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BIS may be understating the returns on investing in R&D

16 Jul 2015

New analysis on the economic returns to investment in R&D published ahead of the Spending Review

The Department for Business Innovation and Skills has just published a really insightful new analysis of the relationship between public and private investment in R&D.

The report makes some conclusions that could be very influential in the upcoming Spending Review:

  • BIS may be understating the leverage that occurs from public funding of research. The new analysis suggests that an extra £1 of public investment will give rise to an increase in private funding of between £1.13 and £1.60 (an average of £1.36). The report says BIS currently use an estimate of £0.85 – and may therefore be underestimating the effect of changes in public expenditure on R&D.
  • Maintaining the Science Budget in cash terms has given rise to an estimated additional £1.2bn of private sector investment that would not have occurred if the budget had been cut in line with other government departments.
  • The report estimates that an extra £1 of public expenditure in university research leads to a further 29p of private investment in research in universities and £1.07 in research conducted elsewhere.

The report uses and builds upon research commissioned by CaSE on the economic significance of the UK science base.

The new findings really show the value of investing in R&D. In the upcoming Spending Review the Government will be looking to see where it can get the biggest bang for its buck as it makes difficult spending decisions. This new report gives the Treasury solid economic evidence that investment in R&D leverages private sector investment and drives much-needed economic growth. Crucially, it proves that not cutting the Science Budget was the right thing to do in 2010 and goes further to show that increasing the budget will bring big returns.

Economic Significance of the UK Science Base

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