D, 2018, Data table 132421 21 201815 14 138 8051015202513 Commons Library Briefing, 21 December 2018 7. R&D: international comparisons The following chart shows total R&D investment as a proportion of GDP in each of the Organisation for Economic Co-operation and Development (OECD) member countries, the EU28 average and the OECD average.7 UK R&D investment equivalent to 1.7% of GDP is below the EU28 average of 1.9%, and below the OECD average of 2.3%. UK has a lower level of R&D investment than competitor countries such as the France (with R&D investment equivalent to 2.2% of GDP), the US (2.7%) and Germany (2.9%).                                                                                                 7  OECD, Main science and technology indicators, 2018 Gross expenditure on R&D, OECD countries % of GDP2016 (*=2015)Source: OECD, Main Science and Technoogy Indicators, 20180.4%0.4%0.5%0.8%0.9%1.0%1.0%1.2%1.2%1.2%1.2%1.3%1.3%1.3%1.3%1.6%1.7%1.7%1.9%1.9%2.0%2.0%2.0%2.1%2.2%2.3%2.5%2.7%2.7%2.9%2.9%3.1%3.1%3.3%3.4%4.2%4.3%0% 1% 2% 3% 4% 5%ChileLatviaMexicoSlovak RepublicTurkeyPolandGreeceIrelandSpainHungaryLuxembourgNew Zealand*PortugalEstoniaItalyCanadaCzech RepublicUnited KingdomAustralia*EU28 averageSloveniaNorwayNetherlandsIcelandFranceOECD averageBelgiumUnited StatesFinlandDenmarkGermanyAustriaJapanSwedenSwitzerland*S KoreaIsrael BRIEFING PAPER Number SN04223 21 December 2018  About the Library The House of Commons Library research service provides MPs and their staff with the impartial briefing and evidence base they need to do their work in scrutinising Government, proposing legislation, and supporting constituents. As well as providing MPs with a confidential service we publish open briefing papers, which are available on the Parliament website. Every effort is made to ensure that the information contained in these publicly available research briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. If you have any comments on our briefings please email papers@parliament.uk. Authors are available to discuss the content of this briefing only with Members and their staff. If you have any general questions about the work of the House of Commons you can email hcenquiries@parliament.uk. Disclaimer This information is provided to Members of Parliament in support of their parliamentary duties. It is a general briefing only and should not be relied on as a substitute for specific advice. 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House of Commons Library: Briefing paper: Number SN04223, 21 December 2018: Research & Development spending

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House of Commons Library: Briefing paper: Number SN04223, 21 December 2018: Research & Development spending

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