The R&D investment challenge: Moving towards a more research-intensive economy

Article

Innovation is the process by which businesses improve how they do things – whether that be how they produce goods or services, what they choose to produce and how they organise their workforce. More innovative firms are likely to be more productive, better to work for, enable us to become more internationally competitive and could enable us to solve big societal problems such as climate change and an ageing society.

Dedicating resources to research and development is key to enabling innovation and the UK economy sits well below the OECD average, 1.7 per cent of GDP is spent on R&D in the UK compared to an average of 2.4 per cent across the OECD. Both the Conservative government and the opposition have set out targets to increase R&D spend as a proportion of UK GDP – up to 2.4 per cent by 2027 and 3 per cent by 2030 respectively.

This briefing note outlines how much public investment may be needed to reach these ambitions. Evidence suggests that public R&D has the potential to ‘crowd-in’ additional private R&D spending, particularly if that spending is ‘mission-based’. We factor in this crowding-in assumption to our modelling, assuming an additional £1 crowds in £1.60 over the decade that follows.

Related items

  1. Must try harder: do the Holyrood 2026 manifestos meet our tests?

  2. An energy smart meter sits on a countertop. It reads electricity: £61.71, gas: £148

    Flex factor: How government can keep network costs on bills down

    Government must strike a better balance between bringing down energy bills now and building a system fit for the future.

  3. Acceleration is not a strategy: A framework for directing AI towards public value before it's too late

    The politics of artificial intelligence is set to drastically change in 2026 as recent technical breakthroughs get implemented across the economy.