R&D intensity at industry level: how does UK compare with top performing OECD countries?

Abstract

This study aims to compare R&D intensity at industry level between the UK and top performing OECD countries. The UK Government has set the target of spending 2.4% of GDP in R&D by 2027 and aims to place the UK in the top quartile of OECD countries. Increasing business expenditure on R&D (BERD) is pivotal to achieve this ambitious target. Industries have very different R&D intensities and the higher the R&D intensity of an industry, the greater its potential to increase BERD. From a policy perspective, it is important to know how R&D intensities of UK industries compare with those of the top performing OECD countries. The study uses data from the OECD ANBERD and STAN databases to calculate R&D intensity (R&D as percentage of value added) for more than 40 industries and for 17 OECD countries over a period of 10 years. The results show that more than 60% of BERD comes from the service sector in the UK while in 11 of the top performing OECD countries the manufacturing sector represents between 51% and 87.5% of BERD. The structure of BERD appears to be an important factor in explaining the stagnation of R&D intensity in the UK in recent decades. Concerning the high and medium R&D intensity industries, the UK’s R&D intensity performance is mixed: relatively good in industries like air and spacecraft and related machinery, weapons and ammunition or motor vehicles, trailers and semi-trailers; but relatively poor in industries such as pharmaceuticals, medicinal chemical and botanical products, computer, electronic and optical products, software publishing, medical and dental instruments and supplies, chemicals and chemical products or electrical equipment.