Research and development expenditure

Research and development expenditure over time 

In 2020 the total expenditure on research and development (R&D) in the North of England was £10.1 billion. This was a 7% increase over 2018. Over the same period R&D expenditure in England increased by 6%, falling by -1% in the Midlands and South West but increasing by 9% in the Greater South East (London, the South East and East of England).

This R&D expenditure was 2.8% of the North’s total gross value added (GVA) in the same year. This was equivalent to £10.5 million per 10,000 working age adults and an increase from 2.6% in 2018.

The North, however, spent a lower percentage of regional GVA on R&D than the England average in the same year (3.2%). £15.4 million was spent on R&D per 10,000 working age adults in England overall. 

Expenditure by source

The largest source of R&D expenditure in the North is business expenditure. Businesses were responsible for almost £7 billion pounds of the total R&D expenditure in the region in 2020, 69% of the total spend. The next largest sources of expenditure were higher education and the government respectively, accounting for 26% and 4% each, with the final 1% coming from private and non-profit sources. 

Compared to the England average the North receives a higher proportion of its R&D from higher education (26% compared to 21%). This is mostly because the expenditure by businesses in the region is lower and almost half the expenditure per head of businesses in the Greater South East. However, on a per capita basis the North spends less on R&D than the national average from all sources.

Business expenditure on research and development 

The ONS publishes data on business expenditure on R&D ahead of its release on total R&D, so there is an additional year of data on R&D spend available from this source. In the North this release shows that there was £7.7 billion spent on R&D by businesses in 2021. This was equivalent to 2.1% of the North’s GVA and an expenditure of £8 million per every 10,000 working age adults.

In the same year England spent the equivalent of 2.5% of its total GVA in the region on R&D, £11.7 million per 10,000 working age adults.

New methodology

In the latest R&D release the ONS used a new methodology, providing data for each year between 2018 and 2020 (revising earlier 2018-2019 data). This new methodology gives a better estimate of the level of R&D expenditure carried out by small businesses, which alternative data from innovation tax credits suggested was higher than that reported in the ONS release. 

The result is that the estimates of R&D spending have been revised upwards. In the North this has increased the proportion of regional GVA spent on R&D from 1.4% in 2019 to 2.6%. Most of the increase is due to a higher levels of business expenditure on R&D. This increased by 88% in the North under the new methodology.

Because of the uncertainty around reporting R&D and to allow time to trial the new methodology the ONS no longer releases R&D statistics in the same level of detail. This means that there are no North East regional figures with the latest methodological changes considered.