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Business R&D investment rises in the UK

06 Dec 2019

We take a look through recent statistics showing business R&D investment in the UK.

Business investment reaches highest level

In keeping with recent trends, business research investment rose in 2018 to its highest level since the collation of the statistics. Investment amounted to £25bn in 2018, a real terms increase of £600m from 2017. In constant prices, last year’s growth represented a 3.9% increase, higher than the average yearly growth of 2.5% since 2007.

This business investment has been dominated by a few distinctive sectors. The pharmaceutical sector invested £4.4bn in 2018, accounting for almost one fifth of business R&D investment. The automotive sector remains the second largest in terms of investment, reaching an all-time high of £3.7bn in 2018. As you may expect in the modern world, investments in computer programming and software development research shows strong growth in the UK, the combination of these areas of research saw investment of £3.4bn in 2018.

Increases in investment met by increased staff numbers

Perhaps unsurprisingly, increased research investment has seen employment in R&D performing businesses continue to grow. Full time equivalent (FTE) employment reached a quarter of a million in 2018, an increase of 17,000 FTEs from 2017. The statistics show that businesses have increased FTEs by almost 100,000 since 2009.

Alongside this increase, there have been shifts in the characteristics within the workforce. While the number of FTE researchers has grown by nearly 40,000 since 2009, the number of researchers has decreased as a percentage of the total workforce. The number of technical FTEs has almost doubled over the same period, while the number of other staff (Administrative, clerical and industrial roles) have doubled over the same period.

International businesses strengthen UK research investment

The statistical release reveals a mixed picture with regards to overseas in investment in business R&D, although the trends have remained the same over the past few years. Investment from overseas into UK-based businesses was £3.25bn in 2018, the lowest level in real terms since 2009, down from its peak of £4bn in 2014. This investment refers to foreign direct investment, either through direct funding from international businesses or international funding programmes.

The statistical release also details investment by ownership of businesses who are based in the UK and perform R&D. Since 2011, overseas-owned businesses based in the UK have invested more in R&D than British-owned businesses. These businesses are those that are headquartered abroad, but retain a physical presence in the UK and funds their own R&D activities in the country. In 2018, 53% of business-based R&D was funded and performed by overseas-owned businesses. This has increased from 40% in 2007 and 27% in 1993 when this dataset was first published.

The US remains the country that has the largest proportion of overseas-owned businesses performing R&D in the UK, increasing UK-based R&D investment by nearly £800m between 2017 and 2018. Japan, Germany and France businesses have the next largest presence in the UK, but US business investment is over twice that of Japan, Germany and France combined.

We have taken these statistics from the ONS publication, who also produce an informative briefing on this dataset.