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Researching R&D

I use data on where businesses choose to invest in research and development to analyse the geography of R&D spending by UK, German, and French governments. I show that the UK underspends in the North West, Midlands and East and overspends in London and Scotland. The German government underspends in the wealthy South and West, and overspends in the poorer North and East. The French government mostly makes investments in the same places as businesses do.

I started looking seriously at European data on regional R&D spending six months ago. It has taken a huge amount of work in my spare time to present my findings as a series of five graphs. I hope that in combination they will make sense.

1. Investment in R&D by businesses within the EU is extremely well correlated with R&D investment associated with governments.

Business R&D expenditure is typically double the spend associated with government. The large economies of Northern Europe — France, Germany, and the UK — follow the same trend. As does Spain.

2. Business and government make similar decisions on where to invest in France.

Paris (Ile de France) is the nation's R&D powerhouse. Bordeaux and Toulouse (Sud-Ouest) perform well, as do Lyon and Grenoble (Centre-Est).

In all cases, business and government-related spend are well matched. The exceptions are the DOMs, largely because of Ariane rocket research, and in the Mediterranean region where intense investments have been made in fusion research and in the poor city of Marseille.

3. The UK government invests much more readily in London in Scotland than business does.

London and Scotland enjoy government investment in R&D far higher than we would expect from the level of business investment. This is largely paid for by lower levels of government investment in the East of England, the North West, and the Midlands.

4. Germany's government-related R&D investment is largely unrelated to business investment and seems targeted to drive regional equality.

Some of the wealthiest regions of Germany — Bayern, Hessen, and Baden in the South — have extremely high business investment in R&D but only an average amount of government investment. Much of this money is transferred to poorer Northern Cities such Bremen and Hamburg and the former East Germany — Berlin, Sachsen and Brandenburg.

5. Maps. Because no-one knows where the NUTS1 regions are.

The best way to see patterns in government R&D investments is on a map. By plotting areas where the government spends much more than business (dark green and blue) and much less than business (light yellow and red) we see how investment in future growth is shifted around a country.

Germany's investment in the poor East at the expense of the very rich South is obvious. France's shows a pretty even pattern of investment. The UK shows a strong concentration of England's R&D spend in London at the expense of the much poorer regions of the West Midlands (Birmingham) and the North West (Manchester and Liverpool).

So what?

Poor investment choices lead to poor outcomes. The poor outcome for the UK has been a large divergence between the productivity (GVA/head) of cities with high government R&D funding such as London and Edinburgh and cities with low government R&D funding such as Birmingham, Manchester, and Leeds.

Most worrying is that although the media, academics, politicians, and think tanks are talking about a "productivity puzzle" — none of them seem interested in this very large and damaging component of it.

Why have I done this?

I do not believe that the UK government assigns its R&D in the places where it would earn the best return. The cumulative influence of an institutional base in London has created a situation whereby our government is making poor decisions. If we are to fix the North-South divide in the UK, this must stop. I have suggested how here and here.

The data and extras

All figures are based on the 2011 dataset within Eurostat's rd_e_gerdreg dataset. This was the most up-to-date at the time of preparation. Some 2012 figures are now available.

Map 5 is available as a Google Earth flythrough here.

A chart equivalent to those for France, Germany and the UK but for Spain is available here.

The graphs I made are all here in Excel.

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