R&D Grants Provide UK £43bn Economic Boost

  • Largest study shows R&D grants turbo-charge growth in high-tech industries
  • They created £43 billion additional turnover and 150,000 jobs
  • Employment is boosted by around a fifth, turnover by a quarter 
  • Job creation from grants strongest in London and the South East

Taxpayer support for high-tech innovation benefits the economy by significantly boosting jobs, turnover and productivity among the companies backed, new research has found.

Over a 13-year period, R&D grants spurred growth worth £43 billion to the British economy – more than five times the £8 billion invested – and created around 150,000 jobs.

But the study – the largest and most comprehensive of its kind, carried out by the Enterprise Research Centre, which is headed by Warwick Business School’s Stephen Roper – also found big variations in the types of firms most likely to benefit from grants, as well as regional differences in the strength of the effects.

Professor Roper, Director of the Enterprise Research Centre, which was due to hold its annual conference at WBS London at The Shard on Thursday, said: “This is the largest and most detailed study yet of the impact public funding for science and innovation has on growth at the firm-level.

Prof Roper and his colleagues tracked 15,000 hi-tech firms which received government R&D grants. It found that on average these firms employed 23% more people after six years compared with firms that did not receive grants. Turnover grew by 28% and productivity by 6% over the same period.

The biggest growth in both employment and turnover occurred among manufacturing firms. The impact seems to be particularly large for the least productive companies. Smaller companies also benefitted more from the grants.

Job creation was strongest in London, the South East and the North West. The turnover of firms increased most in Scotland, Yorkshire and London.

The new research, which studied £8 billion worth of grants to nearly 15,000 firms from 2004 to 2016, shows the effects can be transformative for recipients.

The main findings show:

  • Across all recipients, employment grew by six per cent in the short term and 23 per cent in the longer term (after six years), compared to non-recipient firms.
  • Taken together, grant-receiving firms created an estimated 150,000 new jobs, many in highly-skilled, well-paid sectors such as biotechnology, medical equipment, engineering, life sciences and high-tech manufacturing.
  • Across all recipients, turnover grew by six per cent in the short term, and 28 per cent in the longer term, compared to non-recipient firms.
  • Productivity was unaffected in the short term but grew six per cent compared to non-recipient firms in the longer term.

The Prime Minister announced an expansion to industrial R&D funding last year as part of the government’s industrial strategy. This included an extra £4.7bn for the science budget over the next four years. The plan is to boost UK industry by focussing on the country’s research strengths.

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