UK firms fall behind in R&D spending league

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UK companies fell further behind their international competitors in research and development investment last year, according to official figures published today. Only 18 British companies appear among the top 300 international companies listed in the annual R&D Scoreboard.

For the first time since the rankings sponsored by the Department of Trade and Industry's Innovation Unit was launched in 1991, UK spending in this area grew at a lower rate than the rest of the world - 4 per cent, compared with the international rate of 5 per cent. This reverses the recent trend for British companies to start to close the gap with overseas rivals.

However, the number of British-based companies in the listing has increased from last year's 12. Wellcome has merged with Glaxo, to become Britain's highest-placed company in 25th position with a spend of pounds 1.2bn, and Boots, GKN, BOC, Lucas, Siebe, BTR and British Aerospace have joined the listing.

The figures were seized upon by Labour as evidence of "the parlous state of Britain's international competitiveness". Adam Ingram, shadow minister for science and technology, said: "British industry has to invest more in research and development if we are going to prosper in what is becoming an increasingly competitive global economy."

This was an echo of the remarks in the scoreboard introduction by Richard Freeman, corporate chief economist at Imperial Chemical Industries, that "unless the UK companies increase their R&D investments faster than their overseas competitors, the UK will lose competitiveness over the longer term".

But he added that the Government was also partly to blame because it had penalised the research and development base through retreating from publicly-funded science and technology. "They have created a culture of under-funding and under-investment in the very bedrock of our economy," he said.

The 1996 table produced by Edinburgh-based accounts monitor Company Reporting shows that the top 18 UK companies spent an average of 2.5 per cent of annual sales on R&D, compared with the overall average of 4.4 per cent for the leading 300 international organisations. Over the five years, the proportion of turnover spent in this way by companies based in the UK has been less than half that of companies in other countries and the same as the 1991 level.

The largest national increase in R&D spending was Sweden's 21 per cent, followed by Canada, Germany and the United States. In France, investment fell 2 per cent, while in Italy it fell 8 per cent.

Mr Freeman said: "The importance of technological activity and innovation for the UK's competitiveness and capacity to create wealth cannot be overstressed.

"However, increasing R&D spending does not automatically lead to commercial success. Companies need to bridge the often-overlooked gap between invention and innovation, the process of successfully exploiting the idea."

To be effective, projects needed to be part of companies' overall strategies and focused on customers' needs. And this required the close involvement of all areas of operations, he added.

In keeping with Glaxo Wellcome's position as the highest-placed British company, the pharmaceutical sector accounted for nearly a third of total R&D spending in the UK - pounds 2.7bn out of the total reported investment of pounds 9.1bn.

R&D spending

Company Current R&D % Change R&D %

Spending of sales

pounds bn % %

World-wide Top 10

General Motors, US 5.40 19 5.0

Ford Motor, US 4.19 25 5.9

Siemens, Germany 3.27 -3 8.2

Hitachi, Japan 3.07 1 6.5

AT&T, US 2.39 20 4.7

Daimler-Benz, Germany 2.38 2 5.1

Matsushita, Japan 2.36 -1 5.4

IBM, US 2.18 0 4.7

Fujitsu, Japan 2.02 -2 9.9

NT&T, Japan 1.96 1 4.5

UK Top 10* pounds m % %

Glaxo Wellcome (25) 1,200 0 15.1 SmithKline Beecham (57) 653 2 9.3

Unilever (61) 585 8 1.9

Zeneca (67) 549 6 11.2

Shell T&T (72) 483 11 0.7

GEC (77) 412 1 7.1

BT (101) 271 2 2.0

Rolls-Royce (137) 206 -6 5.7

Reuters (149) 191 20 7.1

ICI (154) 185 1 1.8

* Word ranking in brackets

Source: UK R&D Sourceboard, 1996. DTI