Gross domestic expenditure on research and development, UK: 2012

Key issues specific to this bulletin

This is the latest annual release about gross expenditure on R&D in the UK by businesses, government departments, research councils, higher education institutes and private non–profit organisations, published by the Office for National Statistics (ONS). The results in this release are in respect of 2012. 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 (GovERD) survey (including research councils), and the Private Non-Profit Research and Development (PNP) survey.

Higher Education R&D (HERD) data are collected from a census of higher education institutes and provided to ONS by the Higher Education Funding Councils (HEFCs).

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 completed the necessary work to meet these requirements and on 3 June 2013, the UK Statistics Authority confirmed that this release, and its associated data, has retained National Statistics status.

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 coordinated and provided by HEFC England with respect to academic years. HEFCs 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 therefore be published is March.

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 used by the majority of commentators on R&D for international comparisons. It covers all R&D performed in the UK, irrespective of who pays for it, including funding from overseas. However, it excludes R&D performed overseas 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 a survey conducted annually by ONS, and covers the business sector of the economy which in 2012 performed 63% of total UK R&D expenditure. As part of the 2012 survey, approximately 5,000 questionnaires were sent to businesses known to perform R&D. This included around 400 of the largest R&D spenders, accounting for approximately 80% of the 2012 total business 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 4,488 businesses representing a response rate of 91%. Estimates from this survey were published on the ONS website on 22 November 2013 in the UK Business Enterprise Research and Development statistical bulletin, 2012.

As part of the assessment of ‘Statistics on Research and Development’ by the UK Statistics Authority, 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 (ESA) 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 an annual census of approximately 140 government departments including seven research councils. Government departments are asked to include the expenditure on R&D they perform as part of their total estimated expenditure on R&D. This includes estimates of R&D performed by local authorities and NHS trusts.

HERD data are provided by the Higher Education Funding Councils for England, Scotland and Wales, the Department for Education in Northern Ireland and the seven UK research councils. These bodies also provide data on external research funding from overseas, 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, approximately one month before the GERD release is published.

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 data are collected in a biennial survey which was introduced in 2011 with approximately 200 organisations being selected. The estimates from this survey were used in the compilation of the 2011 GERD publication, the first time since the 2003 reference year. Previously, estimates had been based on a number of different sources.

Identifying exactly who carries out R&D in this sector is a challenging task. A letter was despatched in 2010 to 344 organisations which were classified as private non–profit bodies, asking if they undertake R&D activities. The response rate was 50%, with 14% of all organisations surveyed responding positively, confirming that they perform R&D. More in depth 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, all 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 totals for 2011.

The PNP survey is run biennially, so this survey did not run in 2013 to collect 2012 data. The next survey will run in 2014 to collect 2013 data from an updated list of R&D performers in this sector. Results for the PNP sector as a performer in 2012 have therefore been estimated.

Revisions

As part of this release, business, government and higher education estimates of R&D for 2010 and 2011 have been revised to take account 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 following table 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 (35 Kb Excel sheet) from 2005 and the calculations behind the averages in the revisions table. The table covers estimates of the UK’s gross domestic expenditure on R&D first published from March 2007 (for 2005) to March 2011 (for 2009).

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

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 to better 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.

A new methodology and a new survey were introduced for compiling estimates of R&D expenditure for the PNP sector as a performer from 2011. The estimates from this survey have been used as the basis for the compilation of the 2012 PNP performer data in this publication.

While all these changes are viewed as being an improvement, they may have an impact on the comparability of 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 components

• 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

Regional estimates were first introduced as part of the 2011 GERD statistical bulletin, published in March 2013. Regional estimates are produced for the four sectors as follows:

• Business – businesses receiving the long questionnaire (the 400 largest R&D spenders) account for approximately 80% of total business 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 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 coordinated and provided by HEFC England and are based on the geographic region of all their Higher Education Institutes (HEIs)

• Government – the annual census of the government sector collects regional full time equivalent (FTE) 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 organisation 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 R&D 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 in ESA 2010, specify that R&D from September 2014 onwards, should be considered as an ancillary activity. 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 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 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 a target of 3% of the EUs’ GDP (both private and publicly funded) to be invested in R&D by 2020. This means that the estimates in this release 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 underpin their assessments of UK innovation performance as well as international work in the field

• The Welsh Government (WG), Scottish Government (SG) and the Northern Ireland Department of Finance and Personnel (DFPNI) 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. 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

Do you make use of our annual estimates of UK GERD? 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.

Science, Engineering and Technology (SET) Statistics

Until the publication of the 2011 estimates in 2013, the Department for Business, Innovation and Skills (BIS) published annual estimates of government departmental spending on Science, Engineering and Technology, known as “SET Statistics”. These are a summary of key science, engineering and technology indicators and are collated by the Office for National Statistics (ONS) using data collected as part of the GoVERD survey. SET Statistics are broader than just R&D, as they comprise Government R&D expenditure (including overseas), technology transfer activities, and scientific and technical postgraduate education and training.

ONS will publish the UK's SET Statistics for 2012. The release of these estimates has been provisionally scheduled for July 2014.

Coherence and international comparisons

An Information Note (807.8 Kb Pdf) providing an assessment of the coherence of R&D statistics with other official statistics was published in 2012 on the ONS website.

ONS Business Statistics

There is a Business and Trade Statistics community on the StatsUserNet website. StatsUserNet is the Royal Statistical Society’s new interactive site for users of official statistics. The community objectives are to promote dialogue and share information between users and producers of official business and trade statistics about the structure, content and performance of businesses within the UK. Anyone can join the discussions by registering via either of the links above.

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Special events

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

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