Gross domestic expenditure on research and development, UK: 2011

Key issues specific to this bulletin

This is the latest in a series of annual releases about gross expenditure on R&D in the UK by businesses, government departments, research councils, higher education institutions and non–profit organisations, published by the Office for National Statistics (ONS). The results in this release are in respect of 2011. ONS began publishing annual data on R&D expenditure in 1993. The source of the information comes from the Business Enterprise Research and Development (BERD) survey, the Government Research and Development survey (GovERD – which includes Research Councils), and the Private Non-Profit Research and Development survey (PNP).

ONS run all the above surveys. Higher Education R&D data (HERD) are collected from a census of higher education institutions and provided to ONS by the Higher Education Funding Councils (HEFC).

All these sectors’ (Business, Government, Higher Education and Private Non-Profit) R&D data are known collectively as GERD, which represents the gross domestic expenditure on R&D in the UK.

A quality report (137 Kb Pdf) for the GERD output is available on the ONS website.

National Statistics

The UK Statistics Authority has reviewed this publication in its report: “Assessment of compliance with the Code of Practice for Official Statistics: Statistics on Research and Development” which was published on 28 June 2012. This review recommended that the UK Gross Domestic Expenditure on Research and Development estimates be designated as National Statistics, subject to ONS carrying out certain requirements. ONS is working hard to meet the requirements set out in this assessment report.

Timeliness and punctuality

An internal investigation has been carried out to identify if it is feasible to publish these R&D statistics earlier than they are at present. Unfortunately, this investigation concluded that it is not possible for ONS to bring forward the publication of these estimates in the short-term.

The main reason for this is that the higher education estimates are collected and provided by HEFC in relation to academic years. They are not able to provide ONS with these estimates until the middle of February each year. Affording time to quality assure and check these data, the earliest that these estimates can be published is March of that year.

As part of this investigation ONS sought the views of some of the known users of this publication. They unanimously stated that they are content with the current publication timetable.

Completeness of coverage

GERD - is the measure most commonly used for international comparisons of R&D by key stakeholders. It covers all R&D performed in the UK, irrespective of who pays for it, including funding from abroad. However, it excludes R&D performed abroad even if it is funded from the UK. The components of GERD relate to R&D performed in all sectors of the economy:

• BERD is conducted annually by ONS, and as the name suggests, covers the business sector of the economy (which, as outlined, covers 64% of total UK R&D expenditure). As part of the 2011 survey, approximately 5,000 questionnaires were sent to businesses known to perform R&D; this included around 400 of the largest R&D spenders, which accounted for approximately 80% of the 2011 total R&D expenditure figure. Smaller R&D performers, and others believed to be performing R&D, were selected using various sampling fractions. Industry product group and business employment size were used as the stratification variables. Completed questionnaires were returned by 4,733 businesses representing a response rate of 92%. The estimates from this survey were published on the ONS website on 20 November 2012 in the UK Business Enterprise Research and Development Statistical Bulletin, 2011. As part of the assessment of ‘Statistics on Research and Development’ by the United Kingdom Statistics Authority (UKSA), a requirement was placed on ONS to review the methodology for producing business R&D statistics to identify potential gaps in coverage and meet the coverage requirements of European System of Accounts (2010). To meet this requirement and to assist users in their understanding of this complex issue an Information Note entitled ‘Coverage of the Business Enterprise Research & Development Survey (147 Kb Pdf)’, was published on 20 November 2012 to address this issue

• GovERD is conducted annually as a census survey. Approximately 140 government departments and research councils are sent a questionnaire. Government departments are asked to include their in-house R&D as part of their estimates – this includes estimates for R&D performed by local authorities and NHS trusts

• HERD is provided by the Higher Education Funding Councils for England, Scotland, Wales and the Department for Education in Northern Ireland. Data are also obtained from them on the external research funding from abroad, non-profit organisations and businesses. The timeliness of these data is the main reason for the delay in the publication of GERD. Data are provided to ONS during February of a given year

It is important to note that R&D funding provided to the higher education sector from government departments, research councils and HEFCs are collected as part of the GovERD survey

• PNP. A new survey of the PNP sector was introduced in 2011, with approximately 200 non-profit businesses receiving the questionnaire. The estimates from this survey have been used in the compilation of this publication for the first time since the 2003 reference year. Previously, estimates had been based on a number of sources. Identifying exactly who carries out R&D in this sector in the UK is a challenging task. A letter was despatched in 2010 to 344 businesses who were classified as non – profit bodies, across all industry classifications and UK regions, asking if they undertake R&D activities. The response rate was 50%, with 14% of all businesses surveyed responding positively, confirming that they perform R&D. Deeper analysis of these responses indicated that only a few industries were identified as performing R&D in this sector. Activities included library and archive activities, botanical and zoological gardens and nature reserve activities, engineering and design activities and technical testing and analysis. In 2011, 690 organisations in these industries were sent a letter to further identify R&D performers. The response rate was 60% with 18% indicating positively. All these identified R&D performers together with known performers from earlier surveys, were sent a questionnaire to collect their estimates for 2011

Revisions

Revisions have been made to the Business Enterprise estimates for 2009 and 2010 and the Government, Research Councils and Higher Education estimates for 2007, 2008, 2009 and 2010. This is due to a combination of late returns and misreporting.

One indication of the reliability of the key indicators in this release can be obtained by monitoring the size of revisions. The table below records the size and pattern of revisions that have occurred over the last five years. Please note that these indicators only report summary measures for revisions, (the revised data may itself be subject to sampling or other sources of error).

A spreadsheet is available providing the revisions of estimates (34 Kb Excel sheet) from 2004 and the calculations behind the averages in the above table. The revision table covers estimates of the UK’s gross domestic expenditure on R&D first published from March 2006 (for 2004) to March 2010 (for 2008). A statistical test has been applied to the average revision to find out if there is bias in the estimates. No statistically significant bias was identified.

Sampling variability

The estimates from the BERD survey are based on a stratified sample drawn from the population of businesses known to actually perform R&D or are likely to be R&D performers. As with any sample survey, the BERD survey is subject to two types of possible error:

• Sampling errors: due to only a sample of the population being surveyed. These estimates can be quantified and were published as part of the BERD publication

• Non-sampling errors. These include factors such as population coverage, misreporting and non-response bias. These errors are generally hard to quantify, because of the difficulty in identifying the population of actual/likely R&D performers and because of the problems ensuring that businesses adhere to Frascati R&D definitions. An Information Note (147 Kb Pdf) has been published which provides an overview of the survey design and looks at the methods and sources used to update the sampling frame

Discontinuities in data

The BERD, GovERD and PNP questionnaires were redesigned after the 2010 survey better to reflect user needs, including new National Accounts and European Union requirements. These followed large revisions to both the BERD and GovERD surveys for the 2007 data collections. The 2007 changes were made to address concerns about data quality and difficulty in completion.

A new methodology has been introduced for compiling the R&D expenditure for the PNP sector as a performer in 2011. A new survey was introduced and the estimates from this census survey have been used in the compilation of this publication for the first time since the 2003 reference year.

While all these changes are viewed as being an improvement, they may have an impact on the comparability of the data over time. Unfortunately, it is not possible to measure this impact.

General information

These points should be noted when examining the data tables:

• There may be discrepancies between totals and the sum of their independently rounded totals

• In addition to being analysed by sector of performance, GERD may be analysed by sector of funding. The R&D performed by any one sector of the economy can be funded by any of the other sectors, or by the performing sector itself

• For the purposes of estimation, the recommended practice of the OECD is to use information from those performing R&D, where this is available. These estimates are considered more reliable than those from surveys of R&D funders

Regional data

This is the first time that estimates for GERD regional data has been published as part of this publication. This is because previously, regional data for the non-profit sector were unavailable. Regional estimates are produced for the four sectors as follows:

• Business – the businesses receiving the long questionnaire (the 400 largest R&D spenders) account for approximately 80% of total R&D expenditure. Each business is asked to provide the workplace postcodes for all the sites at which the business performed R&D, and to allocate the total expenditure figures of the business to the sites on a percentage basis. Regional data for the remaining 20% of total expenditure all have a value estimated by grossing up using county region codes from the business register of R&D performers. Aggregation is undertaken at broad product group and county level

• Higher Education – these estimates are provided by HEFC and are based on the geographic region of all their Higher Education Institutions (HEIs)

• Government – the annual survey of the government sector collects regional full time equivalent (FTE) employment data. Ratio estimation is then applied to the corresponding in-house expenditure data to provide estimates per FTE per region. These are then aggregated to provide regional expenditure values for this sector

• Private non-profit – each organisation is asked to provide the workplace postcodes for all the sites at which the organisation performed R&D, and to allocate the total expenditure figures of the organisations to the sites on a percentage basis. As this survey is a census, any non responder's expenditure estimates are allocated regionally using the county region codes from the business register

Users and uses of data

GERD is the UK’s most reliable estimate of national research and development spending that draws together information on research and development spending in the public and private sectors for both civil and defence applications.

Changes introduced as part of the amendments to the System of National Accounts (SNA) in 2008 and European System of Accounts (ESA) in 2010 specify that R&D, from 2014 onwards, should be considered as an ancillary activity and expenditure on R&D should constitute investment in R&D assets, which as a consequence needs to be capitalised in the UK National Accounts. In short, R&D expenditure will now contribute to the compilation of the value of the UK’s net worth and be included as part of Gross Domestic Product (GDP) estimates. Please see the ONS ESA 2010 page for more information.

There are numerous users within and outside government who use these data to produce various analyses and to inform policy decisions. These include:

• European Union’s Statistical Office (Eurostat) - the UK provides statistics measuring R&D activity in accordance with the European Commission Regulation No. 995/2012 of the European Parliament and the council. The estimates in this statistical bulletin are used to provide information that is consistent with other EU member states and to enable benchmarking to be achieved. Europe 2020 targets for economic growth include 3% of the EUs’ GDP (both private and publicly funded) to be invested in R&D/innovation by 2020. This means that these estimates are essential in monitoring progress towards this target

• OECD – uses GERD data for constructing internationally comparable databases and producing regular statistical publications such as the ‘Main Science and Technology Indicators’ (MSTI) and ‘The Annual Business Enterprise Research and Development’ statistics (ANBERD). The data are also used for analytical studies, which underpin economic analyses and policy reviews

• The European Commission’s Research and Innovation Directorate has recently published the Innovation Union Competitiveness report, 2011. One of the key findings is that the EU is slowly moving towards its target of 3% of GDP but there is a widening gap between the EU and its world competitors notably due to weaker business R&D investment

• The Department for Business, Innovation and Skills (BIS) use GERD data to assess policy impact and inform debate. R&D data underpins their assessments of UK innovation performance as well as international work in the field. BIS used to produce an R&D Scoreboard, until 2010. The R&D Scoreboard was the leading source of information and analysis on the world's top R&D active companies, both in the UK and globally. The Scoreboard listed the 1,000 UK and 1,000 Global companies investing most in R&D, enabling companies to benchmark their own investments against sector leaders. The Scoreboard was based on data abstracted from companies annual reports and accounts. The last Scoreboard to be published includes commentary and analysis prepared by the Economist Intelligence Unit for the year 2010. View the latest R&D Scoreboard

• The Department for Business, Innovation and Skills (BIS) also includes UK government expenditure on R&D by government department and research councils, in its annual publication of Science, Engineering and Technology (SET) Statistics. This is a collaborative publication with ONS input

• The Welsh Government (WG) and the Scottish Government (SG) use GERD data as a key indicator for measuring the performance of their respective economies within the UK, as well as to monitor and develop R&D policies which seek to increase R&D investment. Regional GERD information is also published in the Scottish GERD tables

• The Research and Development Society is a UK-based organisation formed to promote the better understanding of R&D in all its forms. Its members include representatives from industry, government departments and agencies, universities and consultants. It holds regular afternoon and evening meetings, usually at the Royal Society in London. The Research and Development Society make use of GERD data, as a key source of information, for understanding how much is being invested in R&D in the UK on an annual basis and to inform wider debates about R&D

Requests for GERD data are made from a variety of sources including academics, government departments, and economic consultants. This means that the data are used in various publications.

For example:

• Dr Ian Viney Head of Strategic Evaluation at the Medical Research Council (MRC), produced analysis in the UK Health Research Analysis 2009/10 published in November 2012, which included funding flows in the UK of health related R&D expenditure

• Defence Analytical Services and Advice Agency (DASA) provides professional analytical, economic and statistical services and advice to the Ministry of Defence (MOD), and defence-related statistics to Parliament, other Government Departments and the public. The MOD intramural expenditure on R&D is included in Chapter 1 – Finance, Table 1.7

A list of those roles and departments who received pre-release access (23.4 Kb Pdf) to the UK Gross Domestic Expenditure on Research and Development, 2011 is available on ONS website.

Do you make use of our annual estimates of UK Gross Domestic Expenditure on Research and Development? If yes, we would like to hear from you (RandD@ons.gov.uk) and understand how you make use of these statistics. This will enable us, in the future, to better meet your needs as a user.

Coherence and international comparisons

The UKSA reviewed this publication in their report “Assessment of Compliance with the Code of Practice for Official Statistics: Statistics on Research and Development” published on 28 June 2012. One of the requirements identified as part of this assessment was to publish improved information on the coherence of R&D statistics with other official statistics. This Information Note (807.8 Kb Pdf) has been produced to address this issue.

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Special events

ONS has recently published commentary, analysis and policy on 'Special Events' which may affect statistical outputs. For full details go to the special events page on the ONS website.

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