As British Science week draws to a close, new figures from the Office for National Statistics provide a timely opportunity to take stock of levels of investment in UK research and development.
Theresa May has put R&D at the heart of her “industrial strategy” for a prosperous post-Brexit Britain, proclaiming her ambition for Britain to become “the global go-to place for scientists, innovators and tech investors”.
We start from a strong position in terms of skills and scientific excellence - one that Prospect is campaigning to ensure is not jeopardised by the impact of Brexit on British researchers’ ability to work with colleagues from the continent or access pan-European funding schemes.
But are overall levels of investment adequate to ensure the UK can grasp the opportunities of the years to come?
The good news from the ONS is that total expenditure on research and development as a share of GDP - the key measure of our economy’s “R&D intensity” – has been rising, from 1.66% in 2014 to 1.68% in 2015.
However it is still some way short of the EU average or that of many other major economies, as the latest comparable data from the EU show:
The CBI has said we should set a target of achieving 3% of GDP by 2025. That would mean raising total public and private sector investment by about £25bn a year in today’s money.
Breaking the figures down, we can see that recent increases have reflected rising private sector R&D expenditure. Previously released figures suggest this was mainly driven by pharmaceuticals, IT, and motor vehicle sectors. (Private sector defence, aerospace and telecommunications R&D is falling in relative or absolute terms.)
Public sector spending (by Government and Research Councils) fell by about £200m in real terms between 2013 and 2015.
However, it is possible that we could see a partial inversion of these trends over the next few years.
Philip Hammond’s Autumn Statement announced increases in public spending on R&D rising to an extra £2bn a year by 2020.
At the same time private sector investment in R&D may be affected by Brexit-related uncertainty. The Office for Budget Responsibility’s latest figures suggest that this could result in total business investment around £15bn-£25bn a year less than previously forecast.
It is also worth noting an ongoing fall in the level of R&D performed (as opposed to funded) by the public sector – for example in the important laboratories or research institutes attached to the Department for the Environment, Food and Rural Affairs, or the Department for Business, Energy and Industrial Strategy - is also due their receiving a declining share of government funding, more of which is going directly to business. This trend has been in evidence since the 1980s.
One factor in this trend is likely to be the shift of research organisations from the public to the private sector – as seen with the recent transformation of the Food and Environment Research Agency into a private joint venture between DEFRA and Capita.
If we want to fulfil Britain’s potential as a world-leader in research and development, we should be careful not to see the balance between the two sides of this mixed economy as a mutually exclusive trade-off.
Lots of economic evidence suggests that public investment in R&D has a “multiplier” effect that “crowds in” private sector investment. Philip Hammond’s boost to public R&D spending should, in the long run, lead to higher business sector investment.
Protecting and strengthening public research institutions matters, too – precisely because the economic benefits of their work may not always be obvious in the short term. A report produced by the business department in 2013 recounted the story of the Plant Breeding Institute. Its privatisation in the 1980s, and eventual disappearance
“robbed the UK of a world-class translational research facility in advanced plant science at precisely the moment when molecular biology was set to revolutionise the field. The consequences are simply that the UK is a world leader in the science but the major breeders are abroad and our ability to turn UK discoveries into UK benefit is handicapped.”
If we want the UK to be able to lead and benefit from the great scientific and technological revolutions of the twenty-first century, we must make sure that both the public and private sectors are enabled to play their part.