In the 2021 Budget, the chancellor highlighted that Innovation and technological progress are central to driving long-term growth and improved living standards, as evidence shows that countries with higher Research and Development (R&D) activity tend to have higher productivity.
Science and innovation will continue to underpin solutions to many of the world’s greatest challenges, from economic recovery to climate change, health emergencies and national security. Every pound the government spends on R&D stimulates, on average, around £2 of private investment. Firms participating in UK Research and Innovation funded projects have been shown to grow employment and sales around 25% faster over six years than comparable firms.
The UK starts from a position of strength, ranking fourth in the Global Innovation Index, is home to four of the top 20 universities globally, and has the second-most Nobel laureates of any nation. However, Gross Expenditure on R&D in the UK in 2019 was 1.8% of GDP, lower than other advanced economies and below the OECD average of 2.5%, a trend primarily driven by low business investment in R&D. To address this, the government is increasing public R&D investment to record levels, providing £20 billion across the UK by 2024-25, including funding for EU programmes, to cement the UK as a global science and technology superpower. This is an increase of around a quarter in real terms: the largest ever over an SR period.
Combining the government’s direct spending on R&D with the support for tax relief, total UK R&D support as a proportion of GDP is forecast to increase from 0.7% in 2018 to 1.1% in 2024-25. This is well above the latest OECD average of 0.7%. For Germany the figure is 0.9%, for France 1%, and for the US 0.7%.
The Budget and SR will support the UK’s world-leading research base, while also ensuring that businesses across the UK have access to the ideas, skills and finance they need to grow, driving increased productivity and leveraging in further private investment. This settlement will make significant progress towards the government’s ambition to increase R&D spending to £22 billion by 2026-27, and drive economy-wide R&D investment to 2.4% of GDP in 2027.
Matt Symonds, Managing Director of TBAT Innovation says “From a UK research and development perspective, this would appear to be a very positive budget, that stimulates, supports and encourages further innovation in the UK, which is great to see. Following Brexit and given COVID, we were looking for commitment to drive innovation and encourage activity in the UK, and we hope the measures announced enable this. We now look forward to further detail and will obviously keep you posted accordingly”
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