18TH FEBRUARY, 2020

Latest Statistics Around R&D Spending In The UK Since 2017

Research and development (R&D) is a crucial part of growing a business. It involves a process of understanding the market in which your company operates, and developing new products or services that meet customer requirements. Organisations that spend time devising an effective R&D strategy have much better chances of long term success than those that don’t. They are also likely to enjoy a sharper competitive edge and increased productivity.

Political ideology of all persuasions has long supported R&D and recognises its importance. The Government has pledged to meet a target of 2.4% of GDP investment in UK R&D by the year 2027, moving up to 3% longer term.

What is the difference between R&D and innovation?

Although R&D and innovation are closely interlinked, they actually have some key differences. R&D refers to systematic work which is undertaken in order to increase knowledge. It therefore requires basic research, applied research and experimental development to create new products, processes or services. Innovation on the other hand often draws on the knowledge gained through R&D, although it doesn’t necessarily require R&D in order to occur. Like R&D however, it’s essential in the creation of new products, processes, services or practices, or in improving existing ones.

Why should companies care about R&D statistics?

A good working knowledge around R&D investment is important for companies to have. Simply put, businesses that are investing in new technological or scientific advancement are likely to grow. They will need to purchase more materials, expand their sites and take on new staff. This in turn swells the government’s coffers and enhances a cycle of reinvestment for the future. Individual companies that invest in R&D can also benefit from a great competitive advantage as well as better changes of survival in an increasingly tough economic climate.

Latest statistics

Most recent Office for National Statistics (ONS) data shows that UK companies spent £25 billion on R&D in 2018, a 5.8% increase from the year before. Expenditure on R&D as a whole also increased, up from £23.7 billion in 2017.

In terms of industries most heavily invested in R&D, perhaps unsurprisingly the biggest winners are pharmaceuticals and aerospace. Aerospace came out on top with the biggest increase in 2018 of 14% to £210 million, with pharmaceuticals maintaining its position as the biggest product group. The pharmaceutical industry saw an increase in R&D spending of 3.3% from 2017, up to £4.5 billion. It also made up 18% of total UK business expenditure, unchanged from 2017.

The motor vehicle industry has been another huge R&D investor since 2017 having grown consistently for the last decade. Spending on R&D in this sector was at £3.8 billion at last check, up 4.3%. The motor vehicle industry also now accounts for around 15% of all UK R&D expenditure.

The telecommunications group is another area that has seen significant increases in R&D expenditure since 2017, now up to £192 million.

However, there have been some declines in R&D expenditure too in certain sectors, notably gas and water supply, electricity, food products and beverages, and waste management. Consumer electronics also saw a sizeable fall in spending, down by £18 million.

Which region saw the largest growth in R&D investment expenditure?

Naturally some regions in the UK see more expenditure on R&D than others, which is down to a number of social and economic factors. However, the east of England has seen the biggest growth in terms of regional expenditure since 2017, increasing by £464 million (9.9%) to £5.1 billion in 2018. London and the south east continue to lead the way in UK R&D expenditure, with 41% of total UK R&D combined.

In Scotland, R&D expenditure doubled between 2010 and 2017, however it then declined slightly in 2018 by 0.6% to £1.2 billion. Again, this could be for a number of reasons, not least economic and political uncertainty.

Going forward

For the next several years at least it looks like R&D Tax Credits are here to stay. The Conservative government has already voiced its target to raise R&D investment to 2.4% of GDP by 2027. However, research published by the CBI in early 2019 suggests that this level may not be reached until 2053 - in time we will see.

R&D Tax Credits

If your company has recently undergone (or is planning to undergo) any innovative projects that involve making technological or scientific discoveries then it may be eligible for help towards the cost.

The R&D Tax Credit scheme was set up by the government to put a portion of R&D expenditure back into a company’s pocket. This is done either by a reduction in its Corporation Tax due or as a lump sum. It’s available to all UK companies in any industry and of any size. For SMEs the relief can be worth as much as 33 pence in every pound spent on R&D work and can help with costs such as staff wages, overheads and materials. The money given back can be used for anything the company sees fit, or of course reinvested for future growth. And with average claim values around £65,000, can your company afford to miss out?

To find out more about R&D Tax Credits and how to apply, please visit the R&D Tax Credits page on our website.

How can Tax Cloud help?

Tax Cloud UK was devised by Myriad Associates, a highly skilled specialist team of R&D accountants and tax experts. Wherever you’re based in the UK and whatever sector you’re in, we can work through your application from beginning to end and we’re proud of our 100% success rate.

We highly recommend trying our Tax Cloud calculator too. With two different areas for both businesses and accountants, it’s an accurate and fast way of discovering how much you could receive.

To get in touch, call our friendly team on 0207 118 6045 or feel free to use our contact page and we’ll call you back.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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Myriad Associates helps businesses maximise tax reliefs and secure R&D grant funds. We specialise in R&D Tax Credits, Video Games Tax Relief, Innovate UK grants, Horizons 2020 grants, and Research and Development Capital Allowance Claims.

  • Submitting R&D tax claims since 2001
  • 100% success rate
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Meet some of the team behind Tax Cloud

Barrie Dowsett Barrie Dowsett ACMA CGMA Chief Executive Officer
David Farbey David Farbey MA, FISTC, FRSA Technical Consultancy Director
Lisa Waller Lisa Waller CTA, ACCA R&D Tax Manager
Lauren Olson Lauren Olson MA, MISTC Senior Technical Consultant