3.3 Business spend on R&D and innovation
Why is it significant?
Expenditure on R&D is one measure of the extent to which business is developing and exploiting new technology and ideas. Expenditure on R&D by industry has also been shown to generate important spill-over benefits for other firms and society as a whole.
	How does the UK perform?
	UK business does not provide itself with the same level of technology resources as other leading industrial nations, with lower expenditure per worker on R&D than most of its major competitors, and since 1991, the gap between spend per worker in the UK and its major competitors has widened (chart 3.3.1).
	This pattern is also reflected in trends in business R&D as a share of GDP. Although this ratio has stabilised in the last few years after a period of decline in the first half of the 1990s, this has to be seen against an increasing trend in other major industrial economies, notably Japan and Germany (chart 3.3.2).
	Chart 3.3.3 looks more broadly at innovation expenditures in 1998-2000. R&D expenditures are the largest component, closely followed by capital expenditure for innovation, which suggests the continuing importance of technology embodied in plant and equipment.
	Chart3.3.4 shows that the overall commitment of national resources to R&D, necessary for knowledge creation and innovation, is lower than for our major competitors.