R&D spending falls 4 per cent after defence cuts

(First Edition)

BUSINESS spending on research and development in Britain dropped by 4 per cent in 1991, largely because of cuts in government support for the defence industry, official figures showed yesterday, writes Robert Chote.

The recession has also forced companies to economise on civil R&D spending. This suggests that British companies may be producing fewer new products with which to exploit any revival in domestic spending or gains in competitiveness resulting from a lower pound.

Total spending on in-house R&D fell from pounds 8.1bn in 1990 to pounds 7.7bn in 1991, according to a survey of 120 companies which account for nearly 90 per cent of all British R&D.

Taking account of inflation, this amounts to a 10 per cent fall in the volume of R&D carried out, following a 0.3 per cent drop in 1990.

Civil R&D spending fell in real terms by just under 7 per cent in 1991, but this was dwarfed by a drop of more than 20 per cent in defence.

The fall in defence R&D was mainly in electronics and aerospace and pulled down the share of defence in overall R&D from 22 to 19 per cent.

Government funding for civil in-house R&D rose by pounds 34m in 1991 to pounds 425m, but its funding of defence R&D dropped by more than pounds 250m to pounds 710m. Nearly half of defence R&D spending was government-funded in 1991, compared with less than 7 per cent of civil R&D.

In the second half of the 1980s, most manufacturers cut the amount they spent on R&D as a proportion of sales. The principal exceptions were chemical and pharmaceutical companies The number of people employed in R&D dropped to 150,000 in 1991, a fall of 38,000 over five years.

R&D spending falls 4% after defence cuts