Projections to reach 2.4% of GDP invested in R&D
05 Jun 2019
This work features in our latest report, Building on Scientific Strength; the next decade of R&D investment.
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 investment decisions made by the UK Government will be pivotal in determining whether the UK will become a more R&D intensive economy and reap the benefits it would bring.
Modelling investment to reach 2.4% of GDP in 2027 and 3% in the long term
Our model shows that UK investment in R&D will need to be £65bn in 2027/28 to reach the target, up from the current level of £35bn (2017). To meet 3% of GDP invested in R&D in the long-term (we have chosen 2034/35), the UK would need to invest £95bn in that year alone.
The assumptions made in our model are detailed below:
- The amount of private investment attracted by public investment was calculated using a 1.36 leverage ratio, from analysis of the relationship between public and private R&D investment. This economic model was applied over 10 years to calculate the growth in public investment required to reach the necessary overall uplift in investment, assuming GDP grows according to OBR forecasts.
- The model begins at 2017/18, 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 extra announced in Autumn Budget 2017 becomes part of the new baseline level.
- The baseline for public expenditure remains flat in cash terms and the private expenditure baseline 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.
- To meet the 2.4% target, the next Spending Review would need to commit an additional £20.2bn over the next five years, around 3 x the £7bn additional funding committed for 2016-21.
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