Policy questions and key messages

1. Is the UK spending enough on R&D?
2. How do the public and private sectors contribute to national expenditure on innovation?
3. How does the UK perform at different stages of innovation?

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The UK is considered to be a leading global hub for scientific knowledge.

• The UK produces more academic publications than any other country, except China and the US, but 57% more than the US and six times more than China in per capita terms.
• The UK is the world leader in field-weighted citation impact (FWCI), a common benchmark for research quality.

However, the UK falls behind in converting scientific knowledge into commercial success.

• Compared to the US, the UK lags behind in development and scale-up metrics.
• The proportion of the workforce employed in medium and high value added manufacturing is lower than in competitor nations, and the value added per worker in these sectors is less than half of that in the US.

The UK’s spending on R&D is higher than the average of the OECD countries, but it is still below that of leading nations.

• The UK’s gross domestic expenditure on research and development (GERD) as a share of GDP was 2.91% in 2021, above the OECD average of 2.72%. However, the UK still lags behind countries such as Korea, the US, Japan and Germany.
• In 2021, UK government-funded R&D amounted to 0.57% of GDP, below the OECD average of 0.63%.

Among the top 100 R&D-investing companies in the world, only three have headquarters in the UK.

• This is quite low, considering that in 2022 the UK was home to a total of 95 of the world’s top 2,500 R&D-investing companies.
• The UK ranks fifth behind the US, which has 827; China, which has 679; Japan, which has 229; and Germany, which has 113 such

The UK’s performance in research, development, scale-up and industrial value added compared

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• The UK is a leading global research hub, producing more academic publications than any other country, after China and the US, but 57% more than the US and six times more than China in per capita terms.[1]
• In field-weighted citation impact (FWCI), a common benchmark for research quality, the UK comes top in the world. In 2020 the UK’s FWCI was 57% higher than the world average and 34% higher than the EU 27 average.[1]
• Compared to the US, the UK lags behind in development and scale-up metrics like business-funded R&D, patents, venture capital and the creation of unicorns.
• The proportion of the workforce employed in medium and high value-added manufacturing is lower than in competitor nations. In absolute terms, value added per worker in these sectors is less than half of that in the US.

Note: [1] Data refers to 2020 – DSIT (2022) International comparison of the UK research base.

R&D intensity: international comparison

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• The latest OECD estimate of the UK’s gross domestic expenditure on research and development (GERD) as a share of GDP was 2.91% in 2021, above the OECD average of 2.72%.
• The UK lags behind countries such as Korea, the US, Japan and Germany, which in 2021 invested between 3.13% and 4.93% of their GDP in R&D.
• In 2022 the UK’s Office for National Statistics (ONS) introduced major revisions to the way in which GERD, performed by the business sector and the higher education sector, is measured.[1]
• Based on the ONS revised methodology, the UK’s GERD amounted to £66.2 billion in 2021, an increase of £4.3 billion from 2020.[2]
• As of February 2024, ONS had not published the official estimates of GERD on GDP incorporating the methodological revisions introduced in 2022.
• For 2020, the Department for Science, Innovation and Technology (DSIT) estimated the UK’s R&D intensity to be between 2.9% and 3.0%.[3]

Note: [1] ONS (2022). Gross domestic expenditure on research and development, UK: 2020 (published on 22 November 2022). See also Section 2 of the 2023 edition of the UK Innovation Report.
[2] ONS (2023). Gross domestic expenditure on research and development, UK: 2021 (published on 17 July 2023).
[3] Nurse, P. (2023). Independent Review of the Research, Development and Innovation Organisational Landscape – Final Report and Recommendations.

Government-funded expenditure on R&D

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• The methodological revisions introduced by ONS to measure the expenditure on R&D in the UK have not impacted the R&D funded by the government.
• In 2021 the R&D funded by the government in the UK:[1]
  – amounted to £12.8 billion, an increase of £700 million from 2020; and
  – represented the second source of R&D funding, after the business sector, which contributed £38.7 billion, and before higher education (£5.6 billion), the private non-profit sector (£1.9 billion) and funding from overseas (£7 billion).

• In 2021 government-funded R&D represented 0.57% of the UK’s GDP, below the OECD average (0.63%).
• The government contribution to R&D in countries at the top of this measure, such as Korea, Germany and the US, was between 0.69% and 1.12% of GDP.

Note: [1] For the UK, government includes central government, UK Research and Innovation, and the Higher Education Funding Councils. ONS (2023). Gross domestic expenditure on research and development, UK: 2021 (published on 17 July 2023).

Top R&D-investing companies in the world

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• In 2022, among the top 100 R&D-investing companies in the world, only three companies had headquarters in the UK: AstraZeneca (14th) and GSK (39th) in the pharma and biotech sector; and HSBC (86th) in the banking sector.
• This is quite low, considering that the UK is home to 95 of the world’s top 2,500 R&D-investing companies, ranking fifth in the world, behind the US, which has 827; China, which has 679; Japan, which has 229; and Germany, which has 113 such companies.

Patent applications in key technologies

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• The UK Science and Technology Framework, released in March 2023, identified five “critical technologies” that will underpin the strategy approach to make the UK a science and technology superpower by 2030:[1]
  – Artificial intelligence
  – Engineering biology
  – Future telecommunications
  – Semiconductors
  – Quantum technologies

• The chart shows the UK patenting activity position in the five critical technologies by looking at the patent offices with the highest number of patent applications for each technology.
• Patent applicants may choose to file a patent where the invention is expected to have broader application and/or higher return.[2]
• In 2021 the UK Intellectual Property Office (UKIPO) ranked 10th in the world for total patent applications, receiving 0.61% of the total world patent applications, in a rank dominated by China and the US.
• UKIPO ranks between 10th and 13th position for four of the five critical technologies, with only the world share of patents in biotechnology at 23rd position.

Note: [1] UK Gov (2023). The UK Science and Technology Framework
[2] WIPO (2019). Artificial Intelligence – Technology Trend.

Appendix 2.1. Correspondence table between the International Patent Classification (IPC) codes and the five technology fields