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UK investment in R&D plunges in blow to ‘science superpower’ plan

Britain’s plan to become a post-Brexit “science and technology superpower” has suffered a significant setback after a fall in research and development investment of almost a fifth since 2014, according to a report.

The Institute for Public Policy Research said the UK’s share of global investment in R&D projects – including in health and life sciences – had fallen sharply from 4.2% eight years ago to 3.4% in 2019 immediately before the Covid pandemic struck.

The decline comes despite successive prime ministers talking up investment as a central plank of their growth strategies, from David Cameron promoting life sciences as the “jewel in the crown” of the British economy to Boris Johnson’s push for the country to be a post-Brexit “science superpower”.

Rishi Sunak pledged this year, during his time as chancellor, to boost public and private sector investment in R&D as a central way to increase the productivity of the British economy.

The UK ranks 11th in the Organisation for Economic Co-operation and Development group of wealthy nations for total R&D investment as a percentage of GDP, well behind comparable rich countries such as the US, Austria and Switzerland.

The IPPR said that, had the UK’s 2014 share of global R&D investment been maintained, it would have been £18bn – or 26% – higher in 2019.

According to the centre-left thinktank, Britain would need to invest an additional £62bn this year from public and private sources to match Israel, the global leader for R&D expenditure.

The UK’s lacklustre performance in maintaining its ranking for investment in science, technology and innovation comes despite successive cuts in the headline rate of corporation tax, which were designed to encourage companies to invest in Britain.

Business investment has also faltered since the 2016 Brexit vote amid heightened political and economic uncertainty facing companies. Investment fell further during the Covid pandemic, and is still 8% below where it was before the health emergency struck.

Speculation is mounting before next month’s autumn statement that Jeremy Hunt, the chancellor, could cut the government’s R&D budget as part of efforts to find savings after the disastrous mini-budget.

The government had set a target for total R&D investment – from public and private sources – to reach 2.4% of GDP by 2027. Total expenditure by the state and companies investing in research in Britain was £38.5bn in 2019, or about 1.7% of GDP.

Warning against cuts to public sector investment, the IPPR report found that state investment fuelled private sector investment. It said that if the government invested an additional £1bn in R&D, private sector investors would contribute an extra £1.4bn over 10 years.

It said if ministers wanted to pursue a growth agenda, investing in health sciences would be significantly more effective than reducing corporation tax. No sector invests more in R&D globally than life sciences.

Shreya Nanda, an IPPR economist and the report’s author, said: “There has been a managed decline in the UK over the past decade – a decline in our economy, our health and our resilience.

“R&D innovation is a vital lever in responding to this decline. We urge the government to increase R&D funding to restore the UK’s leading global position, encourage private sector investment and ultimately deliver economic growth.”

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