UK unlikely to hit 2.4% of GDP spending target on R&D by 2027, warns HEPI

No indication UK is on the right trajectory to hit its target and research budgets are under severe pressure

The UK is likely to miss its R&D spending target of 2.4% of GDP, according to a new release by HEPI today.

In a new article by Adão Carvalho of the Department of Economics at the Universidade de Évora in Portugal, Carvalho states that in light of “poor record of goals-based R&D targets around the world” and targets being “unrealistic”, everything points to the UK missing its target.

67% of all cases studied missed the target by -40% to -100% and another 17% by more than -100%

Says Carvalho: “Many countries set research and development (R&D) intensity goals – in the form of Gross Expenditure on R&D as a percentage of GDP – as an essential element of science, technology and innovation plans,” and this would lead you to assume that this is “a proven policy to raise a country’s global R&D expenditure to a desired level of GDP”.

However, Carvalho’s research shows otherwise – “67% of all cases studied missed the target by -40% to -100% and another 17% by more than -100% (in other words, their R&D intensity decreased over the period).”

Carvalho attributes this to both “bad policymaking” and the goal being too “difficult to accomplish”.

UK unlikely to hit 2.4% of GDP spending target on R&D by 2027, warns HEPI

 

Professor Dame Ottoline Leyser recently told the Public Accounts Committee: “It is a very challenging target and I think that the hit to the economy from Covid makes ensuring and prioritising that public investment challenging.”

High failure rate

So why is there such a high failure rate of R&D intensity goals?

Carvalho points to a number of factors such as “some are related to the way the goals are set and others are related to the economic essentials to raise R&D expenditure, including the characteristics of the industry (more or less R&D intensive), the R&D infrastructure, the number of skilled researchers (in industry and academia), incentives for firms to invest in R&D, and the type and amount of public R&D incentives”.

Carvalho evidences the 2017 Conservative Party election manifesto which stated: “We will… ensure further growth so that… we meet the current OECD average for investment in R&D – that is, 2.4% of GDP – within 10 years, with a longer-term goal of 3%.”

And then Labour’s election manifesto just two years later promising to “create an innovation nation, setting a target for 3% of GDP to be spent on research and development (R&D) by 2030”.

Says HEPI’s director Nick Hillman: “The long-term nature of such targets means policymakers may set the targets with honest intent but are rarely around for long enough to see them through or to be held accountable for missing them. Other priorities typically overtake such commitments to R&D.”

With “unrealistic goals put at stake the indicator and the credibility of the policy and the policymakers behind it”, the “problem lies in the commitment of governments not in the importance and usefulness of the indicator”, concludes Carvalho.


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