By Tim Ferguson, 30 October 2006 15:25
NEWS
The last year has seen a dramatic hike in R&D investment in the UK, with a total increase of more than £2bn.
According to the Department of Trade and Industry's 2006 R&D scoreboard, spending on research and development in the UK has risen to £19.2bn this year from around £17bn in 2005.
One of the key growth areas is the software sector, which saw a 13 per cent increase in R&D spending. Other big growth areas include the aerospace and pharmaceutical industries.
Some of the overall increase in spending is due to a number of companies revealing their R&D spending for the first time but a third of this increase is the result of a four per cent boost in spending from the UK's top 800 companies.
Minister for science and innovation, Lord Sainsbury said the results show the UK is an "attractive location for R&D activities, and companies are increasingly recognising the benefits of the UK as a productive environment for R&D investment".
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The figures show UK R&D investment is growing at the same rate as in the US, with companies from both sides of the Atlantic increasing R&D spending by around eight per cent.
Lord Sainsbury acknowledged there is still room for improvement. He said: "Global competition remains strong and the government is committed to making the UK one of the best places in the world for science and innovation."
The UK figures follow encouraging results from the European Commission's Industrial R&D Investment Scoreboard , published in early October.
Comments
There are 3 comments. Join the discussion
1. Eric the Disillusioned
Haven't seen it myself. I did see a directive from our CFO explaining that we got tax breaks for R&D so could we all please identify anything that could be legitimately classified as R&D so we could claim the tax back. Does that count?
2. Brian Murray
I have been trying to restrain myself from commentary on this as I can feel the over-cynical side of my character stirring rigorously - particularly if we consider the European ration of this pie! Having worked in cross-sector technology for many years now, I have become increasingly pessimistic regarding the UK approach to innovation and development.
Although we should take a significant boost from the fact that our R&D investments are growing once again, we should remember that we (the UK, or even Europe generally) are woefully low in the global stakes. Growing at the same rate as the US will not be good enough!
The IT market is undoubtedly dominated (to the point of saturation) by the US, with companies simply vying for each other's slices from the same pie. 'What happens next?' is the interesting question - Will the US continue to drive and control the market? Will secondary support players succeed to the point of significant market share? Will innovators flourish outside the US?
Given our R&D focus is gaining health, is there an opportunity for the UK here? Unfortunately we may not really be seeing anything new as regards the IT industry. In fact, the similarities between the energy and IT industries here are remarkable. With the vision for opportunistic investment, the US dominate most (if not all) technology-exploiting industries - the best examples of which being IT and energy.
Like most of us, I've been following the latest series of political dances around energy use and the respective impacts on the environment. Many things come to mind here but a couple of key points stand out around the 'to tax or not to tax' debates.
First and foremost, it is heartening to see that we are finally realising the falsity of the economies we have been living under for the past three or four decades. However, a secondary point becomes apparent in that we are still incapable of looking beyond superficial financial mechanisms towards the more complex issues of deriving real, long-term solutions. We repeatedly seem to find ourselves praying at the idol of financial controls, in preference to facing the underlying issues and seeking pragmatic solutions. This is reflected within 'Eric the Disillusioned' comment.
The 70s saw the energy industry flourish with R&D, excitement and enthusiasm .... production settled down and the bean counters took over. Oil companies developed captive markets and fell in love with high oil prices. Any significant investment in R&D to increase production lowered oil price so was deterred. Protection of shareholder interests governed all. Come the new century, oil & gas problems now feed the same sort of excitement around alternative energy.
The same cycle is unfolding with IT - but where is the R&D? ... mostly in the US, where the big IT (and energy) companies, many of which originated from 'disruptive' R&D, are comfortable with the status quo because they have already captured a market which is now dependent on them. Not spending money on overly innovative ideas keeps their shareholders smiling. IT management also know they can rarely go wrong buying from the big, 'stable' names. CIOs have to please their board, who in turn need to please their shareholders. Same problem, opposite direction.
A combination of cultural or economic factors with innovative, disruptive technologies is what is needed to upset the status quo. The need for an opportunistic investment culture, particularly in R&D, to benefit from this is clear.
The UK could well continue, and take this initiative, in IT R&D. But what did we do in energy? The North Sea revenues fiasco needs no comment. The UK wind energy business is now dominated by Danish, Dutch and German companies. UK investors are willing to back wind farms but not wind technologies.
Generally speaking, it's been shown that companies which invest in R&D, repeatedly outperform the rest of the stock market. So why is it 'the City
3. Brian Murray
So why is it 'the City' never takes a longer-term or national view? James Dyson makes an excellent example in the 2004 Dimbleby Lecture regarding seeking UK investment - "I was seeking funding to manufacture my vacuum cleaner. A delightful American called Bob Peyton was also looking for money. He wanted to expand his chain of pizza restaurants. I wanted to build up something with a potential world-wide market. My business would not offer a return for several years, whereas Bob was promising a relatively quick buck. So guess who got the funding?"
So the real question is - will we adopt a culture and provide ongoing financial backing to support an R&D focus in the long term, or will our innovation, intellectual capital and talent following our history and be tempted or/and acquired overseas?