Projections for R&D spending to reach 2.4% of GDP

CaSE has published a one-page report setting out the scale of public and private funding needed to reach the Government’s target of 2.4% of GDP on R&D by 2027 and 3% in the long-term

To reach the target of spending 2.4% of GDP on R&D by 2027 and 3% in the long-term, substantial increases will be needed to public and private investment. The upcoming Spending Review settlement will be pivotal in determining whether the UK will become a more R&D intensive economy and reap the benefits it would bring.

Modelling R&D investment reaching 3% of GDP

The public investment baseline remains flat beyond 2021/22, while the private investment baselines increase with GDP growth, reflecting recent UK trends. Increases are based on a leverage ratio of 1:1.36. Total R&D investment will need to be £62.4bn in 2027/28 to reach 2.4% of GDP.

We are calling on the government to:

1. Set out the long-term budget for the public portion of investment up to 2027 in line with the ambition for R&D investment to reach 2.4% of GDP.
2. Create a vision for what reaching the 2.4% target will achieve and a roadmap for delivery with Cabinet level buy-in and accountability across Government
    

Model assumptions:

• Our model begins at 2016/17, using the latest year of available data on the Gross Expenditure on R&D (GERD) in the UK, split into public and private spending using GERD categories. The £2.3bn announced in Autumn Budget 2017 also becomes part of the new baseline level.
• The baseline for public expenditure remains flat in cash terms and private expenditure increases in line with GDP growth, as per trends in the past decade, using OBR forecasts for GDP growth in the short and medium term.
• The additional investment has been calculated using a leverage ratio of 1.36 over ten years for public funding leveraging private investment.