Pharmaceutical sector continues to lead in R&D investment

Pharmaceuticals accounted for over 17% of the total R&D expenditure by UK businesses

UK businesses invested £50 billion in research and development (R&D) in 2023, according to the annual survey report released by the Office for National Statistics (ONS).

This marks a £1.4 billion increase (2.9%) compared to the previous year’s £48.5 billion.

Pharmaceuticals remained the largest contributor to business R&D spending, with £8.7 billion allocated to the sector, accounting for 17.4% of the total R&D expenditure by UK businesses. However, this is slightly down from £8.8 billion in 2022.

Other major contributors among product groups included software development with R&D spending at £7.6 billion, and miscellaneous business activities such as technical testing and analysis at £6.9 billion.

When measuring the value of R&D performed by industry, the scientific research and development industry emerged as the top performer, with £12.7 billion spent, representing 25.3% of total business R&D.

Expenditure on the manufacture of basic pharmaceutical products and pharmaceutical preparations was £457 million in 2023, making up just 0.9% of the total R&D spend. This was a decrease from £540 million in 2022.

Regionally, London led the way with £11.0 billion (22.0%) of the total business R&D spend in 2023. The East of England followed closely behind with £9.7 billion (19.5%), while the South East contributed £8.5 billion (16.9%).

Businesses largely relied on their own funds for research and development, accounting for £38.52 billion of the total £50 billion in 2023.

UK government contributed £2.76 billion, while overseas funding amounted to £7.62 billion.

The latest ONS survey sampled around 19,000 businesses in Great Britain, down from 37,000 in 2022.

Since the 2022 survey, the ONS has adopted a new sampling method by drawing the sample from the entire Inter-departmental Business Register (IDBR). This replaces the previous approach, which relied on a pre-established reference list of businesses.

The ONS release noted: “Sampling directly from the IDBR ensures that the sample measures the level of R&D performed by businesses across the whole UK economy more effectively than our previous approach.

“It also more accurately measures the breakdowns of total R&D expenditure, such as regional distribution and type of R&D performed.”

The 2023 results are the second to be based on the new methods.