Drop in UK research spending leaves it trailing rest of the EU

Research squeeze. Angelika Warmuth/EPA

The UK is investing less on research and development across both the public and private sectors and remains behind Europe on the proportion of its GDP spent on research, prompting leading academics to warn that it puts Britain in a weak position to develop new technologies.

The total amount of money invested in the UK on research and development (R&D) actually dropped by 3% in 2012, using constant prices adjusted for inflation, according to data released by the Office for National Statistics. This included a 2% fall in spending on investment by business, where the majority of research innovation takes place.

At the same time, there has been a fall in the proportion of GDP spent on research. In 2012, the UK spent 1.72% of its GDP on R&D, down from 1.77% in 2011.

This keeps it below the estimated 2.06% of the GDP of all the 28 EU member states spent on research in 2012. The UK is ranked joint 12th in Europe for the percentage spent on R&D, behind the Nordic countries as well as France, Germany and the Netherlands.

The EU has set a goal for members to spend 3% of GDP on R&D by 2020. European research experts warn that without states such as the UK meeting the target, the EU as a whole has little chance of reaching it.

It is also behind a 2004 target set by the Labour government for the UK to reach 2.5% of GDP spent on R&D by 2014.

Drop in overall spending

The ONS data showed that in constant prices adjusted for inflation, overall investment in R&D fell 3% from £27.9 billion in 2011, to £27 billion in 2012. It had risen 2% between 2010 and 2011. The figure measures investment by business, higher education, government (including research councils) and private non-profits, and is collectively known as growth expenditure on R&D (GERD).

The ONS said the decrease should be taken in the context of an increase in overall GDP in 2012. Although actual expenditure on R&D has risen 56% since 1985, as a percentage of GDP it has been in decline since the 1980s. A fifth of all R&D expenditure is now funded from overseas, compared to just 8% in 1985.

“This is not good news for the UK,” said Tom McLeish, pro-vice-chancellor of research at Durham University. “The economic recession created a deeper trough in the UK, and a slower recovery than the main competitor European partners, and especially the US. It is no coincidence that these nations invest proportionally more in R&D than the UK.”

“A balanced national funding portfolio into universities, and also by industry, is essential to create the pipeline of innovation,” he said.

Composition of total R&D spending. Office for National Statistics

Highly concentrated

Of the £27 billion invested in 2012, 63%, or £17.1 billion, was spent by business. This was a 2% decline from 2011. The pharmaceuticals sector spent the most at £4.2 billion, followed by computer programming companies and the motor industry.

The bulk of the remaining R&D investment was done through higher education institutions, which spent 27% of the UK total, followed by the government and research councils with 8% and private non-profits with 2%.

The majority, or 93%, of R&D was spent on civil projects, an increase of 70% since 1989. At the same time, spending on defence research has decreased 62% and stood at £1.8 billion in 2012.

Kieron Flanagan, lecturer in science and technology policy at Manchester Business School, said this showed an unbalance in UK investment. “R&D is only one input to innovation and may be a particularly poor indicator for a services-dominated economy like the UK.”

“But even when attempts are made to correct for the sectoral make-up of the UK economy, we still seem to underinvest in R&D relative to comparator countries. UK public and private investment in R&D is too low, and public (government) investment is highly concentrated in research carried out in the universities.”

In its recent grant letter to the Higher Education Funding Council for England, the government confirmed it would ring-fence science and research funding in cash terms to $1.57 billion for 2014-15

However, Flanagan said: “We invest strongly in science, but devote too little investment to technological development, and have done for decades. This puts us in a weak position either to drive the development of new technologies in the UK or to capitalise on new or emerging technologies from elsewhere.”

“The UK innovation system is like a bicycle with only one wheel: that one wheel, the science base, may be ‘world-class’, but without a second wheel, an effective public and private technology base, we simply aren’t going anywhere.”

The statistics also play into concern that social sciences are losing out on funding to science, technology, engineering and technology. James Wilsdon, professor of science and democracy at the University of Sussex, and chair of the Campaign for Social Science, said he believes the UK must increase its R&D investment because there is “now a compelling evidence base for the links between research, innovation and economic growth.”

“Whatever we think about the pros and cons of GERD ratios, we shouldn’t see 12th place in Europe as an acceptable ranking for one of the continent’s leading economies,” Wildson said.

“It’s also vital that more R&D investment is directed towards interdisciplinary work between the natural and social sciences, so we can investigate and better understand the social, as well as scientific and technological, dimensions of big societal challenges such as ageing, healthcare, welfare and climate change.”

European target under scrutiny

In Europe, the viability of a 3% GDP target for R&D has come under scrutiny. “Reaching the target of 3% GDP by 2020 depends very strongly on the performance of the large member states and if they are not able to define and keep on track of a financial pathway towards that target the EU has no chance of reaching it,” says Manfred Horvat, adding the UK’s decrease sent “alarming signals”.

He said the 3% GDP target, which combines public and private R&D spending is: “probably not the best indicator because only the public part can be directly influenced by political decisions.” Horvat pointed to an alternative proposal by Professor Luc Soete of a 3% GDP knowledge investment target, that would combine a 1% GDP target for public expenditure and 2% target for higher education.

For now, the northern European states dominate in terms of the amount invested in research. Nora Albu, research associate at WifOR, an empirical economic research institute in Berlin, says that the 3% of GDP target for R&D “has already been reached by Sweden and Finland for many years.” For some member states, she says, “targets as high as 4%” of total GDP are possible.

Newer EU members, faced with their own research challenges but not subject to the same budgetary restrictions as the rest of the Eurozone, are trying to catch up. Albu used Croatia as an example. “The share of R&D from education to the total R&D spending in 2010 is 28% for Croatia and only 27% for the UK,” she said.