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News Release from: DTI Innovation Group
Edited by the Electronicstalk Editorial
Team on 23 October 2002
UK firms boost research and development
spending
"Grow your own wealth", is the message from the 12th annual R and D scoreboard released by the DTI Innovation Group's Business Finance and Investment Unit.
"Grow your own wealth", is the message from the 12th annual R and D scoreboard released by the DTI Innovation Group's Business Finance and Investment Unit Data in the scoreboard suggest that UK companies are increasing their investment in R and D for new products and services
This article was originally published on Electronicstalk on 8 Nov 2004 at 8.00am (UK)
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The average R and D intensity (R and D as a percentage of sales) for the UK R and D scoreboard has been steadily rising - from 1.8% in 1998 to 1.9% in 1999, 2.1% in 2000 and 2001, to 2.2% in 2002.
This shows that the UK is closing the gap with the top 1000 US R and D investors, whose R and D intensity has remained constant at 4.3% for the last two years.
Similarly, the percentage of UK-owned companies that qualify for the US scoreboard, and have an R and D intensity over 10%, also shows an increase, from 4 to 5% in the 1999 and 2000 scoreboards, to 10% in 2001 and 11% this year.
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The corresponding percentage for the US scoreboard has risen from 25 to 33% over the last three years.
Author of the report Dr Mike Tubbs, a senior industrialist with the DTI Business Finance and Investment Unit, said: "This year's Scoreboard includes more data than ever before, allowing an in-depth comparison of the R and D performance of UK and international companies.
"It is an international benchmarking tool to help companies decide if they are investing at the right level, as part of their overall business strategy, and in comparison to their competitors.
It also highlights a number of areas where the UK could be looking to improve".
Commenting on the scoreboard, Trade and Industry Secretary, Patricia Hewitt said: "This scoreboard once again highlights the importance of R and D to a company's long-term growth strategy.
Taking full advantage of science and innovation is crucial to driving up productivity and generating wealth.
The scoreboard shows that there are UK companies in almost all sectors that are investing in R and D at world-class intensity levels - our aim is to encourage more businesses to follow their example".
"We have listened to the concerns of industry and we have put in place measures to enhance innovation throughout the UK economy, and in particular to support our vital manufacturing base.
To encourage more investment in R and D we negotiated and secured in the last budget the new R and D tax incentive for large and middle-sized companies, which complements the existing R and D tax credit for small companies".
"We recently set out our strategy for supporting UK manufacturing businesses, and substantially increased our investment in science.
By 2005-6 we will have increased the investment in our science base by GBP 1.25 billion per year compared with this year, an average annual real terms increase of 10%, to bring new innovation to the UK economy.
Further investment in knowledge transfer enables effective partnerships between companies and universities or research institutes".
One company that is investing heavily in R and D is metrology specialist, Renishaw, which has provided a commentary for the report.
According to its Chairman and Chief Executive Sir David McMurtry, the key to Renishaw's success has been a sustained investment in R and D.
McMurtry said: "Each successful product we bring to market provides a flow of margins that fund the development of future products and processes.
Our organic growth strategy has allowed us to build a business with turnover in excess of GBP 100 million with no net borrowing and cash resources of over GBP 30 million, while returning a profit each year".
"We continue to expand our R and D investment - a 15% increase last year - it is the engine that will secure the long-term success and growth of our business", he added.
Other key Scoreboard findings include the following.
Comparing the UK with USA, the distribution of US and UK R and D is very different, with over half of the UK companies that meet the entry conditions for the US scoreboard appearing in the lowest R and D intensity band (of below or equal to 2%) compared with 28% in this band for the USA.
The UK has 11% of its companies with R and D exceeding 10%, compared with 33% of US companies in this high intensity band.
A comparison of middle-sized companies (GBP 70 million to GBP 500 million sales) in the five highest R and D sectors (electronic and electrical, health, IT hardware, pharmaceuticals and biotechnology and software and IT services, revealed that the UK has less than 10% of the number of such US companies.
Notably, almost two thirds of the UK middle-sized group have an R and D intensity below 10%, compared with the USA, where nearly two thirds have an intensity above 10%.
For middle-sized companies outside the five high R and D sectors only 2% of UK companies have R and D intensities above 6%, compared with 24% above this level for the USA.
The scoreboard also looks at findings from an extensive study of organic growth versus growth through major acquisitions which shows that sustained organic company growth based on R and D and capital investment (Capex) is positively correlated with increased relative shareholder returns, in UK companies over three to four year periods.
This is in stark contrast to both UK and US companies that focused their investment on major acquisitions, which, in two-thirds of cases, were associated with a reduction in relative shareholder returns.
The figures show the UK could be missing out.
In the broad engineering sectors, US companies currently spend about 20% of the sum invested in R and D and Capex on major acquisitions, compared with 150% in the UK companies studied.
The UK invests in R and D above international levels in the sectors of pharmaceuticals, aerospace and defence and health but is below international levels in several other sectors.
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