Both the ONS and Eurostat have released details of spending on Research & Development (R&D) during 2023; for the UK, this grew by +2.9% compared to 2022, with an increase of +6.7% recorded in the EU. In the UK, the largest sector for R&D spending was pharmaceuticals, with the automotive industry also making an important contribution.
Differences in the approach to publishing these statistics make further direct comparisons more difficult – the ONS tends to focus on spending values while the Eurostat approach is to look at R&D intensity, expressed as the share of GDP. Also note that the UK data is for the business sector only, while the Eurostat figures are for the whole economy. The rest of this note will bring some highlights from both reports.
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Total expenditure on R&D in the UK is estimated to have been £49.97 billion, an increase of +2.9% compared to the 2022 level. Owing to a major change in methodology last year, the time series does not go any further back, except at the aggregate level. The manufacturing sector accounted for 48% of total spending, well above its general share of the economy overall, emphasising the importance of our sector; spending by the manufacturing sector on R&D grew by +3.9%, again ahead of the economy overall.
The service sector accounted for 47% of total R&D expenditure with other industries such as agriculture, extraction, utilities and construction responsible for the other 5%.
Within manufacturing, the highest spending sector was pharmaceuticals (36% of total sector R&D spending), followed by automotive (20%), aerospace (8%) and machinery/mechanical engineering (6%). Inevitably, most of this expenditure is done in larger companies, with those employing more than 1,000 people accounting for 56% of total R&D spending in the manufacturing sector; however, it is interesting to note that in the machinery/mechanical engineering industry (which includes machine tools), smaller companies (under 400 employees) make a more significant contribution as they account for 55% of R&D expenditure in this industry group.
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The main measure used in the Eurostat report is R&D intensity – the share of GDP which is accounted for by R&D expenditure. For the EU as a whole, this stood at 2.22% in 2023, a marginal increase on the 2022 level and significantly higher than the 2.08% recorded a decade earlier in 2013, although it is lower than the peak of 2.28% in 2020 (that figure was boosted by pandemic related R&D, especially in the pharmaceutical sector). One advantage of this methodology is that it minimises the impact of inflation as all of the values are expressed in current prices, changes in which will also affect the GDP values.
Despite these increases, in 2023 the EU’s R&D expenditure relative to GDP remained well below the corresponding ratios in Japan (3.41% 2022 data), the USA (3.59% 2022 data) and South Korea (4.85% 2022 data) – Chinese expenditure stood at 2.56% (also 2022 data). They do not quote the equivalent figure for the UK.
Within the EU, the highest levels of R&D intensity in 2023 were in Sweden (3.57%), Belgium (3.32%), Austria (3.29%), Germany (3.11%) and Finland (3.09%). There were another 5 countries where the rate is less than 1% – Romania (0.5%), Malta (0.6%), Cyprus (0.7%), Bulgaria and Latvia (both 0.8%).
Eurostat does not provide a breakdown by industry, only by sector of the economy. This shows that the business enterprise sector continues to account for the largest share of R&D expenditure and in 2023 it represented 66% of EU R&D spending. This was followed by the higher education sector (21%), the government sector (11%), and the private non-profit sector (1%).
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The UK data can be found on the ONS website at https://www.ons.gov.uk/releasecalendar (11 December) while the Eurostat data, which is not in their usual series, is available as a summary on their website at https://ec.europa.eu/eurostat/en/web/products-eurostat-news/w/ddn-20241211-2 with a link to the more detailed article at the bottom of this page; both of these can be requested from MTA.