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A look into which region and what industries spent the most on R&D and what effect this has had on the economy...
The House of Commons Library recently released the Research & Development (R&D) Spending report, put together by Georgina Hutton, with contributing authors Chris Rhodes and Matthew Ward, offering impartial analysis and statistical research on the topic. Let’s look a little closer at some of the statistics…
Innovation is crucial to the continued success of the nation on a global level. The ultimate goal of R&D funding is to create and maintain jobs, which in turn strengthens the economy and increases internal investment. Good quality R&D by nature relies on human endeavour and problem solving, with new knowledge being an important by-product of this.
R&D is defined in the Frascati Manual, which is the internationally agreed benchmark for collecting and reporting on R&D. Its definition goes as follows:
…creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge.
When applying for funding or aid for R&D projects, companies and institutions need to prove they are making an advance in science or technology and overcoming technical challenges not easily solved as deemed by a competent professional.
The good news is R&D expenditure is on the up. In 2019, total R&D expenditure was £38.5 billion, corresponding to £577 per head and 1.74% of the UK’s GDP. These numbers have been steadily increasing since 2000, where we saw a total of £26 billion in expenditure at £442 per head. However, when compared to 1986 figures, R&D’s proportion of GDP has gone down from 1.84%, despite the expenditure figures nearly doubling.
In 2017, the UK government set a ten-year goal to increase R&D’s percentage of GDP to 2.4%, just under the global average of 2.5%, by 2027. Though we have seen an increase since 2017, this proportion has remained roughly level in the past thirty years. To meet this goal, a substantial increase in R&D funding will be required across the board, from the private and public sectors alike.
R&D spending is measured in two ways to get the fullest picture of the nation’s progress in innovation; using a performance metric (i.e. how much is performed in the UK by an organisation) or a funding analysis (i.e. how much UK organisations spend funding these activities) offers further insights than a single system of measurement.
The private sector, or business sector, holds the largest share of R&D spend in performance and funding, with 67% and 54% respectively. The public sector makes up 27% of UK R&D funding; it’s made up of the UK Government and its R&D incentives, UK Research and Innovation (UKRI) and the devolved higher education funding councils, predominantly through the Business Energy and Industrial Strategy (BEIS). Higher education institutions’ own budgets and private non-profit organisations (like medical research charities) also make up the funding of UK R&D.
The report clearly establishes that the South East, the East and London make up the majority of the R&D performed, at 54% and a total of £20.8 billion combined. This figure is also the highest when accounting for population, with £1,106 per head in the East versus the national average of £577.
On the other end of the scale, Wales, Northern Ireland and the North East make up only 6% of the performed R&D, at roughly £800 million each. The extremes of the scale are equally reflected in the R&D employment numbers, with the South East employing 50,000 people in R&D and the North East making up only 6,000 of the R&D professionals in the private sector. As the UK seeks to boost its investment overall, these areas should be at the top of the priority list.
R&D accounted for around 486,000 full-time jobs in the UK in 2019, mostly made up of researchers and technicians. The private sector employs 56% of R&D professionals, followed by 39% in higher education. The UK has a strong foundation in pharmaceuticals, which is reflected in their high numbers of R&D professionals, with 29,000 working in the sector. Other proudly British industries have large investments in R&D, like motor vehicles and software development. Though not directly equivalent to the employment proportions, the pharmaceutical industry.
Over recent years, more people have been employed in R&D, rising by 4% compared to 2018, equating to 11,000 people now in the R&D field. This trend is in line with the general increase in R&D budget and bodes well for the future of innovation in the UK.
When comparing R&D spending to other countries, the Organisation for Economic Co-operation and Development (OECD) is an intergovernmental agency that can shed light on these relationships. Overall, the UK is below the EU average of 2.1% and the OECD average of 2.5% when looking at R&D investment as a proportion of GDP. This puts us below France (2.2%), the US (3.1%) and Germany (3.2%).
Fortunately, some of the biggest funders of R&D globally have operations in the UK. Three companies based in the UK feature in the top 100 companies investing in R&D; GlaxoSmithKline with £4.47 billion, AstraZeneca with £4.23 billion and HSBC with £1.64 billion. Hopefully, as the UK continues to invest in innovation on its way to meet the 2027 goal, we’ll see more British companies on this list, especially as we seek to build back stronger following the Covid-19 pandemic.
One of the ways to access R&D funding is through the UK government’s R&D tax credits scheme. Offering up to 33% of eligible costs back to companies engaging in R&D activities, R&D tax credits are one of the more generous incentives for innovation. If your company is pushing the bounds of science and technology and overcoming technological difficulties, you can likely claim tax credits.
If your project is very innovative, you can also apply for innovation funding. At Myriad Associates, we have extensive experience in this field and can offer guidance when making an application to a funding body, whether it be the home-grown Innovate UK or the multinational Horizon Europe.
Want to find out more? Our expert team can advise you on eligibility or offer guidance with a quick consultation. Give us a call on 0207 118 6045 or use our contact page for friendly, professional advice.