1. Main points

In 2015, total expenditure on research and development (R&D) performed in UK businesses, in current prices, increased by 5% compared with 2014, to £20.9 billion.

Civil R&D expenditure increased by 6% in 2015 to £19.4 billion, while defence R&D expenditure decreased by 4% in 2015 to £1.5 billion.

In 2015, expenditure on R&D performed in UK foreign-owned businesses increased by 5% and accounted for 51% of total UK business expenditure on performing R&D.

The largest increase in R&D expenditure performed by UK businesses in 2015 was in the Motor vehicles and parts product group, which increased by £339 million (14%), in current prices.

The largest increase in regional R&D expenditure in percentage terms was in Northern Ireland, which increased by 40% (£143 million) to £501 million, in current prices compared with 2014.

In 2015, total business employment in R&D in the UK increased by 6% to 206,000 full-time equivalents (FTE).

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2. Overview

This release provides estimates of businesses' expenditure and employment relating to research and development (R&D) performed in the UK in 2015. These statistics are presented on a current price basis, which reports prices as they were at the time of measurement and not adjusted for inflation, and constant prices, which are prices adjusted for inflation between years using the gross domestic product (GDP) deflator1. The latter is more appropriate when analysing changes in R&D expenditure over time.

R&D is defined as “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”. These statistics are produced according to internationally agreed standards defined by the Organisation for Economic Co-operation and Development (OECD), as published in the “Frascati” Manual.

R&D statistics are collated annually using information from approximately 5,400 businesses2 from across the UK. These data are used across government for policy and monitoring purposes on science and technology, of which R&D is an important part and are also used in academia and the private sector. From 2014, R&D contributes to the formation of UK assets and therefore feeds into main economic statistics such as GDP and the value of the UK’s net worth.

In March 2017, we will publish UK gross domestic expenditure on research and development (GERD) for the year 2015. The GERD statistical bulletin will include estimates for R&D carried out by 4 sectors of the economy: namely business enterprise (BERD), higher education (HERD), government including research councils (GovERD) and private non-profit organisations (PNP). GERD is the preferred measure for use in international comparisons of overall R&D expenditure.

We also publish the UK government expenditure on science, engineering and technology (SET) statistical bulletin which contains broader measures of government R&D expenditure.

Notes for overview

  1. The GDP measure used is non-seasonally adjusted money GDP from 1955-56 to 2015-16 (1955 to 2015) consistent with United Kingdom Economic Accounts Q1 2016 published on 30 September 2016.

  2. Each year we select approximately 4,000 businesses selected for this survey from a continually updated register of known R&D performers in England, Scotland and Wales. In addition to this, approximately 1,400 businesses in Northern Ireland are surveyed by the Department of Finance (DoF) and their estimates added to those collected for Great Britain to form UK totals.

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3. R&D expenditure

Expenditure on R&D by UK businesses reached £20.9 billion in 2015 in current prices, up from £7.8 billion in 1991. The change in R&D expenditure reflected a steady increase over the period, with an average annual growth rate of 4.2%.

In constant price terms, the value of R&D expenditure in 2015 (£20.9 billion) reached its highest level on record, surpassing the 2014 high by £1.1 billion. A long-term upward trend is still evident when considering R&D expenditure in constant price terms, with an average annual growth rate of 2.1% since 1991 levels (£12.6 billion) (Figure 1).

The total business R&D expenditure in 2015 represented 1.1% of GDP. This estimate has remained unchanged since 2013.

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4. R&D expenditure by product group

On an annual basis, the 400 largest R&D performers, which accounted for approximately 75% of the 2015 total R&D expenditure estimate, are asked to select the industry product groups that best describe the type of R&D activities that they undertake. For the 2015 survey, the largest 400 performers were those businesses previously reporting more than approximately £5.4 million expenditure on performing R&D. The concept of "product groups" is described in more detail in the UK Business Enterprise Research and Development Quality and Methodology Information (QMI) report.

In 2015, Pharmaceuticals continued to be the largest product group, with £4.2 billion expenditure. This product group accounted for 20% of total expenditure on R&D performed in UK businesses, experiencing an increase in 2015 following decreasing expenditure for 3 successive years (Figure 2).

The largest increase in an individual product group was in the Motor vehicles and parts group, which increased for the sixth year in succession, to £2.7 billion in 2015, an increase of £339 million (14%) from the estimate of £2.4 billion in 2014. This product group accounted for 13% of total expenditure on R&D performed in UK businesses in 2015.

More evidence of the growth in the motor industry can be viewed in our statistical bulletin UK Manufacturers’ Sales by Product (PRODCOM) for 2015.

Another notable increase was in the Computer programming and information services activities group, which increased by £152 million (6%) in current prices from an estimate of £2.2 billion in 2014 to £2.4 billion in 2015. In 2015, this group also accounted for 11% of total expenditure on R&D performed in UK businesses.

Other product groups reporting around £1.0 billion or more R&D expenditure in the UK in 2015 were:

  • Aerospace, £1.7 billion (8% of total R&D expenditure)
  • Miscellaneous business activities; Technical testing and analysis, £1.1 billion (5%)
  • Machinery and equipment, £1.0 billion (5%)
  • Research and development services, £998 million (5%)

These 7 product groups accounted for 68% of the total UK business R&D expenditure in 2015.

The product group with the largest decrease was Telecommunications which decreased by £134 million (14%) to £825 million in 2015.

Since 2014, 19 of the 33 product groups experienced an increase in levels of R&D expenditure by UK businesses in current prices, 12 product groups decreased and 2 remained unchanged. In terms of percentage growth, the largest increases were in the Sewerage, waste management, remediation activities (53%), Transport and storage, including postal and courier activities (29%) and Research and development services (22%) product groups. The largest decrease in percentage terms was the Casting of iron and steel product group which decreased by 24% (£12 million) to £39 million in 2015.

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5. Civil and defence R&D expenditure, by broad product group

R&D expenditure statistics can be split between the civil and defence sectors. Expenditure on R&D performed by UK businesses in the civil sector in 2015 (£19.4 billion) accounted for 93% of the total, with the remainder accounted for by defence (£1.5 billion). The value of R&D expenditure within the civil sector in 2015 reflected a 6% rise on the previous year, while expenditure on defence R&D experienced a decline of 4% over the same period.

Figure 3 presents civil and defence R&D expenditure since 1991. This highlights that, while R&D expenditure by businesses in the civil sector increased by an annual average growth rate of 2.7% in constant prices since 1991, expenditure in the defence sector decreased by an annual average of 1.8% per year over the same period.

Civil R&D expenditure can be further split between the Manufacturing, Services and “Other” sectors (see Table 5 in the 2015 datasets). In 2015, expenditure in Manufacturing accounted for 68% of total civil expenditure on R&D performed in UK businesses, compared with 77% in 2004 (the first reference period in the associated 2015 datasets). Manufacturing accounted for 89% of total defence expenditure on R&D performed in UK businesses in 2015, compared with 92% in 2004.

Mechanical engineering, part of the Manufacturing sector, was the largest contributor to defence expenditure on R&D performed in UK businesses (28% of total defence expenditure) in 2015, with Aerospace (26%) the second highest.

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6. R&D expenditure by industry

Estimates of R&D expenditure on an industry basis, according to the Standard Industrial Classification 2007 (SIC), were first introduced in the 2011 BERD statistical bulletin to broaden the scope of the estimates (see Table 27 in the 2015 datasets).

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 group. This is because businesses may report significant R&D in product groups that are different to the main classification of their business according to the SIC. The concepts of product groups and SIC are described in more detail in the UK Business Enterprise Research and Development Quality and Methodology Information (QMI) report.

The highest level of business R&D expenditure in 2015 by SIC was performed by businesses that were classified to the Scientific research and development industry, at £5.3 billion, which represented 25% of total expenditure (Figure 4).

There are 5 other industries that had R&D expenditure of around £1.0 billion or more:

  • Manufacture of motor vehicles and trailers, £2.4 billion (11%)
  • Computer programming, consultancy and related activities, £1.7 billion (8%)
  • Architectural and engineering activities, £1.6 billion (8%)
  • Manufacture of other transport equipment, £1.6 billion (8%)
  • Manufacture of computer, electronic and optical products, £985 million (5%)

These 6 industries accounted for 65% of the total UK business R&D expenditure in 2015.

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7. Employment in UK businesses on performing R&D

Estimates of employment in R&D are produced on a full-time equivalent (FTE) basis, whereby businesses convert part-time employees’ hours into full-time employees’ equivalent. FTE estimates provide a better indication of total labour input than a simple headcount.

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 (206,000) was reached in 2015 (Figure 5).

The number of FTE staff employed in R&D increased from 194,000 in 2014 to 206,000 in 2015, an increase of 6%. While there has been growth in recent years in the number of people working on R&D, this should be seen in the context of a growth in the total employment in the UK labour market. Therefore, part of the growth in employment on R&D may reflect the wider growth in total employment in the economy. See our Labour market statistics for more information on total employment levels.

The 2015 estimate comprised:

  • 106,000 scientists and engineers (51%)
  • 64,000 technicians (31%)
  • 36,000 administrative staff (17%)

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8. Country and regional breakdown of expenditure and employment in UK businesses on performing R&D

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 2 regions combined accounted for 43% of UK business R&D expenditure in 2015. These regions combined also employed 79,000 full-time equivalent (FTE), which made up 38% of total R&D employment in 2015.

The regions or countries with the lowest levels of employment on performing R&D were the North East employing 4,000 FTE, with Wales and Northern Ireland employing 5,000 and 6,000 FTE R&D staff respectively. These regions or countries also had the lowest corresponding totals of expenditure on business R&D.

The majority (92%) of UK R&D expenditure was carried out in England in 2015. Businesses in England spent the equivalent of £350 per head of population on performing R&D, more than the other countries of the UK, with Northern Ireland spending £271, Scotland spending £162 and Wales spending £117.

The largest overall increase in expenditure by region since 2014 was in the West Midlands, which rose by £242 million (13%) in current prices from the 2014 estimate of £1.9 billion. London showed an increase in expenditure of 11% (£189 million) in current prices to £1.9 billion in 2015. Yorkshire and The Humber also increased by 11% (£79 million), to £779 million in 2015. The North West and North East also showed increases of 10% and 9% respectively in R&D expenditure in 2015 compared with 2014.

The largest increase in regional R&D expenditure in percentage terms was in Northern Ireland, which increased by 40% (£143 million) to £501 million, in current prices compared with 2014. The change in R&D expenditure in Northern Ireland is the result of several factors, including companies beginning new projects, resulting staff increases and spending on new equipment and materials. This can have a large impact on annual Northern Ireland R&D estimates, particularly where larger companies have commenced a significant R&D project.

The largest overall decrease in expenditure by region since 2014 was in the South West, which fell by £89 million (6%) in current prices from the 2014 estimate of £1.6 billion. Wales also experienced a decrease of £24 million (6%) in current prices from the 2014 estimate of £386 million. The only other country or region to show a slight decrease was Scotland, which fell by £3 million in current prices from the 2014 estimate of £874 million.

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9. Sources of funds for expenditure on R&D performed in UK businesses

The largest source of R&D funding in 2015 was businesses’ own funds at £14.7 billion, which increased by £1.2 billion (9%) on the 2014 estimate of £13.4 billion. Businesses’ own funds accounted for 70% of total business R&D expenditure in 2015 compared with the 2014 estimate of 68%.

Overseas funding of UK businesses’ R&D was £3.8 billion in 2015, a decrease from £4.0 billion (5%) in 2014. This accounted for 18% of total expenditure by UK businesses on performing R&D in 2015, compared with the 2014 estimate of 20% (Figure 6).

The UK government’s funding of businesses’ R&D in 2015 was £1.8 billion, a decrease of £77 million (4%) in current prices from the 2014 estimate of £1.9 billion. This represented 9% of total business R&D expenditure. UK government funding was mostly in the defence sector (£1.0 billion), which made up 55% 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.

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10. Ownership of businesses performing R&D in the UK

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 2011, when 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 and 2013 with 52% and 54% respectively. Expenditure on R&D in the UK by UK-owned and foreign-owned businesses increased in 2015 by 6% and 5% respectively. However, as a percentage of total UK R&D, foreign-owned businesses’ expenditure has decreased from the high of 54% in 2013 to 51% in 2015. This indicates a slight recovery by UK-owned businesses, increasing from 46% in 2013 to 49% in 2015 (Figure 7).

On 15 March 2013, we 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. 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%.

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11. International comparison

When comparing total business R&D intensity across countries, it is important to take into account differences in industrial structure. The Organisation for Economic Co-operation and Development (OECD) produces a Science, Technology and Industry Scoreboard to facilitate these comparisons. International comparisons of R&D data can also be found on the Eurostat website.

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”.

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12. Quality and methodology

The Business Enterprise Research and Development Quality and Methodology Information document contains important information on:

  • the strengths and limitations of the data and how it compares with related data
  • users and uses of the data
  • how the output was created
  • the quality of the output including the accuracy of the data
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13 .Background notes

  1. Main issues specific to this bulletin

    This is the latest annual release about expenditure and employment in research and development (R&D) by UK businesses. The results in this release are in respect of 2015. We 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.

  2. General information

    These points should be noted when examining the data tables:

    • respondents were asked to make a return for the calendar year 2015 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
    • there may be differences between totals and the sum of their independently rounded components
    • 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
    • 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
    • note that £1.0 billion = £1,000 million in this release
    • the 2013 and 2014 estimates have been revised where necessary to take account of businesses misreporting and late returns
  3. Your views matter

    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 Cecil Prescott on +44 (0)1633 456767.

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Contact details for this Statistical bulletin

Cecil Prescott
RandD@ons.gsi.gov.uk
Telephone: +44 (0)1633 456767