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BEIS predicts major blow to business R&D

‘Significant decrease in R&D investment’ expected due to pandemic, says business department

The business department has suggested that companies’ spending on R&D is likely to take a major hit from the Covid-19 pandemic, potentially undermining pledges to drive up research spending.

The Conservative party has repeatedly committed to raising overall UK investment in R&D to 2.4 per cent of GDP by 2027. To do this, both public and private R&D spending needs to increase significantly, as currently the figure hovers at around 1.7 per cent.

But in written evidence submitted to the House of Commons science select committee, the Department for Business, Energy and Industrial Strategy suggests that the economic impact of the coronavirus pandemic will almost inevitably depress companies’ investment in R&D.

BEIS points out that business expenditure on R&D dropped 8 per cent when GDP fell 1 per cent in the 1990 recession, and it fell 3 per cent when GDP dropped 4 per cent in 2009 after the financial crisis.

“Recent Office of National Statistics figures show the UK experienced a 20.4 per cent contraction of GDP in April-June 2020, which is a much greater contraction than those in 1990 or 2009, but lower than forecasts predicted,” says the September-dated evidence, which was made public last week. “With this major reduction in GDP, we can expect a significant decrease in R&D investment and its growth.”

Decreases are unlikely to be uniform. BEIS notes that, after the 2008 recession, the pharmaceutical industry increased its R&D spending, while aerospace spending dropped.