This release provides estimates of businesses' expenditure and employment relating to R&D performed in the UK in 2012, irrespective of the residence of the ultimate owner or user of the R&D produced.
Two types of estimates are presented in this release, current and constant price terms. Estimates in current prices present the value of R&D expenditure collected from the Business Enterprise Research and Development (BERD) survey. Constant price estimates have been adjusted for inflation between years using the GDP deflator. This allows changes in the volume of R&D expenditures to be examined on a comparable basis 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 businesses that produce consumer goods and services spend large sums of money, on a systematic basis, improving existing products.
For the purposes of this release, 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. In the Frascati Manual, R&D 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 and evaluating science and technology policy.
The estimates in this release are derived from the BERD survey. The survey has been run annually since 1993. Each year approximately 5,000 UK businesses are selected for this survey from a continually updated register of known 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.
The National Accounts provide the framework that is used to define and measure the UK’s economic performance, such as the value of the UK’s Gross Domestic Product (GDP). Changes to the European System of Accounts (ESA) mean that from 2014 onwards, expenditure on R&D will contribute to the formation of assets and therefore the value of the UK’s net worth.
In March 2014 ONS will publish UK Gross Domestic Expenditure on Research and Development (GERD) for the year 2012. The UK GERD statistical bulletin includes estimates for R&D carried out by the following four sectors of the economy, as defined in the Frascati manual, namely business enterprise (BERD), higher education (HERD), government including research councils (GovERD) 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 overall 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 current prices. In 2012, £17.1 billion was spent on R&D performed by UK businesses. This is compared with £11.5 billion in 2000 and £5.0 billion in 1985. The 2012 estimate of £17.1 billion is a decrease of 2% in current prices compared with the 2011 estimate (£17.5 billion).
In constant prices, the 2012 estimate of £17.1 billion is a 4% decrease on the 2011 estimate (£17.8 billion) of expenditure on R&D performed in UK businesses.
Despite business R&D expenditure decreasing between 2011 and 2012, there has been a trend of increasing expenditure since 1985. Over this period there has been an increase of £6.3 billion, in constant prices, on the 1985 estimate of £10.8 billion (Figure 1).
Figure 2 shows expenditure on business R&D as a percentage of GDP since 1985. Total business R&D expenditure in 2012 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 1999 and 2001. Figure 2 highlights that business R&D expenditure as a percentage of GDP peaked in 1986 at 1.5%.
A target set by the UK government in 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. For the 2012 survey, the largest 400 spenders were those businesses previously reporting more than approximately £4.6 million expenditure on R&D. 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. In 2012, Pharmaceuticals remained the largest product group with £4.2 billion expenditure, accounting for 25% of total expenditure on R&D performed in UK businesses. However, R&D expenditure in Pharmaceuticals decreased by 15% in current prices compared with the 2011 estimate of £4.9 billion (Figure 3).
The Telecommunications product group also showed a decrease in expenditure of 15% in current prices since 2011, from £1.1 billion to £889 million in 2012. This accounted for 5% of total expenditure in 2012. More starkly, since 2007, this product group has decreased by £843 million (49%) in constant prices.
The largest increase in expenditure since 2011 was in the Motor vehicles and parts product group, which increased by £207 million in current prices from the 2011 estimate to £1.7 billion in 2012, a 14% increase. The Motor vehicles and parts product group made up 10% of expenditure in 2012.
Other product groups reporting around £1 billion or more R&D expenditure in the UK in 2012 were:
Computer programming and information service activities, £1.9 billion (11% of total R&D expenditure);
Aerospace, £1.5 billion (9%);
Machinery and equipment, £998 million (6%).
These six product groups accounted for 66% of the total UK business R&D expenditure in 2012.
Of the 33 R&D product groups, 20 saw an increase in levels of R&D expenditure by UK businesses in current prices, since 2011, while 13 product groups decreased. In terms of percentage growth, the largest increases were in the Construction (87%); Electricity, gas and water (83%); Textiles, clothing and leather products (43%) and Consumer electronics and communication equipment (33%) product groups.
R&D expenditure and employment can be split between the civil and defence sectors. Expenditure in the civil sector in 2012 (£15.5 billion) accounted for 91% of total business R&D expenditure.
In 2012, in current prices, civil R&D expenditure decreased by 1% from £15.7 billion to £15.5 billion and defence R&D decreased by 10% from £1.8 billion to £1.6 billion compared with 2011.
Figure 4 shows that while business R&D expenditure in the civil sector increased by 56% in constant prices since 1989, business expenditure on R&D in the defence sector decreased by 47% in constant prices over this period.
Civil R&D expenditure can be further split between the Manufacturing, Services and 'Other’ sectors (see Table SB5 in 2012 Datasets (1.13 Mb Excel sheet) ). In 2012, expenditure in Manufacturing accounted for 69% of total civil R&D expenditure, compared with 77% in 2001. Manufacturing accounted for 94% of total defence R&D expenditure in 2012, compared with 92% in 2001.
Mechanical engineering, part of the Manufacturing sector, was the largest contributor to defence R&D expenditure (33% of total defence expenditure) in 2012, with Aerospace (22%) and Electrical machinery (17%) second and third respectively.
Estimates of R&D expenditure on an industry basis, according to the Standard Industrial Classification (SIC), were first introduced in the 2011 BERD statistical bulletin to meet an expressed user need (See Table 27 in 2012 datasets (1.13 Mb Excel sheet) ).
The highest level of R&D expenditure in 2012 by SIC was performed by businesses that were classified to the ‘Scientific research and development’ industry, at £4.7 billion (27% of total expenditure) (Figure 5).
Five other industries had R&D expenditure of around £1 billion or more:
Computer programming, consultancy and related activities, £1.6 billion (9% of total R&D expenditure);
Manufacture of motor vehicles and trailers, £1.5 billion (9%);
Manufacture of other transport equipment, £1.4 billion (8%);
Architectural and engineering activities, £1.2 billion (7%);
Manufacture of computer, electronic and optical products, £977 million (6%).
These six industries accounted for 66% of the total UK business R&D expenditure in 2012.
It is important to note that estimates of R&D by industry are not directly comparable with the estimates of R&D expenditure by product groups. This is because businesses may report significant R&D in product groups which are different to the main classification of their business according to the SIC. 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.
Employment in R&D has remained relatively stable in recent years. The lowest level of employment in R&D in the last decade occurred in 2005, when 146,000 FTE were employed, while the highest level (160,000) was reached in 2011 (Figure 6).
The number of FTE staff employed in R&D remained unchanged at 160,000 between 2011 and 2012. The 2012 estimate comprised of:
90,000 scientists and engineers (56%),
43,000 technicians (27%),
27,000 administrative staff (17%).
It is possible, using data from the BERD survey, to analyse R&D expenditure by country and region. In this context, ‘region’ refers to the location where a business performs R&D, not the location of either the business’ headquarters or that of any external funders.
The South East and East of England continue to dominate where R&D expenditure takes place in the UK. These two regions combined accounted for 44% of UK business R&D expenditure in 2012 (Map 1). These regions combined also employed 66,000 FTE which made up 41% of total R&D employment in 2012. The regions with the lowest levels of employment in R&D were the North East and Wales, both employing 3,000 FTE R&D staff (Map 2).
The majority (92%) of UK R&D expenditure was carried out in England in 2012.
While Northern Ireland, Wales and Scotland showed increases in current prices (19%, 6% and 4% respectively) in R&D expenditure in 2012 compared with 2011, there was a decrease in expenditure in England of 3%.
The largest source of R&D funding in 2012 was businesses’ own funds at £11.3 billion, which accounted for 66% of total R&D expenditure.
Overseas funding of UK businesses’ R&D was £4.0 billion in 2012, 24% of total business UK R&D expenditure (Figure 7).
The UK Government’s funding of businesses’ R&D in 2012 was £1.3 billion, a decrease of £158 million (10%) in current prices. This represented 8% of total business R&D expenditure. UK government funding was predominantly in the defence sector (£1.1 billion), which made up 78% of government funding of business R&D expenditure. This includes government awarded contracts to UK businesses to develop aircraft, naval ships, submarines and their systems and equipment.
In 1993, when the BERD survey began on an annual basis, 73% of UK business R&D expenditure was by UK owned businesses and 27% by foreign owned businesses. The majority of UK business R&D expenditure continued to be performed by UK owned businesses until 2010, when 59% of UK business R&D expenditure was performed by UK owned businesses. In 2011, for the first time, just over half (51%) of business R&D expenditure in the UK was by foreign owned businesses. This pattern of ownership continued in 2012 (Figure 8).
On 15 March 2013, ONS published R&D expenditure by foreign owned businesses, which contained more detailed analysis of the pattern of ownership of businesses that performed R&D between 1995 and 2011. This was based on the estimates that had been included in the 2011 BERD statistical bulletin. Estimates for 2010 and 2011 have been revised in this bulletin. It should be noted that the original 2011 estimate of the proportion of R&D expenditure by foreign owned businesses has been revised upwards from 50% to 51%.
When comparing total business R&D intensity across countries, it is important to take into account differences in their industrial structure. OECD produces 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".
Key issues specific to this bulletin
This is the latest annual release about expenditure and employment in R&D by UK businesses. The results in this release are in respect of 2012. 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 survey is available on the ONS website.
The BERD survey is conducted annually by ONS. As part of the 2012 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 78% of the 2012 total R&D expenditure estimate. 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 4,488 businesses representing a response rate of 91%.
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, commonly referred to as GERD, is reported separately in the annual GERD statistical bulletin.
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 has carried out the necessary work to meet these requirements and on 3 June 2013, the UK Statistics Authority confirmed the National Statistics designation of the BERD publication.
Timeliness and punctuality
An internal investigation was carried out in 2012 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. As such, production of the BERD UK statistics cannot be brought forward from November.
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.
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 less than three months from the close of the survey.
Completeness of Coverage
As part of the assessment of ‘Statistics on Research and Development’ by the UK Statistics Authority, a 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)
’ was published on 20 November 2012 to address this issue.
The 2010 and 2011 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||17,107||-89||219|
A spreadsheet (42 Kb Excel sheet) is available giving the revisions of estimates from 2005 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 2006 (for 2005) to November 2010 (for 2009). 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 £1,518 million. The calculated standard error, as shown in Table 25, is £39 million. 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. The
Information Note (147 Kb Pdf)
referred to in Background Note 4 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 2012 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 were 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.
Standard Industrial Classification
The UK Statistics 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’.
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 (SMEs) is included as part of this publication (Table 26). The SME definition used is that under the European Commission Recommendation (2003/361/EC) of 1 January 2003, in which SMEs are defined as enterprises with less 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) accounted for approximately 78% of total R&D expenditure in 2012. Each business was 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 accounted for the remaining 22% of total expenditure, all had 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 sector, 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 is reported separately, as part of a publication commonly referred to as GERD. The 2012 GERD estimates will be published in March 2014.
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 need to be capitalised in the UK National Accounts. In short, from 2014, R&D expenditure will contribute to the compilation of the value of the UK’s net worth and be included as part of Gross Domestic Product (GDP) estimates.
There are numerous other users within and outside government who use these data to produce various analyses and to inform policy decisions. These include:
Eurostat (E uropean Union’s Statistical Office) - the UK provides statistics measuring R&D activity in accordance with the European Commission Regulation No. 955/2012 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 by 2020. This means that the estimates in this release are essential in monitoring progress towards this target.
It should be noted that at the time of this publication, Eurostat have already published provisional estimates for EU member states gross expenditure on R&D in 2012. These estimates include business sector data. The provisional estimates for the UK were based on projections, and therefore when making comparisons with other countries, users are advised to use estimates from this release for UK business R&D expenditure, rather than Eurostat's provisional estimates for the UK.
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 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 June 2013, the National Audit Office published Research and Development funding for science and technology in the UK. This report was published in response to a request from the House of Commons Science and Technology Committee, and provides an overview of R&D spending in the UK since 1985.
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
An Information Note (807.8 Kb Pdf) providing an assessment of the coherence of R&D statistics with other official statistics was published in 2012 on the ONS website.
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|David Matthews||+44 (0)1633 456756||Business Outputs and Developments Division||RandD@ons.gsi.gov.uk|