UK falling behind on R&D spending

The number of UK companies in the top 1,000 R&D spenders declined from 36 to 33

UK companies are not investing enough money in research and development (R &D), according to management consultancy Booz & Company.

The firm's fifth annual global innovation spending analysis found that, although spending on R&D has risen in the UK, the country is being outstripped elsewhere. Booz warned that this could have an effect on future UK innovation, particularly as business starts to pick up after the recession.

Booz found that R&D spending in the UK rose by 3.5 per cent to £500m in the past year, below the global average, and that the number of UK companies in the global top 1,000 R&D spenders declined from 36 to 33. The best placed of these companies was GlaxoSmithKline Plc at number 11 followed by Astra Zeneca at number 18.

However, spending has increased globally over the same time, according to the firm, despite the recession. Worldwide R&D spend rose by 5.7 per cent to $532bn (£326bn), while more than a third of firms admitted that their net income had plummeted over the same period.

"The UK should take heed that its competitors in other countries are outspending them on R&D and could be in a better place to benefit from the upturn as the economy revives," said John Potter, partner at Booz & Company.

The 10 companies that spent the most were Toyota, Nokia, Roche Holding, Microsoft, General Motors, Pfizer, Johnson & Johnson, Ford, Novartis and Sanofi-Aventis. The top 20 spenders accounted for 26 per cent of spending by the entire Innovation 1000.

Which firms spend the most money is determined by the industry in which they operate. Perhaps unsurprisingly, the automotive industry has suffered, and 60 per cent of firms in the sector admitted that they were spending less.

Booz said that companies in the software and internet sector had seen the recession as an opportunity, and that eight out of 10 had increased their spend over the past year.