1. Output information


 National Statistic   
 Survey name  Business Enterprise Research and Development (BERD) Survey
 Frequency  Annual
 How compiled  Sample-based survey
 Geographic coverage  UK (Country and Region)
 Last revised  20 November 2020

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2. About this quality and methodology information report

This quality and methodology report contains information on the quality characteristics of the data (including the European Statistical System five dimensions of quality) as well as the methods used to create it.

The information in this report will help you to:

  • understand the strengths and limitations of the data
  • learn about existing uses and users of the data
  • understand the methods used to create the data
  • decide suitable uses for the data
  • reduce the risk of misusing data
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3. Important points

  • The Business Enterprise Research and Development (BERD) Survey measures expenditure on research and development (R&D) performed by UK businesses, the source of funding for this R&D work and the employment of people working on R&D in UK businesses.

  • Results from the survey are published annually in the Business enterprise research and development statistical bulletin.

  • The survey uses the Organisation for Economic Co-operation and Development (OECD) definition of R&D, as set out in the Frascati Manual 2015. The Frascati Manual defines R&D as “creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge”. R&D must contain an appreciable amount of novelty.

  • R&D performed by businesses in Northern Ireland is measured in a separate survey conducted by the Northern Ireland Statistics and Research Agency (NISRA); the results from this are aggregated with those collected from the survey of Great Britain to form UK estimates.

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4. Quality summary

The statistics on research and development (R&D) expenditure by UK businesses consist primarily of:

  • expenditure on in-house R&D performed by businesses in the UK (intramural R&D)
  • the source of funding for R&D performed
  • employment of people working on R&D

Estimates are provided in current or constant prices. Current prices (also known as nominal or cash) are expressed in terms of the prices of the reference period, while constant prices (also known as real terms) are adjusted using the gross domestic product (GDP) deflator. This removes the effects of inflation by fixing the prices of goods and services in one period (the base year), so that only the volumes change, allowing changes in government expenditure on R&D to be examined on a comparable basis over time.

Business Enterprise Research and Development (BERD) data

What it measures

The BERD Survey collects information on expenditure on R&D undertaken by UK businesses, R&D employment, and sources of funds for the R&D performed.

Frequency

The survey is conducted on an annual basis (results are published in the November after the reference year).

Sample size

The UK sample size is approximately 5,400 businesses (that is, 4,000 in Great Britain and 1,400 in Northern Ireland).

Periods available

The BERD survey estimates have been produced annually since 1993.

Sample frame

The sampling frame is a reference list of all known R&D performers in Great Britain. The reference list is updated annually, from a range of other sources, such as the Annual Business Survey. It should be noted there is no definitive list of businesses that perform R&D.

Sample design

For Great Britain the top 400 businesses by size of previously reported R&D expenditure are automatically selected and receive the long form (referred to as “large R&D performers”).

The remaining 3,600 businesses are selected from the pre-determined list of R&D performers by stratified random sampling where the strata are defined using employment and industry product group.

For Northern Ireland, a census survey is carried out of approximately 1,400 known R&D performers.

Weighting and estimation

Long form non-responders are estimated based on their previous returns.

Short form non-responders and non-sampled businesses are estimated using ratio estimation.

Outliers

For the 3,600 smaller responders that receive the short questionnaire, an outlier ratio is calculated and the top and bottom 5% are trimmed. The automatic outlier ratio is calculated by dividing R&D employment by total business employment.

Manual outliers are identified during results investigations by expert judgement from staff.

Strengths and limitations

Strengths of the survey include:

  • the BERD response rate is usually above 80% at the publication of results, although the 2019 response rate was lower at 56% because of the coronavirus (COVID- 19) pandemic

  • short forms, which are sent to most responders apart from the largest R&D performers, to minimise respondent burden

  • the high level of detail in BERD allows the user a thorough insight into the R&D of businesses within the UK

Limitations of the survey include:

  • with a sample size of 4,000, detailed breakdowns of results beyond those published in the statistical bulletin are limited

  • it is assumed short form responders only perform one type of R&D and that this relates to their main business classification, this may not always be the case

  • the data release is published 11 months after the period to which the data relate

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5. Uses and users

The Business Enterprise Research and Development (BERD) Survey is the largest contributor to measuring the UK's gross domestic expenditure on research and development (R&D). The other components are the UK government, the higher education sector and the private non-profit sector. Gross expenditure on R&D in the UK performed by all sectors of the economy is reported separately, in the UK gross domestic expenditure on research and development (GERD) statistical bulletin

The UK government's Industrial Strategy published in 2017 includes a target to "raise UK investment on R&D to 2.4% of GDP by 2027". As the largest contributor to total UK R&D expenditure, the business sector is integral to achieving this objective. BERD statistics help monitor the business sector's progress towards reaching this target.

Information is used by government departments and other organisations for planning, policy and monitoring purposes. There are many other users within and outside government who use these data to produce various analyses and to inform policy decisions. These include Eurostat and the Organisation for Economic Co-operation and Development (OECD).

The UK has provided statistics measuring R&D activity to the EU's Statistical Office (Eurostat) in accordance with the European Commission Regulation Number 995/2012 of the European Parliament and the Council. The estimates in the BERD publication are comparable with other EU member states because of the use of the Frascati Manual definition and collection guidelines on R&D statistics.

The OECD uses UK BERD data in preparing internationally comparable data tables and producing regular statistical publications such as the Main Science and Technology Indicators (MSTI) and the Analytical Business Enterprise Research and Development statistics (ANBERD).

Other BERD data users include:

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6. Methods used to produce the BERD data

How we collect the data

The Business Enterprise Research and Development (BERD) Survey measures "business enterprises" as defined in the Frascati Manual. This excludes government organisations, higher education establishments and private non-profit organisations.

The survey uses a paper questionnaire to collect respondent data. The statutory basis of the BERD Survey in Great Britain is the Statistics of Trade Act 1947 and in Northern Ireland, it is the Statistics of Trade and Employment (NI) Order 1988.

Sample design

The BERD Survey uses a reference list of known research and development (R&D) performers to form the sampling frame from which the sample is drawn. The reference list is updated annually, which minimises the selection of wrongly classified businesses.

Using the whole UK business population as the sample frame would not be suitable for this survey, as R&D takes place in only a small proportion of businesses. This list contains approximately 39,900 UK businesses (38,500 in Great Britain and 1,400 in Northern Ireland) and is updated annually before the survey selection begins.

Once a business has been identified as an R&D performer, it is added to the reference list. Upon selection for survey, the business must return a completed questionnaire. If the returned questionnaire states the business does not perform R&D, the business will be removed from the reference list. If a business ceases trading, this information will feed through to the Inter-Departmental Business Register (IDBR), which is used to create the reference list. This means that there is also the potential for some businesses to remain in the universe after they have ceased trading until the following year's selection, resulting in potential over-coverage.

The reference list is updated from many sources including R&D-related questions on other surveys, such as the Annual Business Survey, the International Trade in Services Survey and the Innovation Survey. We also request information on new businesses undertaking R&D from both the Welsh and Scottish Governments and also the Department for Business, Energy and Industrial Strategy (BEIS).

All businesses in Great Britain previously reporting R&D in-house expenditure of above a particular threshold, are included in the sample and receive the long questionnaire. This threshold is set to identify the top 400 businesses with the highest R&D expenditure from the most recent survey and the value of the threshold is updated from year to year. It was approximately £6.3 million for the 2019 survey.

The rest of the sample is drawn from the list of R&D performers, using sampling fractions utilising employment size band and industry product group of the businesses. These 3,600 selected businesses are sent a shorter version of the R&D questionnaire, which requests R&D expenditure and employment totals. The three employment size bands used in the sampling process are 0 to 99, 100 to 399, and 400 and over.

All known Northern Ireland R&D performers are sent a version of the long questionnaire, which includes additional questions required by the Northern Ireland Statistics and Research Agency (NISRA).

Survey questionnaires

There are two types of questionnaire sent out to businesses each year; a long and a short questionnaire. Both of these request a calendar year report, from January to December. If this is not available, businesses are asked to provide the dates of the 12-month period they are reporting for. Estimates are acceptable if actual figures are unavailable.

The long questionnaire, which is sent to the 400 businesses in Great Britain that have previously returned the highest values of performed R&D, asks for:

  • a breakdown of capital and non-capital expenditure on in-house R&D
  • description of the type of R&D performed (product group) and the type of research undertaken (basic, applied or experimental)
  • whether R&D relates to civil and/or defence
  • how in-house R&D expenditure for the relevant year was funded
  • how much R&D was purchased
  • number of employees working on R&D and the full-time equivalent (FTE)
  • type of employees (researchers, technicians and support staff)
  • postcodes that relate to the workplaces where R&D is carried out

The short questionnaire, which is sent to the 3,600 businesses in Great Britain, asks for:

  • expenditure on in-house R&D

  • whether R&D relates to civil and/or defence

  • how much R&D was purchased

  • the number of employees working on R&D

Questionnaires are dispatched annually in mid-February with a return date of early April. To achieve optimum response, two written reminders are sent to businesses, the first in mid-April and the second in mid-May. All businesses who have a significant impact on the survey (known as "key responders"), who have not replied, are also telephoned before the first set of results are produced.

How we process the data

Returned questionnaires are scanned by our Survey Processing Centre with Optical Character Recognition (OCR) used to create an image. Images are stored electronically, reducing paper handling, retrieval and storage. For confidentiality purposes, the paper version is then shredded and recycled. Once the data are recorded on the database, a series of credibility checks are applied to aid data validation and dubious data are investigated.

Results are processed for the three employment size bands within each industry product group.

The research and development (R&D) expenditure of businesses who return the long form is allocated to the product group or groups according to the categories selected by responders that best describe the subject type of R&D activity they undertake. The expenditure of short form responders is allocated to a product group that relates to their Standard Industrial Classification (SIC) 2007 (which describes the main activity undertaken by the business, regardless of its R&D).

Estimation for non-responding and non-sampled businesses

Estimates for non-responding long form businesses are calculated using growth factors that are derived from businesses in receipt of the long form type that have returns in both the current and previous reference period, who are in the same cell as the non-responder. If there are insufficient long form responders in the cell to calculate a growth factor, then information from the previous year is used. Where this is not available, historical data are used.

For those businesses receiving the short form who do not respond, as well as un-sampled businesses, R&D expenditure is estimated separately in each strata using business employment as the auxiliary variable.

The calculation is conducted at cell level, where a cell is defined by product group, employment and the particular variable in question. Outliers are removed before estimation and added back in after estimation has been conducted. An outlier is an observation that appears to deviate markedly from other members of the sample in which it occurs. The top and bottom 5% in each cell are trimmed as outliers as long as the cell contains 20 observations or more.

A per head ratio is calculated for each of the long questionnaire cells and applied to the corresponding short questionnaire cell totals. For the value questions not collected on the short form, ratio estimation is used to estimate data, based on data received from long form R&D performers in the same product group.

To estimate for short questionnaire totals, total business employment for all businesses in the sampling frame is calculated for each cell. All businesses not trimmed as outliers have their R&D total (for example, employment, in-house expenditure or whichever total is being calculated) aggregated. This is divided by the aggregate total business employment to give a per head value to use as a base for the cell to be weighted by. The sample frame employment for each non-responding or unsampled business is then multiplied by the per head R&D employment to give an estimated value for that cell. The outliers then have their question values aggregated together and added to the estimated figures.

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7. Quality characteristics of the BERD data

Output quality

Sampling error

Sampling error arises when estimates are based on a sample rather than a full census of the population. The difference between the estimates derived from the sample and value that would be obtained from a census is referred to as the sampling error. Sampling errors are not currently provided in the Business Enterprise Research and Development (BERD) publication.

Non-sampling error

Non-sampling errors are not easy to quantify and include errors of coverage, measurement, processing and non-response. There is some difficulty in identifying the population of actual or likely research and development (R&D) performers and also problems in ensuring that businesses adhere to the Frascati Manual R&D definitions.

Response rates provide an indication of the likely impact of non-response error on estimates. The response target for Great Britain for 2019 was 80% for short questionnaire responders and 93% for long questionnaire responders.

Coherence and comparability

Comparability between BERD and HMRC statistics

HM Revenue and Customs (HMRC) publishes an annual report Research and Development Tax Credits Statistics (PDF, 573KB). This contains detailed information about the number and value of research and development (R&D) tax credit claims made by businesses. The report also includes statistics on R&D expenditure that relates to claims for tax credits. In addition, HMRC's report includes comparisons of their R&D estimates, with those published by the Office for National Statistics (ONS).

Table 1 of the HMRC report (PDF, 573KB) published on 30 September 2020 compares the values of UK business research and development (BERD) and HMRC R&D expenditure. The BERD estimate of the expenditure on R&D performed in the UK in 2018 was £25.0 billion. The HMRC estimate of the value of R&D expenditure that was used for tax credit claims in 2018 to 2019 was £34.5 billion. However, there are conceptual and methodological differences between how the two datasets are compiled, which need to be considered before making direct comparisons. For example, the BERD sample is drawn from a list of businesses previously identified as performing R&D, whereas the HMRC data are captured from businesses reporting R&D information directly to HMRC via their Corporation Tax returns.

New BERD survey questions as part of assessment of comparability with HMRC data

New questions were added to the 2019 BERD questionnaire to help gain new information about whether BERD expenditure leads to tax credits. Separate questions were introduced asking about tax credit claims in relation to in-house R&D (that is, performed by businesses themselves) and for tax credit claims in relation to R&D conducted outside the respondent’s business.

The new questions ask whether the business had submitted, or intended to submit, a claim for R&D tax credits in relation to in-house R&D performed by the business; and whether the business had submitted, or intended to submit, a claim in relation to R&D purchased from outside the business.

Eurostat data

It should be noted that, at the time of the BERD publication each year, Eurostat would have already published provisional estimates for EU member states’ gross expenditure on R&D. These estimates include business sector data. The provisional estimates for the UK are based on projections and therefore when making comparisons with other countries, users are advised to use estimates from the BERD release for UK business R&D expenditure, rather than Eurostat’s provisional estimates for the UK.

Concepts and definitions (including list of changes to definitions)

Research and development (R&D) and related concepts follow internationally agreed standards defined by the Organisation for Economic Co-operation and Development (OECD), and published in the Frascati Manual. An updated version of the manual was published in 2015 and this included the five new criteria to determine whether an activity is R&D:

  • novel

  • creative

  • uncertain

  • systematic

  • transferable and/or reproducible

R&D activity is distinguished by the presence of an appreciable element of novelty. If the activity follows an established pattern it is excluded; if it departs from routine and breaks new ground it is included. For example, activities such as routine testing, market research, patent applications, trial production runs and artistic work are excluded. Overheads of R&D projects are included. Value Added Tax (VAT) is excluded.

The reclassification of R&D as an intangible asset in the European System of Accounts 2010 (ESA 2010) resulted in us carrying out the work to implement the change in the national accounts from treating R&D as intermediate consumption, to gross fixed capital formation.

Geography

Results for Great Britain are added to results for Northern Ireland to produce UK totals. These are broken down by UK country and region (Nomenclature of Territorial Units for Statistics: NUTS 1) for the November publication. Some users have expressed a need for more detailed regional breakdowns; the size of the survey means that it is difficult to produce robust estimates at detailed geographical areas. Therefore, although estimates at the NUTS2 regional level have been provided to Eurostat, as part of the BERD data submission, results at this level are not included in the BERD statistical bulletin.

Accessibility and clarity

The ONS's recommended format for accessible content is a combination of HTML web pages for narrative, charts and graphs, with data being provided in usable formats such as CSV and Excel. Our website also offers users the option to download the narrative in PDF format. In some instances, other software may be used or may be available on request. Available formats for content published on the ONS website but not produced by the ONS, or referenced on the ONS website but stored elsewhere, may vary. For further information, please refer to our accessibility statement.

Timeliness and punctuality

The time between the end of the reference year and the publication date is approximately 11 months for the BERD Survey, as the results are published in November each year. In the unlikely event of a change to the release dates, public attention will be drawn to the change and the reason fully explained, as set out in the Code of Practice for Statistics.

For more details on related releases, the UK National Statistics release calendar is available online and provides 12 months' advance notice of release dates. If there are any changes to the pre-announced release schedule, public attention will be drawn to the change and the reasons for the change will be explained fully at the same time, as set out in the Code of Practice for Statistics.

Why you can trust our data

The Office for National Statistics (ONS) is the UK's largest independent producer of statistics and is its national statistical institute (NSI). The data policies detail how data are collected, secured and used in the publication of statistics. We treat the data that we hold with respect, keeping it secure and confidential, and we use statistical methods that are professional, ethical and transparent.

How we disseminate the data

Our primary method of disseminating the data is through our UK business enterprise research and development statistical bulletin.

Results are also supplied to Eurostat. Bespoke special analyses can also be commissioned on request, and these will also be published on our website.

While an EU member state and for the duration of the Brexit transition period, the UK has an obligation to collect and provide R&D data to Eurostat under European Commission (EC) Regulation Number 995/2012.

How we review the data

Revisions are made as standard to the returned data in the previous two survey periods, where appropriate.

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8. Other information

For information regarding conditions of access to data, please refer to the following links:

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Manylion cyswllt ar gyfer y Methodoleg

Cecil Prescott
RandD@ons.gov.uk
Ffôn: +44 (0)1633 456767