The sectoral distribution of R&D

R&D spending by companies in the UK850 was dominated by five sectors: pharmaceuticals and biotechnology, aerospace and defence, software & computer services, fixed line communications and automobiles and parts, which together accounted for 60% of R&D (see Figure 2). The pharmaceuticals and biotechnology sector was by far the largest investor, accounting for 37% of the UK850 total. It invested over six times as much as any of the other four sectors none of which invested more than 6% of the UK850 total.

Figure 2: Distribution of UK850 R&D expenditure (2007)

The domination of firms in the five biggest sectors has declined steadily over the last three Scoreboards: their share of investment in R&D by the UK850 has declined from 65% two years ago, to 63% last year and 60% this year.

Globally, five sectors also dominated expenditure by the world’s leading R&D investors. Three of the sectors were also amongst the five largest spending sectors in the UK – pharmaceuticals and biotechnology, automobiles and parts and software & computer services – and two were different, technology and hardware equipment and electronic and electrical equipment.

The pharmaceuticals and biotechnology sector remained the largest sector globally, ahead of technology and hardware equipment, for the second year running. However, in contrast to the UK, the three biggest spending sectors globally have broadly similar shares of total R&D investment among the G1400. They accounted for more than 68% of the investment by the G1400 (see Figure 3). The picture this year is similar to the previous year, where the same five sectors also accounted for more than 68% of the investment by the G1400.

Figure 3: Distribution of G1400 R&D expenditure (2007)

While R&D expenditure amongst the G1400 was relatively concentrated in the leading countries’ firms, the sectors in which those firms operate varied significantly between the leading countries (see Figure 4). Both the USA and France and, to a lesser extent, Japan had relatively diversified portfolios of R&D whereas Germany was more concentrated, especially in automobiles and parts. R&D in South Korea and Switzerland remained highly specialised in electronic and electrical equipment and pharmaceuticals and biotechnology respectively. The 88 UK firms in the G1400 were also quite specialised, with pharmaceuticals and biotechnology dominating, but the UK88 had the largest amount of R&D – 52% -outside the major sectors of all the leading countries covered by the analysis.

Figure 4: Growth in R&D expenditure by sector across G1400 (2003-2007)