Skip to content

R&D investment rises in the UK

05 Aug 2021

James Tooze looks at the most recent publication of R&D investment statistics

The Office for National Statistics have published the latest figures for R&D expenditure in the UK. The data shows that in 2019, the UK collectively invested £38.5bn in R&D, up by £1.3bn from 2018. This means that the UK invested 1.74% of GDP in R&D. The growth in R&D expenditure continues the long-standing trend of increases to research investment but reaching the UK Government’s target of investing 2.4% of GDP on R&D will require a significant step change in the rate of increase.

I have tried my best to illustrate the variation in the graph below, with the blue dotted line showing where the UK would get to by 2027 if recent trends continue, and the red dotted line showing the required trajectory to reach 2.4% by 2027.

Due to the time lag in the availability of R&D expenditure data, we are two years closer to 2027 than the data we have available. This could cause a variation in the steepness of the trajectory required to reach 2.4% but the graph does show the type of concerted action that will be required. What is crucially important in delivering this step change in research investment is a long-term plan and a multi-year budget for public investment in R&D. To reach 2.4% of GDP invested in R&D by 2027, significant increases to private investment will also be required. The government can help to show businesses that the UK is serious about becoming a more research-intensive country by setting out it’s stall and making long-term commitments to investing in R&D. We are hoping to see this in a Comprehensive Spending Review that we are expecting later in the year.

The data also helpfully shows how the flows of money go from those funding R&D to those who are performing the R&D. In 2019, private business, private non-profit organisations and investment from overseas funded £28bn of R&D, which represents 73% of the total investment. The Higher Education sector is the group of organisations that benefit most greatly from external funding, as the statistics show that HEIs funded £65m of R&D but performed £9bn of R&D in 2019. The ONS have produced an interactive graphic to display the flow of R&D investments in more detail.

R&D investment across the UK

Alongside figures relating to the sources of funding for R&D, the data also allows us to look at the spread of investment across the different regions of the UK. When combining the investment statistics with ONS population estimates, we are able to normalize the data to show investment per capita across the UK.

The graph shows that the East of England, South East and London invest more than the UK average, and the East of England invests almost five times as much as Wales per head. While the regions that benefit from the highest levels of R&D investment have consistently done so, there is more of a varied picture when looking at relative increases to R&D expenditure over the last few years. The graph below shows how a number of regions have increased their levels of research investment above the UK average.

The data shows that while some of the least research-intensive regions of the UK have been able to increase investment in research others have struggled. This shows both the challenge and the possibilities ahead for the UK Government’s ‘levelling-up’ agenda. The North West has decreased in levels of research investment in both absolute terms and per capita between 2016 and 2019, and Wales’ growth in research intensity is some 5% lower than the UK average. As a region that has also been heavily dependent on EU development funding for research, Wales faces some serious challenges that must be supported as part of the UK Government’s ‘levelling up’ agenda. The Shared Prosperity Fund must play a significant role in supporting research and innovation across the UK to enable and empower every region across the UK to capitalize on its research strengths, regardless of their size.

More interesting trends appear when splitting the source of investment by region, which pulls out some valuable information. The data allows us to produce a UK-wide average of the relationship between public and private investment by region and compare the data.

The grey line in the graph above shows the average trendline across the UK, with some outliers labelled. The graph shows that Scotland and London receive a much higher proportion of public R&D investment, while the East and West Midlands receive significant amounts of private investment without winning as much public investment.

We feel that it is vital to highlight the number of trends that sit underneath the UK’s total R&D investment figure. Being cognisant of how research investment is changing across the UK, particularly across the breadth of the country, is incredibly important in designing measures to address the unique challenges presented in each region. The government’s ‘levelling up’ agenda and the endeavour for the UK to become a ‘science superpower’ go hand in hand. Each region of the UK will never be the same, but in supporting local R&D and maximising its capabilities, the UK can create greater opportunities for everyone in the country, whilst also driving knowledge and technology to improve people’s lives.