The ONS published 2016 data on R&D expenditures performed in UK businesses. Here are seven things you should know about the latest trends.
1) Business expenditures on R&D continued to grow in 2016
UK businesses spent £22bn on research and development in 2016. This was an increase of 5.6% over the last year.
2) Manufacturing continued to account for the biggest share of business expenditures on R&D
Manufacturers’ expenditures on R&D amounted to £15.4bn in 2016. This represented 69% of overall business R&D spending in the UK – the largest sector contribution, well greater than manufacturing’s share of UK output.
3) Pharma still the biggest spender on innovation
Within manufacturing, pharmaceuticals incurred the largest chunk of business expenditures on R&D. Pharma companies spent £4.1bn on R&D in 2016, and accounted for 26.7% of all manufacturing R&D.
However, this share has fallen steadily since 2010 when the sector represented 40% of all manufacturing R&D. Pharma R&D spending is still below its 2008 levels in current terms.
4) Automotive R&D spending is sky rocketing
The automotive sector recorded the largest contribution to the year-on-year growth rate in expenditures on R&D performed by UK manufacturers. Carmakers’ R&D spending increased by £562m in 2016, up by 20% over the last year.
The trend is encouraging as it will help narrow the gap in terms of R&D intensity between the UK and its main competitors. In 2015, automotive accounted for the largest differential in terms of R&D spending between the UK and France.
5) Manufacturing R&D is widespread across UK regions
6) Foreign-owned companies incurred around half of R&D expenditures performed by UK businesses
Foreign-owned companies spent £11bn on R&D in 2016, and 336 million more than a year ago (+3.1% in current terms). By country of ownership of businesses performing R&D, the United States, Germany and France formed the top 3.
In 2016, EU-owned companies spent £3.8bn on R&D, which represented 17.5% of overall R&D expenditures performed by businesses in the UK.
7) R&D expenditures remained highly concentrated among a few firms
In 2016, the top 100 enterprises performed 61% of overall R&D expenditures performed by UK businesses, and employed 43% of all R&D personnel.
What needs to happen next?
Tomorrow, the Chancellor will deliver his 2nd budget statement this year. We have previously highlighted what manufacturers wanted to see from Autumn Budget and the Industrial Strategy in order to promote innovation and propel business spending on R&D. Policy actions should primarily:
- Promote the benefits associated with the 4th industrial revolution through demonstrators and enhance supply chain cooperation on 4IR innovation and adoption through collaborative funding as part of the Industrial Strategy Challenge Fund
- Increase the rate of the R&D tax credit under the Large Companies scheme
Check out the blog tomorrow to see what actions the Chancellor will take to boost research and innovation in the UK.