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Pharmaceutical industry leads national decline in R&D spending

Annual business expenditure on R&D in the UK fell in 2012 for the first time since 2009, with spending on pharmaceutical R&D suffering the biggest decline, according to government figures.

Overall, business R&D in the UK decreased by 2 per cent or £17.1 billion in 2012 compared with 2011, data published by the Office for National Statistics on 22 November show. The change, which is a decrease of 4 per cent when inflation is taken into account, comes after inflation-adjusted increases were seen in 2010 and 2011. 

The drug industry scaled back spending on R&D the most, with a decrease of £727 million, or 15 per cent, from 2011 to 2012. Pharmaceuticals make up the UK’s largest product group for R&D. With £4.2bn in R&D expenditure in 2012, it accounts for 25 per cent of the UK’s total business R&D spending, or about £4.9bn in 2011 at today’s prices.

Defence R&D also went down substantially, decreasing 10 per cent to £1.6bn in 2012. The telecommunications industry, which accounted for £1.1bn in R&D spending in 2011, reduced its spending by 15 per cent, to £889m in 2012.

However, some industries increased their spending, with the largest boost in the automotive industry, up 14 per cent to £1.bn in 2012. This group accounts for 10 per cent of UK business spending on R&D. Increases were seen in business R&D spending in computing and information services, aerospace, and machinery from 2011 to 2012.

Foreign-owned businesses accounted for the majority, 51 per cent, of business R&D spending in the UK in 2012. They also accounted for 51 per cent of the spending in 2011, the first time that they overtook UK-owned businesses’ R&D spending. When the annual survey on businesses’ R&D spending began in 1993, foreign-owned businesses accounted for just 27 per cent of the overall total.

Overall, business R&D spending amounted to 1.1 per cent of the UK’s GDP, a level it has maintained since 2007. The percentage of GDP that the UK devotes to R&D overall has ranged from 1.77 to 1.86 per cent from 2007 to 2011, according to figures from the statistical office of the European Union Eurostat. The data for overall UK R&D expenditure in 2012, including both business and public spending, are due to be published in March 2014.