Scottish Government

29 November 2011

A National Statistics Publication for Scotland

This document is also available in PDF format and full tables are available in excel format.

Further information can be found on the Research and Development website.

BUSINESS ENTERPRISE RESEARCH AND DEVELOPMENT SCOTLAND 2010

This publication presents information on research and development ( R&D) performed by businesses operating in Scotland in 2010 as well as revisions to previously published data for 2008 and 2009. The data in this release are sourced from the Business Enterprise R&D survey conducted by the Office for National Statistics ( ONS).

Note that this publication presents the latest statistics for private sector Business Enterprise R&D ( BERD) only. Statistics on Gross Expenditure on R&D in 2010, of which BERD expenditure is a component, will become available in 2012.

BUSINESS ENTERPRISE RESEARCH AND DEVELOPMENT ( BERD)

Expenditure and employment

The value of Business Enterprise Research and Development ( BERD) undertaken in Scotland in 2010 was £622 million, 3.9% of the UK total. Expenditure decreased by £25 million (in real terms) since 2009. This represents a 3.8% decrease in real terms.

BERD expenditure in Scotland is dominated by the manufacturing sector (£415 million), followed by the services sector (£144 million) and then other sectors (£63 million), such as extractive industries. Since 1999 overall BERD expenditure has increased by 23.7% in real terms. When this increase is broken down to the three sectors of R&D expenditure it shows that manufacturing expenditure has increased by 2.8%, services expenditure has increased by 73.1% and expenditure in other sectors has almost quadrupled since 1999. The large increase in expenditure in other sectors can be traced back to the low level of expenditure in 1999. In the short term, expenditure on manufacturing R&D decreased by 9.2% (£42 million) in real terms between 2009 and 2010 and expenditure on R&D in other sectors decreased by 17.6% (£13 million). However, expenditure on services R&D increased by 27.2% (£31 million) ( Table 1B).

Despite the recent growth in the services sector, just under 40% of Scottish BERD expenditure was supported in just two product groups in the manufacturing sector: 'pharmaceuticals' (23.9%) and 'Precision instruments and optical products; photographic equipment' ¹ (14.5%) ( Table 2A). Businesses in Scotland employed 7,472 R&D staff in 2010, up from 6,919 in 2009. Over half (56%) of R&D staff are scientists and engineers ( Table 14).

_{1. This product group was previously entitled 'computer, electronic and optical products; photographic equipment'.}

Scottish local authority area comparisons

In 2010 nearly two thirds (65.0%) of BERD expenditure was undertaken by businesses located in just six local authority areas: The City of Edinburgh (23.6%), North Lanarkshire (15.0%), West Lothian (8.4%), Glasgow City (6.7%), Dundee City (5.9%) and Aberdeen City (5.4%) ( Table 9). As with the overall expenditure pattern for Scotland, manufacturing R&D expenditure dominates within four out of the six top local authority areas; The City of Edinburgh, North Lanarkshire, West Lothian and Dundee City. Whereas, within Aberdeen City 43.8% of R&D expenditure was undertaken in other sectors, which includes extractive industries and within Glasgow, 59.9% of R&D expenditure was undertaken in the services sector ( Table 10, 2010). Over the longer term, the majority of R&D expenditure has been concentrated in a small number of local authorities.

UK regional comparisons ²

In 2010 the average BERD spend per head of population was £119 in Scotland compared to £258 per head of population in the UK ( Table 11).

Within the UK, the bulk of BERD expenditure takes place within the East of England (24.8%) and the South East (23.4%) regions ( Table 12).

_{2. BERD expenditure as a percentage of GDP and international comparisons will be available after the 2010 GVA data for Scotland is published by the Office for National Statistics ( ONS) on the 14th December 2011.}

R&D funding and size & ownership of R&D performing businesses

Just under two thirds (64%) of R&D undertaken by businesses in Scotland was funded by businesses operating in the UK, 9% was funded by the government and 27% came from overseas ( Table 7). In terms of business size, the largest companies (400 employees and over) accounted for 56% of total BERD expenditure. However, within the services sector companies employing 0 to 99 employees accounted for 55% of services BERD expenditure ( Table 18, 2010). USA owned firms undertook 39% of BERD expenditure in Scotland, followed by Scottish based firms (35%) ( Table 22).

BACKGROUND NOTES

Sampling and Regional Estimates

1. The majority of the data presented in this release are sourced from the Business Enterprise R&D ( BERD) survey conducted by the Office for National Statistics ( ONS). The ONSBERD survey is an annual sample survey based on a continually updated register of R&D performers. The ONS 2010 BERD Statistical Bulletin is available at http://www.ons.gov.uk/ons/dcp171778_238137.pdf

2. In 2010, approximately 5,000 questionnaires were sent to businesses in the UK known to perform R&D; this included around 400 of the largest R&D spenders. Smaller R&D performers and others believed to be performing R&D are sampled. Industry product group and business employment size were the stratification variables. Completed questionnaires were returned by 4,672 businesses representing a response rate of 91 per cent.

3. The largest R&D performers account for approximately 80% of the total UK expenditure. Each of these large R&D performers is asked to name all the sites at which the business performed R&D and to estimate the R&D spend at that site, this expenditure is then allocated to the appropriate region. Regional data for the smaller R&D performers are estimated from sample returns.

4. A summary quality report for the ONSBERD survey is available at: http://www.ons.gov.uk/ons/guide-method/method-quality/quality/quality-information/business-statistics/summary-quality-report-for-business-enterprise-research-and-development--berd-.pdf

Coverage

5. BERD includes business enterprise R&D performed in Scotland irrespective of the residence of the ultimate owner.

6. BERD excludes R&D funded by Scottish businesses that is performed overseas.

7. BERD excludes R&D carried out by higher education or government (including government departments, agencies and non-departmental public bodies; local authorities; and private non-profit organisations). Public corporations are counted as business enterprises.

8. Gross expenditure on R&D in Scotland in 2010 performed by all sectors of the economy (i.e. business, higher education and government) will be reported separately in 2012.

Product Groups

9. The 400 largest R&D spenders are asked to select the industry product groups that best describes the type of R&D activities they undertake. In 2010, these product groups were updated to better reflect the new Standard Industrial Classification ( SIC 2007) codes. For the smaller R&D performers, no product group data are collected in the BERD survey. However, the businesses' Standard Industrial Classification ( SIC) codes are known from the Inter-Departmental Business Register ( IDBR) and the assumption is made that the R&D expenditure is for the detailed product group corresponding to that SIC. This approach must be regarded as approximate since, in practice, an individual business can perform R&D for a range of product groups.

10. The introduction of SIC 2007 in the 2009 survey has resulted in some businesses' R&D moving to a different product group than previously published. The largest impact has been with businesses with Publishing activities as these have moved out of the manufacturing sector and are now included under Miscellaneous business activities. There has been an increase in the Other manufactured goods product group due to businesses being reclassified from Textiles, clothing and leather products, Pulp and paper products, Rubber and plastic products, Fabricated metal products, Machinery and equipment and Precision instruments and optical products. Also, the Processing of nuclear fuels is now classified with Non-ferrous metals instead of Refined petroleum and coke cover products.

11. The titles of the detailed product groups have been updated in this publication to better reflect current industry classification. A full list of the titles of the detailed product groups can be seen in Table A. The titles of four detailed product groups have been changed completely. Office machinery and computers are now entitled Computers and peripheral equipment, Radio television and communication equipment is now entitled Consumer electronics and communication equipment, Computer, electronic and optical products; photographic equipment is now Precision instruments and optical products; photographic equipment and Computer and related activities is now Computer programming and information service activities.

12. The broad product groups, which consist of aggregations of the detailed product groups, were refined and expanded in 2002 in order to more accurately categorise the data within the manufacturing and service sectors. Services' broad product group includes R&D consultancy and other services in support of the manufacturing industry.

Discontinuities in the data

13. On 1 July 2001, the government research agency, the Defence Evaluation and Research Agency ( DERA) was disestablished and two new organisations were created. Around a quarter of DERA remained within the Ministry of Defence ( MOD) as a government agency whilst the remaining three-quarters became a private limited company ( PLC). As a PLC, its R&D activities from 2001 are classified and included within the Business Enterprise sector.

14. The BERD survey questionnaire was redesigned from the 2007 survey to better reflect user needs and to address concerns about data quality and difficulty in completion. While the changes are an improvement, they could have an impact on the comparability of the data returned, as businesses better understand what is required and quality improves.

Definition of R&D

15. The ONSBERD survey follows the definition of research and development proposed by the Organisation for Economic Cooperation and Development ( OECD) and published in the 'Frascati' Manual. According to the manual, R&D is defined as:

"Creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of the stock of knowledge to devise new applications."

16. The definition therefore excludes activities such as market research, most software development, routine testing and quality control and artistic design work.

Employment

17. Employment is calculated by respondents to the ONSBERD survey on the basis of 'full-time equivalent' staff averaged over the year. The categories of employment used are:

· Researchers - engaged in the conception or creation of new knowledge, products, methods and systems.

· Technicians - perform scientific and technical tasks normally under the supervision of researchers.

· Others - support staff including skilled and unskilled craftsmen, secretarial and clerical staff participating in R&D projects.

Real Terms

18. The cash values are converted to real terms using Treasury GDP deflators. The deflators are available at: http://www.hm-treasury.gov.uk/data_gdp_index.htm

Time period for which the results relate

19. Respondent to the ONSBERD survey were asked to make a return for the calendar year 2010 or the nearest 12 month period for which figures were available. Data for all years published were collected on the same basis.

Revisions Policy

20. BERD Scotland follows the Revisions Policy for the ONSBERD results - the latest (year t) results are provisional until two years later (year t+2).

21. BERD expenditure as a percentage of GDP and international comparisons will be available after the 2010 GVA data for Scotland is published by the Office for National Statistics ( ONS) on the 14th December 2011.

Latest Revisions

22. The 2008 and 2009 data have been revised to take account of company misreporting and late returns.

Standard Errors

23. Standards errors for expenditure in Scotland by product group are included in the publication for the first time ( Table 26). Investigation is ongoing into the availability of more detailed quality measures in future publications.

24. The estimates in the UK publication are based on a stratified sample drawn from the population of businesses known to be actual or likely R&D performers. As with any sample survey, these estimates are subject to two types of possible errors:

Sampling errors, due to only a sample of the population being surveyed. These errors can be quantified, as shown in Table 26.

Non-sampling errors. These include factors such as population coverage, misreporting and non-response bias. These errors are generally hard to quantify. Because of the difficulty in identifying the population of actual/likely R&D performers and because of the problems ensuring that businesses adhere to Frascati R&D definitions, non-sampling errors could be sizeable for the R&D inquiry

25. It is possible to calculate the confidence intervals for expenditure by detailed product group, as a measure of sampling error. To illustrate this, the total expenditure for product group Consumer electronics and communication equipment is £60.9 million. The calculated standard error, as shown in Table 26, is £6 million.

The 95 per cent confidence interval for this estimate is then given as £49.1 million to £72.7 million i.e. £60.9 million +/- 1.96 x the standard error. A 95 per cent confidence interval means that it is expected that in 95 per cent of samples, this range would contain the true value.

Issued by:

Business, Enterprise and Energy Statistics
Office of the Chief Economic Adviser
5 Atlantic Quay
150 Broomielaw
Glasgow
G2 8LU

Telephone

Press Office: Karen MacKinnon 0131-244-2175
Statistician: Marina Curran 0300-244-6813

email: industrystatistics@scotland.gov.uk

Website: www.scotland.gov.uk/Topics/Statistics/Browse/Business/RD