Tax breaks fail to halt decline in UK R&D investment

Government tax incentives have failed to halt a worrying decline in research and development investment by UK businesses, according to the latest global league table.

R&D spend by UK companies has fallen for a second successive year, this time by one per cent to £17bn - despite an overall rise of five per cent across the world's top 1,000 organisations, whose R&D budgets total £220bn.

The Department for Trade and Industry's R&D scoreboard also shows that the two per cent European R&D growth is well behind the high-tech economies in Asia. South Korea and Taiwan now contribute 33 companies to the global 1,000, with Hyundai and Samsung among major investors in R&D.

China too saw double-digit growth in R&D spend and is predicted to overtake Europe in the percentage of GDP it spends on R&D within five years.

One of the reasons cited for the UK and Europe's poor performance in the R&D league table is that they have fewer companies in R&D intensive high-tech sectors such as IT and electronics and are instead over-represented by 'old industry' food manufacturing, oil and utilities firms.

The three largest R&D sectors globally are automotive, IT hardware and pharmaceuticals, while pharmaceuticals, automotive and aerospace grew the most rapidly amongst the top 10 sectors, according to the report.

Science and innovation minister Lord Sainsbury said in the report: "The UK is facing increasing competition from rapidly growing economies including India and China. In order to meet these challenges, the UK must build on its strengths of science and innovation, competing on ideas not on low wages."