Research and analysis

The value of public R&D

Published 30 October 2025

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Key finding

Based on a comprehensive analysis of the evidence, DSIT’s assessment is that, on average, £1 of civil public R&D investment generates £8 in net economic benefits for the UK over the long term.

This average spans a large and diverse portfolio, with individual programmes also generating and tracking their own unique benefits.

When accounting for the significant health, national security, environmental, and quality of life benefits from various types of civil public R&D, the full social benefits would be even higher than £8 per public pound invested.

Why public R&D matters

Research and Development (R&D) and the new ideas and technologies it creates underpin long run economic growth[footnote 1], [footnote 2], [footnote 3]. UK public R&D delivers substantial benefits for the UK through multiple channels. It boosts productivity, creates higher quality jobs, improves our health and quality of life, and delivers strategic benefits which range from supporting our transition to Net Zero to boosting the UK defensive capabilities that will protect our sovereignty.

Public R&D is a key part of the government’s Industrial Strategy and supports the Plan for Change. The government is investing more than £86 billion in public R&D to drive economic growth and deliver these transformational benefits, including more than £55 billion invested by the Department for Science, Innovation and Technology (DSIT)[footnote 4].

DSIT channels these investments across 3 areas:

(1) protecting curiosity-driven, foundational science that transforms our society and economy for generations to come
(2) supporting strategic government and societal priorities
(3) targeting innovative, UK-based companies to scale-up and grow.

The department manages 68% of government R&D investment and 76% of civil government R&D[footnote 5].

Our evidence-based approach

DSIT ensures that its R&D investment decisions rest on a robust evidence base. The department defines the value of its investments in terms of growth and benefits for citizens, in line with the Green Book, and it regularly reviews and assesses its R&D programmes to understand what works and maximise their value. Programme-level evaluations provide crucial evidence of the value of public R&D and have demonstrated strong returns from public R&D investments. For example:

  • The average £1 of Innovate UK grants generates £3 in business benefits for recipient firms[footnote 6], and including the benefits from knowledge spillovers and leveraged private investment would push this even higher.
  • Knowledge Transfer Partnerships - which place recent graduates in businesses with support from an academic partner – have generated between £4.20 and £5.50 in net benefits per pound invested[footnote 7].
  • Long-term monitoring by the British Antarctic Survey led to the early discovery of the Ozone Hole, saving the UK an estimated £6.1 billion through reduced crop damage and skin cancer cases[footnote 8].

The department continues building this evidence base. New programme evaluations are published regularly by UKRI on their website and logged by DSIT on the Government Evaluation Registry. These evaluations follow DSIT’s evaluation strategy and the Magenta Book. DSIT and UKRI are also improving the quality of their evaluations by identifying best practice in R&D evaluations and counterfactual methods.

Assessing the overall public R&D portfolio

Beyond individual programmes, the department assesses returns across the entire civil public R&D portfolio. This portfolio level approach more comprehensively captures R&D’s full economic impact and generates the £8 return estimate[footnote 9].

The department’s portfolio assessment uses economy-wide impact evidence, enabling more comprehensive impact estimates than programme-level approaches allow. Programme evaluations are crucial for measuring the direct impacts on immediate beneficiaries and for understanding the value offered by each specific programme, but they typically miss wider societal benefits that emerge indirectly or over extended periods. Capturing these technological spillovers and other economy-wide impacts is key to fully understanding the value of public R&D.

The department draws on an extensive evidence base for this assessment. It regularly reviews existing evidence with input from external experts and independent studies.  While estimates across the academic literature differ due to different sectors, data, and methods, studies consistently show that public R&D drives considerable long-term gains for the UK economy.

The assessment is based on evidence in 3 primary areas: how public R&D boosts productivity, how it stimulates private R&D investment, and the benefits that flow from this additional private investment.

UK public R&D boosts UK productivity

The evidence shows that UK public R&D investment boosts UK productivity. Frontier Economics (2024) builds on academic work by Haskel et al. (2014)[footnote 10] and Goodridge et al. (2015)[footnote 11] and provides the most detailed and current evidence on UK public R&D returns. They found an average rate of return of 40% 6 years after the public R&D investment. Put simply, the average £100 million of public R&D investment generates, after 6 years, a sustained boost to private sector productivity worth £40 million each year[footnote 12], [footnote 13].

This aligns with other studies, some showing even higher returns. Ziesemer et al. (2024) found an internal rate of return of 162% for the UK[footnote 14]. Fieldhouse and Mertens (2023) estimate 140 to 210% for US public R&D[footnote 15]. Dimos & Vorley (2023) examined Innovate UK grants and found a rate of return of 73% for recipient firms[footnote 16].

Public R&D leverages private R&D investment

Investing in public R&D also leverages private R&D investment.

Oxford Economics (2020) estimated that the average £1 of UK public R&D investment leverages £2 of private R&D investment in the long run; higher than the estimate for OECD countries of £1.6 leveraged per public pound invested[footnote 17], [footnote 18].

While NCUB (2024)[footnote 19] found higher leverage ratios of £3 to £4, the department will continue to use Oxford Economics’ more conservative estimate until more robust long-term data is available. Despite uncertainties, the evidence clearly shows that public R&D leverages significant private investment.

Public R&D investment leverages private investment through several mechanisms: generating investable ideas, providing foundational research infrastructure and talent, de-risking investments, and attracting matched funding.

For example, each of the 3 ventures from the government’s novel Research Ventures Catalyst programme secured at least 1:1 non-public co-investment[footnote 20]. SMEs involved in the £139 million Innovate UK Investor Partnership Programme went on to raise £851 million in subsequent follow-on investment[footnote 21].

These programme investment figures exclude indirect follow-on funding in other parts of the economy as the innovations spread, making comprehensive studies like Oxford Economics (2020) essential for understanding full leverage effects.

Benefits from leveraged private investment

Leveraged private R&D investment generates substantial business benefits. After an extensive review and meta-analysis of 1,150 estimates from 63 studies, Frontier Economics (2023) conservatively estimated that firms that invest in R&D see an average rate of return of 20% per year. In other words, the average £1 invested by a business in R&D generates 20p of benefits to that business each year[footnote 22].

R&D investments also create spillover impacts beyond the investing firm. These knowledge spillovers can occur when innovations spread across the economy or when supply chain innovations boost wider productivity.

Frontier Economics (2023) concluded that the economy-wide spillovers were at least as large as the returns to the investing firms. In other words, the average £1 of business R&D investment boosts a firm’s annual productivity by 20p and the wider economy’s productivity by a further 20p[footnote 23].

Frontier’s assessment drew on a meta-analysis by Ugur et al. (2020)[footnote 24] and balanced this against high-quality studies such as Bloom et al. (2013)[footnote 25], Goodridge et al. (2017)[footnote 26] and Lucking et al. (2019)[footnote 27]. The latter 2 studies found that the social returns (the return to the investing firm plus the wider spillovers) were even higher at 4 times the returns to the firm itself.

The department also considers several other factors in its assessment of public R&D, and further details on these are provided in Annex 1.

Additional benefits beyond economic returns

The £8 return estimate captures more economic benefits than programme level evaluations, but more work is needed to capture all the significant and diverse impacts from R&D programmes.

For example, the return captures private sector productivity impacts but, due to data limitations, does not capture public sector productivity benefits.

The currently available data at the portfolio level is also not sufficiently robust to include several hard-to-capture but real impacts in the £8 estimate. Individual programme evaluations capture their unique benefits. For example, Health R&D programmes can monetise health benefits through estimating the additional Quality-Adjusted Life Years (QALYs) people will live, and environmental programmes can monetise climate-related benefits through estimating CO2e savings that bring UK emissions down. At the portfolio level, government R&D is diverse, including research to boost health outcomes, grow businesses, improve the environment, bolster security, and pursue ideas that lead to transformational discoveries. The £8 estimate is based on robust and representative evidence about the diverse government R&D portfolio which includes all these research areas.

These hard-to-capture but real impacts are likely to be significant. For example:

  • UK public research led to the first monoclonal antibody products. Today, over 100 monoclonal antibody-based drugs have been licensed, transforming certain cancers from being labelled as terminal diseases to chronic conditions. These drugs are a major source of new treatments and account for nearly 20% of the annual new drugs approved by regulators[footnote 28].
  • Research at the Offshore Renewable Energy Catapult is increasing the speed at which wind turbines are deployed. This is reducing the UK’s greenhouse emissions and energy security risks[footnote 29].
  • Researchers at the AI Security Institute are working with model providers to identify vulnerabilities and strengthen the safeguards of top AI systems – improving the resilience and security of our economy and society[footnote 30].

DSIT’s assessment of public R&D returns is a conservative estimate of the true returns to public R&D because these significant impacts are difficult to capture with currently available data.

Using this assessment

The £8 return estimate shows the importance of public R&D to the economy and society, and it guides government investment decisions.

However, this assessment is not applied to individual programmes or specific portfolios. The £8 return only applies to portfolios that are large, diverse (across field, funding mechanism, research stage and organisational structure) and representative of the full breadth of UK civil public R&D investments[footnote 31].

The government will continue to assess individual programmes and specific portfolios of programmes using programme-specific evaluation evidence and strategic fit to national priorities. This overarching assessment is not used to quantify returns to programmes or specific portfolios of programmes, especially in business cases.

Conclusion

The evidence consistently and compellingly shows that public R&D investments have substantial and positive economic impacts, with the average pound invested in public R&D generating £8 in net benefits for the UK.

By fostering innovation in key sectors, driving productivity, and generating significant returns, public R&D is crucial for long-term economic growth and prosperity. Continued support and investment in public R&D will be key for the UK to harness its full potential and secure long-term economic prosperity.

Annex 1

Further factors and evidence that feed into the department’s overall assessment of the value of public R&D

Based on the evidence, DSIT’s assessment is that £1 of civil public R&D investment generates, on average, £8 in net benefits for the UK over the long term[footnote 32]. This assessment draws on a wide range of evidence to come to a considered view. The evidence mentioned above touches on the productivity impacts of public R&D, how public R&D leverages private R&D and how the leveraged private R&D generates further impacts. In addition to these, the department’s assessment also accounts for evidence in the following areas:

1. The share of private R&D investment that is leveraged from outside the UK

This impacts the cost to the UK of the leveraged R&D and has implications for where the returns of private R&D investment go. Our assessment relies on the latest R&D investment data from the ONS[footnote 33].

2. The time profile of private leveraged investment

Public R&D is estimated to leverage private sector investment over a 15-year period[footnote 34].

3. The opportunity cost of private R&D investment

Some private investment in R&D may displace other forms of private investment in non-R&D capital. In the absence of direct evidence, the historical performance of UK equity returns is used to estimate the returns that would have been generated by the displaced investment[footnote 35].

4. The lag between investment in R&D and the benefits from that investment

There is no consensus in the evidence base on the lag between R&D and its impact. This applies to both public[footnote 36], [footnote 37] and private R&D[footnote 38]. We have used a 6-year lag for public R&D and a 2-year lag for private R&D (including for spillover benefits) based on consistency with the broader evidence base and the other estimates we use in this assessment.

5. The depreciation of the benefits of R&D to the UK over time

Some ideas from R&D can become less relevant over time as they are supplemented by new and better solutions. Most of the R&D rates of return literature assumes a depreciation rate of 15% for private rates of return to private R&D[footnote 39], with less consensus around the figures for public returns. In their manual on intangible investments, Corrado et al. (2016) assumed that 5% may be suitable for basic R&D and 7.5% for R&D by the average European government[footnote 40]. We have balanced this with the need to maintain methodological consistency with other key evidence we use in our assessment and have settled on a depreciation rate of 5% for public R&D[footnote 41]. There is less evidence on the depreciation rate of spillover returns so we have assumed it depreciates in line with public R&D at a rate of 5%.

6. Appraisal period

Our assessment looks at the benefits of public R&D over a 60-year window to be consistent with assessments of long-term infrastructure projects across government[footnote 42].

7. Social time preference

Our assessment uses Green Book discount rates to convert future benefits into present value terms.

  1. Solow (1956) A Contribution to the Theory of Economic Growth ↩

  2. Fieldhouse & Mertens (2023) The Returns to Government R&D: Evidence from US Appropriations Shocks ↩

  3. Frontier Economics (2024) Returns to Public Research and Development ↩

  4. Measured over the 4 years of the 2025 Spending Review period from 2026-2027 to 2029-2030 ↩

  5. HMT (2025) Spending Review 2025 - Table 4.2. Figures are for the year 2025-2026. 68% is DSIT total divided by government total. HMT (2024) Written Questions and Answers. Research: Finance. Questions for Treasury UIN 11882 - 76% is DSIT total divided by government total excluding the Ministry of Defence and SIA. ↩

  6. Dimos & Vorley (2023) Innovate UK Grants & R&D Returns ↩

  7. SQW (2023) Knowledge Transfer Partnerships Evaluation ↩

  8. Natural Environment Research Council (NERC), Deloitte (2015) Impacts of NERC science: ozone hole ↩

  9. The net economic benefit assessment is based on Green Book aligned social cost-benefit analysis and is not a GDP forecast. ↩

  10. Haskel et al. (2014) The Economic Significance of the UK Science Base ↩

  11. Goodridge et al. (2015) The Contribution of Public and Private R&D to UK Productivity Growth ↩

  12. Frontier Economics (2024) Returns to Public Research and Development ↩

  13. We place a greater emphasis on UK evidence in our assessment because studies suggest the returns to public R&D may vary significantly by country. In particular, Van Elk et al. (2019) estimated country-specific R&D returns across 22 OECD countries using data from 1963-2011. Based on the diversity of results across countries and the importance of country-specific factors to identify significant results, the authors argued that country-specific evidence was key for estimating growth impacts. Paper Reference: Van Elk. et al (2019) Estimating the Returns to Public R&D Investments: Evidence from Production Function Models. ↩

  14. Ziesemer et al. (2024) Internal rates of return for public R&D from vector error-correction model (VECM) estimates for 17 OECD Countries ↩

  15. Fieldhouse and Mertens (2023) The Returns to Government R&D: Evidence from U.S. Appropriations Shocks ↩

  16. Dimos and Vorley (2023) Innovate UK Grants and R&D Returns ↩

  17. Oxford Economics (2020) Research and development: The relationship between public and private investment ↩

  18. Oxford Economics (2020) built on earlier work by Economic Insight (2015). Reference: Economic Insight (2015) Research and development: relationship between public and private investment ↩

  19. National Centre for Universities & Business (2024) Unlocking growth: The impact of public R&D spending on private sector investment in the UK ↩

  20. DSIT (2025) Research Ventures Catalyst: finalist applications ↩

  21. UKRI (2025) Investor partnerships future economy programme. Accessed: 18/09/2025. Information is about the Investor Partnership Programmes between 2017 and 2024. ↩

  22. Frontier Economics (2023) Rate of Return to Investment in R&D. This meta-analysis built on the previous meta-analysis of Ugur et al. (2016) and Hall et al. (2010). References: Ugur et al. (2016) R&D and productivity in OECD firms and industries: A hierarchical meta-regression analysis. Hall et al. (2010) Measuring the Returns to R&D. ↩

  23. Frontier Economics (2023) Rate of Return to Investment in R&D ↩

  24. Ugur et al. (2020) What do we know about R&D spillovers and productivity? Meta-analysis evidence on heterogeneity and statistical power. ↩

  25. Bloom et al. (2013) Identifying technology spillovers and product market rivalry. ↩

  26. Goodridge et al. (2017) Spillovers from R&D and other intangible investment: Evidence from UK industries. ↩

  27. Lucking et al. (2019) Have R&D spillovers declined in the 21st century? ↩

  28. Statistic is based on US Food and Drug Adminstration approvals. MRC (2025) Economic impact of MRC-funded research ↩

  29. UKRI (2025) Turbine test centre challenges the world ↩

  30. AISI (2025) How we’re working with frontier AI developers to improve model security, AISI Work ↩

  31. Innovation programmes’ scale of impact can vary significantly such that the average return is not necessarily a helpful guide to the the value of any specific project or portion of programmes that isn’t representative of the whole. See Figure 1 in Kremer et al. (2019) for a helpful illustration of this. References: Kremer et al. (2019) Is Development Innovation a Good Investment? Which Innovations Scale? ↩

  32. The net economic benefit assessment is based on Green Book aligned social cost-benefit analysis and is not a GDP forecast. ↩

  33. ONS GERD Statistics; The total amount of overseas funded R&D divided by overseas, business-self funded and private non-profit funded R&D. ↩

  34. Oxford Economics (2020) Research and development: The relationship between public and private investment ↩

  35. Barclays (2025) The Barclays Equity Gilt Study 2025 ↩

  36. Fieldhouse and Mertens (2023) The Returns to Government R&D: Evidence from U.S. Appropriations Shocks ↩

  37. Frontier Economics (2024) Returns to Public Research and Development ↩

  38. Frontier Economics (2014) Science and innovation: rates of return to investment ↩

  39. Frontier Economics (2023) Rate of Return to Investment in R&D ↩

  40. Corrado et al. (2016) SPINTAN Manual: Measuring Intangible Capital in the Public Sector: A Manual – see Table 18 ↩

  41. We balance Corrado et al. (2016) with perspectives such as Frontier Economics (2023) and Frontier Economics (2024) which suggest that a very low (or 0) depreciation rate may be suitable. A higher depreciation rate assumption in studies like Frontier Economics (2024) would have been expected to increase their estimates of rates of return because current R&D investment would then have to make up for historic investments that are now depreciating in addition to the generating new productivity benefits. Using a low depreciation rate assumption maintains alignment with the Frontier Economics (2024) study. ↩

  42. HMT (2022) Green Book ↩

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