A new set of economic statistics was quietly slipped out last week with little comment from either the press or politicians.
The latest national statistics on business enterprise research and development (BERD) expenditure for the UK is the basic measure of how well we are doing as an innovative nation.
So what were the results for Wales?
In cash terms, BERD expenditure for Wales in 2008 was £243m, slightly down on the £244m recorded in 2007. In contrast, BERD expenditure in the UK increased by 1.7% to £15.9bn. However, the results varied across the UK – BERD expenditure increased in cash terms in all but five of the 12 UK regions between 2007 and 2008, with the largest percentage increase in the North West of England (up 11.4%) and the largest reduction in the West Midlands (down 13%).
These statistics emphasised, yet again, that Wales remains a small player in the private sector R&D stakes, accounting for roughly 1.5% of the UK total. In contrast, the UK regions with the largest R&D expenditure were all in England: the East of England accounted for 26% of the total expenditure; the South East accounted for 22% and the North West accounted for 14%.
More worryingly for the Welsh Assembly Government, their target of private sector research and development expenditure equating to 1% of the total economy by 2010 looks even further away than ever.
In 2008, BERD accounted for 0.5% of GVA, down from the 0.8% recorded in 2004. This means that, assuming a 3% growth in GVA for 2009 and 2010, R&D expenditure in Welsh businesses would have to increase by £240m over this two-year period.
Some will say that this target was never achievable and there will be very little change in R&D expenditure in the short term. There is support for this argument, given that a quarter of the R&D performed in the UK is within the pharmaceutical sector, a sector in which we have not been traditionally strong.
The next biggest spender is the aerospace sector, which accounted for £1.7bn of R&D expenditure in 2008 or 11% of the UK total.
Given the presence of Airbus in Wales, then increased focus on this sector could reap dividends for the Welsh economy over the longer term, especially with recent investments in composite technologies, R&D should hopefully increase expenditure in this area, although it is worrying that the sector did spend £326m less on R&D in 2008, a drop of 16%.
Despite these structural and geographical differences, it must be remembered that Wales, unlike the majority of UK regions, has been given additional funding to support R&D spending and innovation within the private sector through European funding such as the Objective One programme. Indeed, between 2003 and 2008, £131m of European funding was allocated, predominantly to the university sector and government programmes, to help boost commercialisation and develop the R&D capability of Welsh business.
The results of this exercise are hardly encouraging. Despite projects worth over a quarter-of-a-billion pounds being undertaken through the programme (if we include the matched funding from academia, government and, in some cases, the private sector), the total amount of annual private sector R&D expenditure across the whole of Wales has only increased from £200m in 2003 to £244m in 2008.
As the Objective One area accounts for only two-thirds of the Wales economy then, broadly speaking, approximately £100m of additional research and development expenditure has been undertaken within the Objective 1 area in Wales during the six-year period from 2003 to 2008. In effect, the Welsh economy is making a loss on its spending to support innovation.
It could be argued that BERD is a crude measurement of innovation activities, yet if high value innovation activities had been successfully developed by the private sector during this period, then we would have seen a boost in the prosperity of Wales. Yet the growth in the Welsh economy between 1998 and 2003 was actually higher than the growth between 2003 and 2008 when these programmes were running.
The most worrying aspect about all this is that there seems to be very little impetus to change the direction of travel with regard to innovation policy in Wales. Indeed, many of the initiatives that were supported under the original Objective One programme are being funded for a second time under the £2bn convergence fund, with little attempt to scrutinise whether we have the right approach to making Wales a more innovative and prosperous nation.
One can only hope that with a new broom in Cardiff Bay, the recently-elected First Minister will abandon the status quo mentality within WAG and order a root-and-branch review of innovation policy to maximise the return on investment from supporting research and development within Welsh businesses and boost the prosperity of the economy of Wales.
The latest national statistics on business enterprise research and development (BERD) expenditure for the UK is the basic measure of how well we are doing as an innovative nation.
So what were the results for Wales?
In cash terms, BERD expenditure for Wales in 2008 was £243m, slightly down on the £244m recorded in 2007. In contrast, BERD expenditure in the UK increased by 1.7% to £15.9bn. However, the results varied across the UK – BERD expenditure increased in cash terms in all but five of the 12 UK regions between 2007 and 2008, with the largest percentage increase in the North West of England (up 11.4%) and the largest reduction in the West Midlands (down 13%).
These statistics emphasised, yet again, that Wales remains a small player in the private sector R&D stakes, accounting for roughly 1.5% of the UK total. In contrast, the UK regions with the largest R&D expenditure were all in England: the East of England accounted for 26% of the total expenditure; the South East accounted for 22% and the North West accounted for 14%.
More worryingly for the Welsh Assembly Government, their target of private sector research and development expenditure equating to 1% of the total economy by 2010 looks even further away than ever.
In 2008, BERD accounted for 0.5% of GVA, down from the 0.8% recorded in 2004. This means that, assuming a 3% growth in GVA for 2009 and 2010, R&D expenditure in Welsh businesses would have to increase by £240m over this two-year period.
Some will say that this target was never achievable and there will be very little change in R&D expenditure in the short term. There is support for this argument, given that a quarter of the R&D performed in the UK is within the pharmaceutical sector, a sector in which we have not been traditionally strong.
The next biggest spender is the aerospace sector, which accounted for £1.7bn of R&D expenditure in 2008 or 11% of the UK total.
Given the presence of Airbus in Wales, then increased focus on this sector could reap dividends for the Welsh economy over the longer term, especially with recent investments in composite technologies, R&D should hopefully increase expenditure in this area, although it is worrying that the sector did spend £326m less on R&D in 2008, a drop of 16%.
Despite these structural and geographical differences, it must be remembered that Wales, unlike the majority of UK regions, has been given additional funding to support R&D spending and innovation within the private sector through European funding such as the Objective One programme. Indeed, between 2003 and 2008, £131m of European funding was allocated, predominantly to the university sector and government programmes, to help boost commercialisation and develop the R&D capability of Welsh business.
The results of this exercise are hardly encouraging. Despite projects worth over a quarter-of-a-billion pounds being undertaken through the programme (if we include the matched funding from academia, government and, in some cases, the private sector), the total amount of annual private sector R&D expenditure across the whole of Wales has only increased from £200m in 2003 to £244m in 2008.
As the Objective One area accounts for only two-thirds of the Wales economy then, broadly speaking, approximately £100m of additional research and development expenditure has been undertaken within the Objective 1 area in Wales during the six-year period from 2003 to 2008. In effect, the Welsh economy is making a loss on its spending to support innovation.
It could be argued that BERD is a crude measurement of innovation activities, yet if high value innovation activities had been successfully developed by the private sector during this period, then we would have seen a boost in the prosperity of Wales. Yet the growth in the Welsh economy between 1998 and 2003 was actually higher than the growth between 2003 and 2008 when these programmes were running.
The most worrying aspect about all this is that there seems to be very little impetus to change the direction of travel with regard to innovation policy in Wales. Indeed, many of the initiatives that were supported under the original Objective One programme are being funded for a second time under the £2bn convergence fund, with little attempt to scrutinise whether we have the right approach to making Wales a more innovative and prosperous nation.
One can only hope that with a new broom in Cardiff Bay, the recently-elected First Minister will abandon the status quo mentality within WAG and order a root-and-branch review of innovation policy to maximise the return on investment from supporting research and development within Welsh businesses and boost the prosperity of the economy of Wales.
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