Newly released figures paint a stark picture: total UK spending on research and development (R&D) – known as Gross Expenditure on R&D (GERD) – fell by 2% in real terms in 2023 compared to the previous year.
This is not a one-off blip. It marks the second consecutive year of decline, meaning that since 2021 the UK has cut more than £2.8 billion in real-terms R&D investment. Importantly, the fall is mostly the result of high inflation eroding the value of investment, rather than a sharp reduction in cash spending. However, the effect is the same: the resources available for R&D are shrinking, just as global competition intensifies.
The drop should be seen as an early warning sign. While the statistics reflect last year’s activity, they point to underlying pressures that, if left unaddressed, could hold back the UK’s long-term growth ambitions.
What’s driving the decline?
The downturn has been led by reductions in both business and higher education R&D, which together make up around 92% of the UK’s total R&D spending. Both sectors are under strain, but the business sector has seen the steepest fall –a 6% decline in real terms since 2021. When the UK’s two largest sources of R&D funding are weakening, the shock is felt across the entire innovation system.
Even more worrying is how this compares internationally. Preliminary OECD data suggests that between 2021 and 2023, the UK recorded the weakest growth in R&D spending among the G7. In effect, our competitors are moving ahead while we risk falling behind.
Why this matters
Why does this matter? Because R&D is the engine of future growth. Every pound invested today lays the foundations for tomorrow’s breakthroughs—whether that’s in new medicines, cleaner energy, or advanced technologies that will define the industries of the future. Yet the latest data shows that engine is beginning to stall.
That is why the current decline is so concerning. At a time when the Government has placed science, skills, and innovation at the heart of its economic strategy, we must act urgently to reverse this trend.
What needs to happen
Reversing the decline will require a clear, long-term plan for R&D investment that restores confidence across business and academia. In practice, that means:
- Targeting funding towards high-growth sectors such as advanced manufacturing, life sciences, and clean technology.
- Providing stable policy signals to give businesses the certainty they need to commit long-term capital.
- Unlocking private investment at scale by reducing risk and crowding in co-funding through well-designed public support.
With these steps, we can turn the tide, rebuild momentum, and ensure R&D once again sits at the heart of the UK’s industrial future.
The numbers at a glance
- UK GERD fell 2% in real terms in 2023
- This follows a 2.1% fall in 2022
- Since 2021, total R&D investment has dropped by over 4% (£2.8 billion)
- Business and higher education account for 92% of total R&D spending
- UK R&D intensity now sits at 2.64% of GDP, down from 2.69% in 2022
The UK has world-leading research strengths, extraordinary talent, and the ambition to lead in global innovation. But without consistent investment, those strengths will not translate into growth and competitiveness.
We should treat these figures as a wake-up call. With focus, clarity and commitment, we can reverse this decline and put R&D where it belongs: at the centre of our economic future.
Principal Economist, NCUB
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