Recent trends in research and development in the United Kingdom

Abstract

The early appearance of research and development statistics and the relative frequency of their publication would seem to indicate that the British government has long held the view that they are an important economic indicator. Invariably, however, official R&D statistics have been published in current prices. This paper argues that the observed trends in current price R&D expenditures over time give a misleading impression of British investment in her technological future. As no specially constructed, official price index for R&D is available, the paper reports on the construction of R&D deflators by industry group using information on input prices for “labour”, “materials, fuel and other current inputs” and “capital”. Using the new price indices, the deflated R&D expenditures show a very different pattern over time. The recent rapid growth and the current high levels of expenditure are more a reflection of extremely strong inflationary forces than an adequate investment performance in this area. A common feature is that the majority of industries reached a peak R&D expenditure in the mid-sixties and have experienced a decline since that time. This general pattern remains, even if an attempt is made to allow for the prolonged periods of economic recession in more recent years. It is shown that real R&D expenditure per unit of physical output also reaches a peak in the mid-sixties and then declines. The observed trends would seem to paint a gloomy picture for future British innovative and industrial performance.