Total UK business expenditure on R&D increased in 2024

Regional BERD

With three years of annual BERD data published using the new ONS methodology it is now possible to start examining trends across these years, broken down by other categories such as region or industry.

As shown graphically below, many International Territorial Level (ITL) 1 regions across the UK are seeing steady private R&D expenditure (in cash terms), with some areas showing sustained cash increases each year, such as London (a 23% increase between 2022 and 2024) and the West Midlands (31%) (ONS BERD 2024 – Table 7). Note that these figures are in cash terms and do not take inflation into account, nor is it possible to normalise this regional data by each region’s GDP as the figures for 2024 are not yet available.

A notable exception is the North West, which initially saw a cash increase from £ 4.9 billion in 2022 to £5.6 billion in 2023, but saw a sharp drop in business R&D expenditure to £4.7 billion in 2024, a 17% decrease from 2023. In this year’s release, the ONS has also provided BERD data broken down to the more granular, ITL2 regional level (ONS BERD 2024 – Table 18). From this data we can see that this decrease in the North West from 2023 to 2024 is mainly being driven by reductions in business R&D expenditure in Cheshire and, to smaller extent, Merseyside.

The ITL2 breakdown also reveals that while London sees high levels of business R&D expenditure overall, the distribution of this expenditure within London is very uneven. The majority of business R&D in London is happening in Inner London – West (£8.8bn, 66%), with just £30m taking place in Outer London – East and North East (0.2% of the London total).

Company size and type

The 2024 data also includes a break down by company employment size bands (ONS BERD 2024 – Table 14 and 17), which reveal interesting trends in business R&D expenditure. As expected, by the standard definition of small and medium sized enterprise (SMEs; companies employing less than 250 staff) the breakdown provided in Table 17 of the ONS data release shows that large businesses make up a majority (68% of business expenditure on R&D in the UK in 2024), with SMEs contributing the remaining 32%.

However, the more granular breakdown by employee number (ONS BERD 2024 – Table 14) shown in the graph below shows that a larger proportion of UK business expenditure on R&D is being done by the smallest group of companies employing 0-99 people (23%) than by the next biggest groups of middling-sized companies that employ 100-399 people (15%) or 400-999 people (14%). The further breakdown by sector highlights that this higher proportion of R&D expenditure in the smallest companies (0-99 employees) is mainly being driven by R&D in the service sector, while the high proportions of R&D expenditure we see in the largest sized companies (1,000 to 4,999 employees and 5,000 or more) are being driven more by companies in the manufacturing sector.

New deflator methodology

The ONS have developed a new R&D-specific deflator, an index used to adjust cash figures to real terms by removing the effects of inflation or deflation. This new deflator is now being used to compile the constant price estimates of R&D in the National Accounts, and has been applied in this BERD data release. The data summary suggests that this new deflator represents an improvement on the historic approach of using the GDP expenditure deflator as while the GDP deflator was the best deflator to use at the time, it was not specific for R&D.