UK lags £62 billion behind in R&D as its global share of investment falls, IPPR reveals

The UK’s share of global research and development (R&D) investment has fallen by a fifth since 2014, according to new analysis of the most recent data by IPPR.

The drop, from 4.2 per cent to 3.4 per cent, has occurred despite consecutive prime ministers talking up science and innovation as a core part of their growth strategies – from David Cameron’s ‘jewel in the crown’ to Boris Johnson’s ‘science superpower’.

The UK only places 11th in the OECD in terms of total R&D investment as a percentage of GDP, well behind countries like Austria, Switzerland and the USA.

Had the UK’s 2014 share of global R&D investment been maintained, it would have been £18 billion – or 26 per cent – higher in 2019.

According to IPPR research, the UK would need to invest an additional £62bn this year – from public and private sectors – to overtake Israel as the leaders in R&D spend.

Additional modelling by IPPR indicates that state investment fuels private sector investment. For example, if the UK government invested a further £1bn in R&D, private sector investors would contribute an extra £1.36bn over 10 years. The UK is currently 34th out of 36 in the OECD for attracting inward private investment.

The Institute argues that if the government wants to pursue a growth agenda, investing in health sciences is significantly more effective than reducing corporation tax. No sector invests more in R&D, globally, than the life sciences.

Changes in ONS methodology announced earlier this month (October) have dramatically increased official estimates of public and private R&D spend, but the UK remains far behind international leaders.

The revised methodology means the UK has now technically met the government’s target of 2.4 per cent of GDP invested in R&D – although more by luck than judgement. However, IPPR argues that genuinely additional R&D investment is vital to overcoming the UK’s chronic lack of growth and low productivity.

The Institute recommends government urgently sets a new stretching R&D target. Researchers have modelled three potential trajectories it could now follow:

• ‘Somewhat ambitious’ - Meeting 3 per cent of GDP by 2027, building on aspirations set out by the CBI, the European Commission and opposition political parties (albeit not in the context of the ONS’ revised R&D estimates). To achieve this, government would need to invest £1 billion extra in R&D, above and beyond existing commitments, by 2027. Private investment would also rise by £0.8 billion in the same year

• ‘More ambitious’ - Meeting 3.5 per cent of GDP by 2030, which would bring us to around the level of R&D investment in Sweden, the USA, and Taiwan. To achieve this, government would need to invest £8.5bn extra in R&D by 2030. Private investment would also rise by £8.3bn in the same year.

• ‘Genuinely world-leading' - Meeting 5.4 per cent of GDP by 2030, putting the UK firmly in a global leadership position by reaching levels close to South Korea and Israel. To get here, public investment rise would need to increase by £43.1bn by 2030. Private investment would rise by £41.9bn in the same year

The report concludes that health research is a particular opportunity for R&D investment. Just like the US government’s 1960s goal of putting a man on the moon, the UK needs a mission-based approach to life sciences policy. This would help align activity with broader social goals, communicate a clear sense of strategic direction and increase funding for R&D by crowding in new investment.

As part of this, the government should take a more activist approach and do far more to optimise the health research environment. Beyond extra public investment, this should include:

• An NHS workforce retention strategy, to ensure the capacity and headspace needed to focus on innovation

• Supporting NHS staff to spend more time on clinical research. New IPPR analysis shows the UK has eight times fewer government researchers than Germany

• A stronger life science skills pipeline, including through reform of the apprenticeship levy

Shreya Nanda, economist at IPPR and the report’s author, said:

“In the 20th century, R&D and the life sciences were the engine behind huge gains in human health and national prosperity. The Covid-19 vaccination has provided a reminder, in the 21st century, of the continued, transformative potential of science. However, whether it is researching new life-saving medicines or developing exciting technologies for the future, the UK is being left behind.

”There has been a managed decline in the UK over the past decade – a decline in our economy, our health and our resilience. R&D innovation is a vital lever in responding to this decline. We urge the government to increase R&D funding to restore the UK’s leading global position, encourage private sector investment and ultimately deliver economic growth.”

ENDS

Shreya Nanda, Chris Thomas and Dr George Dibb, the report’s authors, are available for interview

NOTES TO EDITORS

1. TABLE: OECD league table of national investment on R&D as a percentage of GDP – top 12 countries