ONS Finds UK Telecoms Industry is Fastest Growing R&D Spender

The UK Office for National Statistics (ONS) has revealed that the telecoms industry was the fastest growing sector for R&D spending in 2018, which saw related communications providers (ISP) and network builders increase their spending on research and development by 25.4% or £192m (total of £947m).

Despite this improvement the sector has reportedly been higher in the past and peaked in 2007 at £1.5bn (based on data from Catax). As for the previous years before 2018, total R&D spending by related firms hit £755m in 2017 and £797m in 2016.

Just to put all of this into perspective. The amount that UK businesses across all sectors have invested in R&D increased by £1.4bn to £25bn in 2018 (up 5.8%). Manufacturing was associated with £16.3bn of R&D spending (up 4.7%), but pharmaceuticals remains the biggest product group with £4.5bn of R&D spending (up 3.3%).

Motor vehicles and parts increased by 4.3% (£154 million) to £3.8 billion, continuing the growth seen over the last nine successive years. The group remains second, behind pharmaceuticals as the largest product group, accounting for 15% of the total expenditure on research and development (R&D) by UK businesses in 2018.

Other product groups reporting £1.0 billion or more R&D expenditure in the UK were (telecoms falls just outside this):

• Computer programming and information services activities (excluding software development), £1.9 billion (7.8% of total R&D expenditure)
• Aerospace, £1.7 billion (6.8%)
• Miscellaneous business activities; technical testing and analysis, £1.7 billion (6.8%)
• Software development, £1.5 billion (6.1%)
• Research and development services, £1.3 billion (5.1%)
• Machinery and equipment, £1.0 billion (4.1%)

Unfortunately the ONS report isn’t detailed enough to include a breakdown of where most of this R&D funding has gone at each operator, although no doubt major broadband ISPs and network builders like BT (Openreach) and Virgin Media will account for a big chunk as they develop new technologies to serve consumers etc.

Mark Tighe, CEO of R&D Tax Specialists Catax, said:

“The telecoms industry is extremely important to the UK strategically and it is reassuring to see such growth in investment.

There is still some way to go if this investment is to recover to levels seen before the financial crash, however, and it is vital this happens if Britain is to continue to be a key technological player on the world stage.

More broadly, this is the second full year that Brexit Britain has shrugged off the political poison after the EU referendum and posted great gains in terms of R&D investment, running head and shoulders above the long-term average.

For the first time in history a quarter of a million people nationwide are engaged full time in keeping the UK at the cutting edge. This is going to make a huge difference to Britain’s prospects outside the EU.

The rate at which UK businesses are adding R&D staff to the workforce remains impressive, virtually matching the previous year with a rise of 7.3%.”

We note that Catax, as a tax relief specialist, has a vested interest in these statistics.