In a blog post last week we set out wide-ranging plans to transform the ONS statistics on Research and Development (R&D). Now the results of the first element of this project have arrived as we publish new R&D estimates covering 2014 to 2020. Heather Bovill explains how the numbers have been improved.
For many years a key component of ONS’s R&D figures have come from the ‘BERD’ survey – Business Expenditure on Research and Development – which measures R&D activity by private sector companies. The BERD survey samples businesses that we identify from wider ONS surveys such as our large Annual Business survey. .
However, HMRC produces its own estimates of R&D, based on the amount of money claimed in R&D tax credits, and some have questioned why the ONS’s estimates were lower than these.
HMRC’s data are produced on a financial year basis, whereas ours is calendar year and HMRC’s data includes some R&D performed by third parties overseas. These and some other differences mean you wouldn’t expect the figures to be identical.
Research suggested, though, that the different estimates should be closer and analysis comparing both sources showed many businesses are not accounted for in the BERD estimates. These were small to medium sized businesses and this is due to these businesses having never been sampled by the ONS.
As part of the review of our figures, we reweighted our returns to take account of the types of companies we now know undertake R&D. We scaled them up to how many of these companies we estimate are in the total UK business population.
When we did this, the new estimates, which we have published for the first time today, show that while our previous estimates would have shown R&D spending at £25.2bn, £26.0bn and £26.9bn for 2018, 2019 and 2020 respectively, the newly reweighted figures show spending at £40.2bn, £41.6bn and £43.0bn for the same period.
These new figures compare with figures published today by HMRC of £41.8bn, £42.8bn and £38.1bn for the equivalent financial years 2018 to 2019, 2019 to 2020 and 2020 to 2021.
It isn’t possible to say yet whether these new figures will impact GDP as they have to be balanced against many other sources when producing our headline estimates. These are early experimental estimates and they may be revised a little more in the future, however, they are an important first step in our ambitious plans to transform our figures on R&D.