Pre-Budget statement unveils plan to increase R&D spending to 2.4 per cent of GDP by 2027

The announcement, issued by the Prime Minister’s office and the Department of Business, Energy and Industrial Strategy, states that an extra £2.3bn of public money will be pumped into R&D in 2021/22, raising government spending in that year to £12.5bn. The government will also work with industry to increase private spending, which could see total R&D spending increase by as much as £80bn over the next ten years.

R&D spending
Business secretary Greg Clark is keen to promote automotive research. Image: SMMT

Government investment in R&D will rise as a share of GDP year-on-year for the next five years. Currently, the country spends 1.7 per cent of GDP on R&D, with a third of that investment coming from government. The announcement would bring that proportion up to the average level of other OECD member states, provided that industry also raises its spending and that the spending increases are carried through by future parliaments (2021/22 is the last year before a new general election has to be held).

Chancellor Philip Hammond is expected to announce further measures in his Budget on Wednesday to help increase industrial productivity, predictions on the growth of which are expected to be cut in Office of Budget Responsibility forecasts to be published alongside the Budget.

“Our Industrial Strategy will propel Britain to global leadership of the industries of the future, seizing the big opportunities of our time – from artificial intelligence and big data to clean energy and self-driving vehicles,” prime minister Theresa May stated.

These sectors are among four “Grand Challenge” areas pinpointed by BEIS as being central to shaping industries where the UK has an edge: these are artificial intelligence and the data economy; clean growth; healthy ageing; and the future of mobility.

Business secretary Greg Clark is due to announce more detail on how the government will work with business, academia and civil society on these Grand Challenge areas on Monday 27 November, 2017 in a major announcement on industrial strategy.

“We want the UK to attract, and create, the best and brightest talents, from Nobel Prize winners to ambitious graduate students, and this game-changing investment will ensure we are the home of the industries of the future and high-quality, good jobs,” Clark said.

“I am delighted that the government has set this ambitious target to increase both public and private R&D spending. Only by taking bold steps like this can we make sure that the UK maintains its world leading status in research and innovation,” commented Sir Mark Walport, chief executive of UK Research and Innovation, the umbrella body for the seven Research Councils and Innovate UK. “Meeting this commitment will require a concerted effort. UK Research and Innovation is already developing ideas as part of the industrial strategy to make sure these investments have the greatest possible impact. We will continue to work with government, industry and academia to make this goal a reality, helping to drive up productivity and improve living standards.”

Royal Academy of Engineering president Professor Dame Anne Dowling said: “I welcome today’s announcement of increased funding for research and development. The engineering profession has called for this investment for some time, along with the other UK National Academies. It is crucial to achieve an investment target of 2.4% GDP in R&D, drawn from both public and private sectors, and to break down the silos between industry sectors to enable innovation and collaboration between academia and industry on emerging technologies.”

Sir Venki Ramakrishnan, president of thew Royal Society, commented: “The industrial strategy, due to be announced next week, is an opportunity for the UK to really start capitalising on our strength in research and innovation.  Today’s announcement of an additional £2.3billion investment in 2021/22 is a welcome step towards building long term, sustainable growth through a knowledge based economy.”

Alongside the R&D announcement, the government said it would also establish a £1.7bn “Transforming Cities Fund” to improve transport links and promote growth in city regions. This fund include £250m earmarked specifically for transport in the West Midlands.

One key goal of this fund is to improve links between city centres and suburbs. It will also focus particularly on making it easier to switch between different modes of transport. “Investment in transport is crucial to a strong and resilient economy,” explained transport secretary Chris Grayling. ”The Transforming Cities Fund will drive productivity and growth in cities where this is most needed, connecting communities and making it quicker and easier for people to get around.” Integrated transport links have already proven to improve city economies in Manchester and Nottingham, he added.

Darren Capan, chief executive of the Railway /industry Association, said the Hammond should bring $500million forward from the funding period beyond 2019 to help the rail sector avoid a funding shortfall. "The Government should use Wednesday’s Budget and the new Transforming Cities Fund announced today to ensure rail suppliers can build, maintain and improve the UK’s railways, so that we can continue to improve services for passengers and freight companies in the months and years ahead,” he said.

These announcements are in addition to the Chancellor of the Exchequer’s announcement over the weekend of a shake-up of regulations for autonomous vehicles that will them to be tested on public roads by 2021. The Law Commission will set out a new regulatory framework focusing on liability. Further details will come in the Budget.