This release provides estimates of businesses' expenditure and employment relating to R&D performed in the UK in 2011, irrespective of the residence of the ultimate owner or users of the R&D produced. Estimates in cash terms present the values of R&D expenditures collected by the Business Enterprise Research and Development (BERD) survey, while real terms estimates have been adjusted for changes in the general price level between years using the GDP deflator. This allows changes in the volume of R&D expenditures to be examined over time.
While R&D is often thought of as synonymous with high-tech firms that are on the cutting edge of new technology, many established consumer goods companies spend large sums of money, on a systematic basis, improving existing products.
The activities that are classified as R&D differ from company to company, but there are two basic models. In one model, the primary function of R&D is to develop new products; in the second model, the primary function of R&D is to discover and create new knowledge about scientific and technological topics with the purpose of uncovering and enabling development of new products, processes, and services. According to the Department for Business Innovation and Skills (BIS), R&D is defined as “any project to resolve scientific or technological uncertainty aimed at achieving an advance in science or technology”.
For the purposes of National Statistics, R&D and related concepts follow internationally agreed standards defined by the Organisation for Economic Cooperation and Development (OECD), as published in the ‘ Frascati’ Manual. R&D, in the Frascati Manual, is defined as “creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society and the use of this stock of knowledge to devise new applications”.
The Frascati Manual was originally written by, and for, the experts in OECD member countries that collect and issue national data on R&D. The definitions provided in this manual are internationally accepted and now serve as a common language for designing, collecting and using R&D data.
The BERD survey has been run annually since 1993. A sample of approximately 5,000 UK businesses was selected for this survey from a continually updated register of R&D performers. The main purpose of the BERD survey is to supply data for policy and monitoring purposes on science and technology, of which R&D is an important part.
As part of this release, estimates for 2009 and 2010 have been revised to take account of businesses late returns and misreporting (see background note 5).
The National Accounts provide the framework that is used to define and measure the UK’s economic performance, such as the size of the UK economy (GDP). Changes to the European System of Accounts (ESA) mean that expenditure on R&D will contribute, from 2014 onwards, to the formation of assets and therefore the value of the UK’s net worth. To facilitate this, additional questions were included as part of the BERD 2011 data collection. Please see the ONS ESA 2010 page for more information.
Published alongside this release, with the aim of assisting users with their understanding of R&D and related concepts, are two information notes. The first, ‘Coverage of the Business Enterprise Research and Development Survey’ (147 Kb Pdf) , reports on the completeness of these estimates. The second, ‘Coherence of UK Research & Development Statistics’ (807.8 Kb Pdf) , draws attention to the coherence of BERD R&D estimates with other UK and international measures of R&D.
In March 2013 ONS will publish UK Gross Domestic Expenditure on Research and Development (GERD) for the year 2011. The UK GERD publication includes estimates for R&D carried out by the following four sectors of the economy, as defined in the Frascati manual, business enterprise (BERD), higher education (HERD), government (GovERD) which includes research councils, and Private Non-Profit (PNP) organisations. GERD uniquely provides information on total R&D expenditure in the UK, and is the preferred measure for use in international comparisons of R&D expenditure.
We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have, and would be particularly interested in knowing how you make use of these data to inform your work. Please contact us via email: RandD@ons.gsi.gov.uk or telephone David Matthews on +44 (0)1633 456756.
Since 1985 there has been a steady increase in R&D expenditure in cash terms. In 2011, £17.4 billion was spent on R&D performed within UK businesses. This is compared with £11.5 billion in 2000 and £5.0 billion in 1985. The 2011 estimate of £17.4 billion is an increase of 8% in cash terms (current) compared with the 2010 estimate (£16.1 billion).
In real terms, the 2011 estimate of £17.4 billion is a 6% increase on the 2010 estimate (£16.4 billion) of expenditure on R&D performed in UK businesses. In real terms the general trend (Figure 1) has also been one of an increase in expenditure since 1985 (£6.5 billion increase).
Figure 2, below, shows expenditure on business R&D as a percentage of GDP, in cash terms. Total BERD R&D expenditure in 2011 represented 1.1% of GDP. This estimate is in line with recent years and is a slight decrease on the 1.2% estimate for the years 2000 and 2001. Figure 2 highlights that business R&D expenditure, as a percentage of GDP in cash terms, peaked in 1986 at 1.5%.
The target set by the UK government in chapter four of the Science and Innovation Framework 2004 - 2014 was to increase business investment in R&D towards a goal of 1.7% of GDP by the end of 2014.
On an annual basis the 400 largest R&D spenders are asked to select the industry product groups that best describe the type of R&D activities that they undertake. The concept of ‘product groups’ is discussed in detail as part of the background notes to this release (background note 9).
The UK is home to some of the world’s largest pharmaceutical companies, and also to the largest aerospace business in Europe. Although there have been some large restructures and closures of key sites during the reporting period, investment in pharmaceutical R&D remains high.
This is reflected in the amount of expenditure invested in pharmaceutical R&D in 2011 at £4.9 billion, an increase of 4% on the 2010 estimate. This expenditure accounts for 28% of the total expenditure on R&D performed in UK businesses in 2011.
Five other product groups reporting significant R&D expenditure in the UK in 2011 were:
Computer programming and information service activities, £1.8 billion (10% of total business R&D expenditure).
Motor vehicles and parts, £1.5 billion (9% of total business R&D expenditure).
Aerospace, £1.4 billion (8% of total business R&D expenditure).
Telecommunications, £1.1 billion (6% of total business R&D expenditure).
Machinery and equipment, £970 million (6% of total business R&D expenditure).
As indicated in Figure 3 below, these six product groups accounted for 67% of the total UK business R&D expenditure in 2011.
Of the 33 detailed product groups, 22 saw an increase in levels of R&D expenditure by UK businesses, in cash terms, since 2010, with 11 showing a decrease. In terms of growth in R&D expenditure, in percentage terms since 2010, the largest increases were in construction (57%); casting of iron and steel (57%); shipbuilding (45%) and wholesale and retail trade (33%) product groups. In contrast, two of the top six product groups, aerospace and telecommunications, showed small decreases in expenditure of 1% and 7% respectively compared with the 2010 estimates.
R&D expenditure and employment can be divided between the civil and defence sectors. Expenditure in the civil sector in 2011 (£15.6 billion), accounted for 89% of total R&D expenditure.
In cash terms in 2011, civil R&D expenditure increased by 8% from £14.4 billion to £15.6 billion and defence R&D increased by 10% from £1.7 billion to £1.8 billion compared to 2010.
Figure 4, shows that whereas business R&D expenditure in real terms in the civil sector has increased by 54% since 1989, business expenditure on R&D in the defence sector has decreased in real terms by 39%.
Civil R&D expenditure can be further divided between the manufacturing and services sectors. In 2011, expenditure in manufacturing accounted for 70% of total civil R&D expenditure and services accounted for 28%. However, since 2000, expenditure on R&D in manufacturing (10% increase in real terms) has not kept pace with the increase in R&D expenditure in services (76% increase).
Mechanical engineering, part of the manufacturing sector, is the largest contributor to defence R&D expenditure (31% of total defence expenditure) in 2011, with aerospace (23%) and electrical machinery (19%) second and third respectively. See Table SB5 in the data section of this publication.
In response to user requirements identified in the BERD quinquennial review (1.44 Mb Pdf) , and as part of the UK Statistic Authority assessment of ‘Statistics on Research and Development’ a new table has been included for the first time as part of this publication (Table 27) detailing estimates of R&D expenditure on an industry basis, by Standard Industrial Classification (SIC).
By SIC, R&D was performed predominantly, unsurprisingly, by businesses that are classified to the ‘Scientific research and development’ industry (34% of total expenditure).
Five other industry classifications showing significant R&D expenditure in the UK in 2011 were:
Computer programming, consultancy and related activities, £1.5 billion (9% of total business R&D expenditure).
Manufacture of motor vehicles, £1.3 billion (7% of total business R&D expenditure).
Manufacture of other transport equipment, £1.2 billion (7% of total business R&D expenditure).
Manufacture of computer, electronic and optical products, £977 million (6% of total business R&D expenditure).
Architectural and engineering activities, £879 million (5% of total business R&D expenditure).
These six industry sectors accounted for 67% of the total UK business R&D expenditure in 2011.
It is important to note that these estimates are not directly comparable with the estimates of R&D expenditure by detailed product groups. This is due to the fact that businesses may have reported significant R&D in industry sectors which are different to the main classification of their business as part of the Inter-Departmental Business Register (IDBR), from which the estimates of SIC are derived. See background notes 9 and 10, which explain the concepts of product groups and SIC in more detail.
Estimates of employment in R&D are produced on a full-time equivalent (FTE) basis whereby businesses convert part-time employees’ hours into a full-time employees’ equivalent. FTE estimates provide a better indication of total labour input than a simple headcount.
The number of FTE staff employed on R&D increased by 4,000 to 158,000 between 2010 and 2011. The number of scientists and engineers increased from 87,000 to 89,000 and accounted for 56% of all staff employed on R&D in UK businesses. The number of technicians increased by 2,000 to 43,000, while administrative staff numbers remained the same at 27,000 in 2011 (Figure 6).
It is possible, using data from the BERD survey, to analyse R&D expenditure by region. In this context, region refers to the location where the businesses perform the R&D, not the location of either the businesses headquarters or of any external funders.
The South East and East of England continue to dominate where R&D is performed in the UK. These two regions accounted for almost half of UK business R&D expenditure in 2011 at 47% (Map 1). These regions also employed 43% of total R&D employment, on an FTE basis, in 2011.
The majority of UK business R&D expenditure was carried out in England, at 93% in 2011. All of the UK regions, England, Wales, Scotland and Northern Ireland showed an increase in business R&D expenditure in 2011 compared to 2010, with growth of 8%, 9%, 11% and 9% respectively.
The largest source of R&D funding in 2011 was from businesses’ own funds at £11.3 billion, which accounted for 65% of total R&D expenditure. Overseas funding of UK businesses R&D constituted £3.7 billion in 2011, 21% of total expenditure (Figure 7).
The UK government’s funding of businesses’ R&D in 2011 was £1.6 billion, 9% of total expenditure. This funding was predominantly in the defence sector (£1.2 billion), 73% of total government funding. This includes government awarded contracts to UK businesses to develop aircraft, naval ships, submarines and their systems and equipment.
Since the BERD survey began on an annual basis in 1993, the majority of annual UK business R&D expenditure has always been by UK owned businesses. In 1993, 73% of UK R&D expenditure was by UK owned businesses and 27% by foreign owned businesses. In contrast, in 2011, 50% of UK business R&D expenditure was by foreign owned businesses, and 50% by UK owned businesses (Figure 8).
When comparing total business R&D intensity across countries, it is important to take into account differences in their industrial structure. The OECD has produced a Science, Technology and Industry Scoreboard to facilitate these comparisons.
In March 2012, as part of a publication ‘The UK R&D Landscape’, it was reported that “the business enterprise component of R&D expenditure in the UK is low by international standards, even after adjusting for structural difference between countries. It is also concentrated in the hands of a few very large firms and the small number of industrial sectors in which they are based. The official statistics reveal that the largest 10 business R&D spenders accounted for 34% of all UK R&D in 2009 and the largest 50 spenders accounted for 56%” (Hughes and Mina 2012, pp.i).
Key issues specific to this bulletin
This is the latest in a series of annual releases about expenditure and employment in R&D by UK businesses by Office for National Statistics (ONS). The results in this release are in respect of 2011. ONS began publishing annual data on business expenditure and employment in R&D in 1993. The source of the information is the Business Enterprise Research and Development (BERD) survey. A quality report (126.8 Kb Pdf) for the BERD is available on the ONS website.
The BERD survey is conducted annually by the ONS. As part of the 2011 survey, approximately 5,000 questionnaires were sent to businesses known to perform R&D; this included around 400 of the largest R&D spenders, which accounted for approximately 80% of the 2011 total R&D expenditure figure. Smaller R&D performers and others believed to be performing R&D were selected using various sampling fractions. Industry product group and business employment size were the stratification variables. Completed questionnaires were returned by 4,733 businesses representing a response rate of 92%.
This Statistical Bulletin reports business R&D performed in the UK irrespective of the residence of the ultimate owner. Overseas activities of affiliates of UK businesses are not included. Gross expenditure of R&D in the UK performed by all sectors of the economy (137 Kb Pdf) , commonly referred to as GERD, is reported separately.
The UK Statistics Authority has reviewed this publication in its report: “ Assessment of compliance with the Code of Practice for Official Statistics: Statistics on Research and Development” which was published on 28 June 2012. This review recommended that the UK Business Enterprise Research and Development estimates be designated as National Statistics, subject to ONS carrying out certain requirements. ONS is working hard to meet the requirements set out in this assessment report.
Timeliness and punctuality
An internal investigation has been carried out to identify if it is feasible to publish these R&D statistics earlier than they are at present. Unfortunately, this investigation concluded that it is not possible for ONS to bring forward the publication of these estimates in the short-term.
The main reason for this is that the Department for Finance and Personnel, Northern Ireland (DFPNI) runs a business R&D survey in Northern Ireland on an annual basis, and provides ONS with estimates for Northern Ireland to allow aggregate UK statistics to be produced. DFPNI cannot release these data to ONS earlier than mid October each year, so production of the BERD UK statistics cannot be brought forward from November.
It is important to note that improvements have been made to the processes underpinning the production of these estimates over the last few years and as a consequence timeliness has been improved. For example, 2007 data were published in January 2008, five months after the close of the survey. In contrast this statistical bulletin has been published only three months after the close of the survey.
As part of this investigation ONS sought the views of some of the known users of this publication. They unanimously stated that they are content with the current publication timetable.
Completeness of coverage
As part of the assessment of ‘Statistics on Research and Development’ by the UK Statistics Authority (UKSA), a further requirement was placed on the ONS to review the methodology for producing R&D statistics to identify potential gaps in coverage and meet the coverage requirements of the European System of Accounts (2010). To meet this requirement and to assist users in their understanding of this complex issue, an Information Note entitled ‘ Coverage of the Business Enterprise Research & Development Survey’ (147 Kb Pdf) , has been published today which seeks to address this issue.
The 2009 and 2010 estimates have been revised where necessary to take account of businesses misreporting and late returns.
One indication of the reliability of the key indicators in this release can be obtained by monitoring the size of revisions. The table below records the size and pattern of revisions that have occurred over the last five years. Please note that these indicators only report summary measures for revisions. (The revised data may itself be subject to sampling or other sources of error).
|Value in latest period||Average revision||Average revision without regard to sign|
|Expenditure on R&D performed by UK businesses||17,408||-239||369|
A spreadsheet is available giving the revisions of estimates (42 Kb Excel sheet) from 2004 and the calculations behind the averages in the table.
The revisions table covers estimates of the UK business enterprise R&D expenditure first published from November 2005 (for 2004) to November 2009 (for 2008).
A statistical test has been applied to the average revision to find out if there is bias in the estimates. No statistically significant bias was identified.
It is possible to calculate the standard error for each detailed product group, as a measure of sampling error. To illustrate this, the total expenditure for the aerospace product group is £1,417 million. The calculated standard error, as shown in Table 25, is £29 million.
The 95% confidence interval for this estimate is then given as £1,359 million to £1,475 million that is £1,417 million +/- two standard errors. A 95% confidence interval means that it is expected that in 95% of samples, this range would contain the true value.
The estimates in this publication are based on a stratified sample drawn from the population of businesses known to actually perform R&D or are likely to be R&D performers. As with any sample survey, the R&D survey is subject to two types of possible errors:
Sampling errors, due to only a sample of the population being surveyed. These errors can be quantified, as shown in Table 25.
Non-sampling errors. These include factors such as population coverage, misreporting and non-response bias. These errors are generally hard to quantify, because of the difficulty in identifying the population of actual/likely R&D performers and because of the problems ensuring that businesses adhere to Frascati R&D definitions. An Information Note (147 Kb Pdf) has been published which provides an overview of the survey design and looks at the methods and sources used to update the sampling frame.
Discontinuities in data
The BERD questionnaire was redesigned after the 2007 survey to better reflect user needs and to address concerns about data quality and difficulty in completion. While these changes are viewed as being an improvement, they may have had an impact on the comparability of the data returned. Unfortunately, it is not possible to measure this impact.
These points should be noted when examining the data tables:
There may be discrepancies between totals and the sum of their independently rounded totals.
In some tables, entries have been aggregated to avoid disclosure of figures in which the returns of individual businesses could be identified. Where this happens, footnotes have been added to the tables.
Respondents were asked to make a return for the calendar year 2011 or the nearest 12 month period for which figures were available. Data for all years published in this Statistical Bulletin were collected on the same basis.
It is sometimes necessary to suppress figures for certain items in order to avoid disclosing data from individual institutions. Tables which contain data which are disclosive will contain a relevant footnote.
The 400 largest R&D spenders are asked to select the industry product groups that best describe the type of R&D activities they undertake. In 2010, these product group descriptions were updated to better reflect the new Standard Industrial Classification (SIC 2007) descriptions. For the smaller R&D performers, no product group data was collected. However, the businesses’ Standard Industrial Classification (SIC) codes are known from the Inter-Departmental Business Register (IDBR). An assumption is therefore made that the R&D expenditure is for the detailed product group that corresponds to the individual businesses’ dominant SIC. This approach must be regarded as an approximation since, in practice, an individual business can perform R&D for a range of product groups.
The implementation of SIC 2007, in 2010, resulted in some businesses’ R&D moving to a different product group than previously published. The largest impact was with businesses with publishing activities as these moved out of the manufacturing sector and started to be included under miscellaneous business activities. There was also an increase in the other manufactured goods product group due to businesses being reclassified from textiles, clothing and leather products, pulp and paper products, rubber and plastic products, fabricated metal products, machinery and equipment and precision instruments and optical products.
The broad product groups, which consist of aggregations of the detailed product groups, were refined and expanded in 2002 in order to more accurately categorise the data within the manufacturing and service sectors. In 2011, sewerage and waste management is now included in the other total when previously it was included in manufacturing.
Standard Industrial Classification
The Authority placed a requirement on ONS, as part of the assessment of Research and Development statistics, to ‘Review the statistical disclosure practices for BERD statistics, with a view to presenting industry statistics in BERD, and publish the results’. To this end, ONS, as part of this publication, has published a table (Table 27), for the first time, detailing estimates of R&D by SIC.
The SIC was first introduced into the UK in 1948 for use in classifying business establishments and other statistical units by the type of economic activity in which they were engaged. The classification provides a framework for the collection, tabulation, presentation and analysis of data, and its use promotes uniformity.
Estimates by SIC are derived by allocating business expenditure to industry classifications using the IDBR. The IDBR is a list of UK businesses that is maintained by ONS and holds information on the business activity (based on SIC) of every business.
Employment estimates are provided by businesses on the basis of ‘full-time equivalent’ staff, averaged over the year. The categories of employment used are:
Researchers – engaged in the conception or creation of new knowledge, products, methods and systems.
Technicians – perform scientific and technical tasks normally under the supervision of researchers.
Others – support staff including skilled and unskilled craftsmen, secretarial and clerical staff participating in R&D projects.
Small and Medium Enterprises (SMEs)
A table providing estimates of R&D expenditure by Small and Medium Enterprises (SME) is included as part of this publication (Table 26). The SME definition used is that under the European Commission Recommendation (96/280/EC) of 3 April 1996, in which SMEs are defined as enterprises with fewer than 250 employees. In addition, a criterion of independence is used to exclude enterprises that are part of a larger enterprise group, so that only true SMEs are evaluated. This criterion is important in the context of R&D estimates, given that R&D activity is often carried out by smaller businesses which form part of larger, sometimes multinational, businesses. To apply the SME definition, historic information on business ownership has been obtained using that currently held on the IDBR. Caution should therefore be exercised in making comparisons over time.
The following process is used to produce regional estimates of R&D. The businesses receiving the long questionnaire (the 400 largest R&D spenders) account for approximately 80% of total R&D expenditure. Each business is asked to provide the workplace postcodes for all the sites at which the business performed R&D, and to allocate the total expenditure figures of the business to the sites on a percentage basis. Regional data for the remaining businesses, which account for the remaining 20% of total expenditure, all have a value estimated by grossing up using county region codes from the business register of R&D performers. Aggregation is undertaken at broad product group and county level.
Users and uses of data
A primary use of the data in this Statistical Bulletin is that it is a key component in measuring the UK’s gross domestic expenditure on R&D. The other components are the UK government, the higher education sector and the non-profit business sector. Gross expenditure of R&D in the UK performed by all sectors of the economy (137 Kb Pdf) is reported separately, as part of a publication commonly referred to as GERD.
Changes introduced as part of the amendments to the System of National Accounts (SNA) in 2008 and European System of Accounts (ESA) in 2010 specify that R&D, from 2014 onwards, should not be considered as an ancillary activity and instead expenditure on R&D should constitute investment in R&D assets, which as a consequence needs to be capitalised in the UK National Accounts. In short, R&D expenditure will now contribute to the compilation of the value of the UK’s net worth and be included as part of Gross Domestic Product (GDP) estimates. Please see the ONS ESA 2010 page for more information.
There are numerous other users within and outside government who use these data to produce various analyses and to inform policy decisions. These include:
European Union’s Statistical Office (Eurostat) - the UK provides statistics measuring R&D activity in accordance with the European Commission Regulation No. 753/2004 of the European Parliament and the council. The business estimates in this statistical bulletin are used to provide information that is consistent with other EU member states and to enable benchmarking to be achieved. Europe 2020 targets for economic growth include 3% of the EU's GDP (both private and publicly funded) to be invested in R&D/innovation by 2020. This means that these estimates are essential in monitoring progress towards this target.
OECD – use BERD data for constructing internationally comparable data tables and producing regular statistical publications such as the ‘Main Science and Technology indicators’ (MSTI) and ‘The Annual Business Enterprise Research and Development’ statistics (ANBERD). The data are also used for analytical studies, which underpin economic analyses and policy reviews.
The Department for Business Innovation and Skills (BIS) use BERD data to assess policy impact and inform debate. R&D data underpins their assessments of UK innovation performance as well as international work in the field. BIS produced an R&D scoreboard until 2010. The R&D scoreboard was the leading source of information and analysis on the world's top R&D active companies, both in the UK and globally. It listed the 1,000 UK and 1,000 global companies investing most in R&D, enabling companies to benchmark their own investments against sector leaders. The scoreboard was based on data extracted from companies' annual reports and accounts. The last scoreboard to be published includes commentary and analysis prepared by the Economist Intelligence Unit for the year 2010. View the latest R&D scoreboard.
The Welsh Government (WG) and the Scottish Government (SG) use BERD data as a key indicator for measuring the performance of their respective economies within the UK, as well as to monitor and develop R&D policies which seek to increase R&D investment.
HM Revenue and Customs (HMRC) use BERD data to support analysis and advice on policy development. BERD is one of the key data sources for policy evaluation.
The Department for Finance and Personnel, Northern Ireland carry out their own annual survey into R&D and then provide ONS with the Northern Ireland business R&D data for inclusion in the UK published results.
The Research and Development Society is a UK-based organisation formed to promote the better understanding of R&D in all its forms. It holds regular afternoon and evening meetings, usually at the Royal Society in London. The Research and Development Society makes use of BERD data, as a key source of information, for understanding how much UK businesses are investing in R&D on an annual basis and to inform wider debates about R&D.
Requests for BERD data are made from a variety of sources including academics, government departments, and economic consultants. This means that the data are used in various publications. For example:
In 2011, the Royal Society published Knowledge, Networks and Nations: Global scientific collaboration in the 21st century which included data published in ONS BERD 2009 Statistical Bulletin as part of the scientific landscape in 2011 (see page 31 in the above link).
In one of a series of working papers by the STEPS centre (Social, Technological and Environmental Pathways to Sustainability), the Economic and Social Research Council (ESRC) published Trends in the Global Distribution of R&D since the 1970s, their interpretation and limitations which refers extensively to BERD data.
Do you make use of our annual estimates of UK Business Enterprise Research and Development? If yes, we would like to hear from you (RandD@ons.gsi.gov.uk) and understand how you make use of these statistics. This will enable us, in the future, to better meet your needs as a user.
Coherence and international comparisons
The UKSA reviewed this publication in their report “Assessment of Compliance with the Code of Practice for Official Statistics: Statistics on Research and Development” published on 28 June 2012. One of the requirements identified as part of this assessment was to publish improved information on the coherence of R&D statistics with other official statistics. This Information Note (807.8 Kb Pdf) has been produced to address this issue.
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|David Matthews||+44 (0)1633 456756||Business Operations and Development Division||RandD@ons.gsi.gov.uk|