UK companies still lag behind their international competitors in research and development spending, according to the latest figures from the Department of Trade and Industry. And there are signs that the gap may widen further.
The DTI's annual R&D scoreboard shows that the top 700 UK businesses spent only 2.2 per cent of sales on research in 2002, compared with 4.3 per cent for the top 700 international companies and 5.2 per cent for firms in the US.
The government is consulting on a revised definition of R&D to make tax credits more straightforward for businesses. Tax breaks were introduced two years ago with the intention of encouraging UK firms to spend more on R&D.
British firms invested £16 billion in R&D last year. But the scoreboard revealed this figure was largely dependent on the pharmaceutical and biotechnology industry, which provided 40 per cent of the country's total research spend.
Other sectors displayed a much poorer performance in terms of R&D. The second largest investor was the aerospace and defence sector, but this contributed only 9 per cent of the UK total.
The Association of the British Pharmaceutical Industry said it was pleased the sector's "enormous investment" in research had been recognised. But it warned increased bureaucracy was impeding R&D in the sector.
The number of clinical trials required before the launch of a new drug in the UK has risen substantially over the past five years, pushing up the average development time to about 13 years.
Gill Samuels, senior director of science policy at Pfizer, the third largest UK investor in pharmaceutical research, told The THES : "In applied science we tend to focus on the risk of the product rather than the benefits. That's a big downside. Inappropriate application of the precautionary principle can destroy innovation."
She said that while a large company such as Pfizer could cope with a high level of bureaucracy, it represented a huge burden on resources for small start-up firms.
Sir Tom McKillop, chief executive of AstraZeneca, the second largest R&D investing firm in the UK with a budget of £1.9 billion, suggested the UK could fall further behind in relative R&D spending.
He said European companies were locating ever less research in the European Union, and investment in the US could grow faster than in the UK. "In the case of AstraZeneca, while we continue to increase our investment in R&D in both the UK and Europe in absolute terms, we are investing at an even faster rate in the US."
Sir Tom attributed this to the size of the US market, but also to its receptiveness to new medicines.
The US tops the scoreboard in four of the five biggest research areas - IT hardware, pharmaceuticals and biotechnology, software and IT services, and health.
The scoreboard showed rapid growth in UK investment in IT software and computer services research. But the UK still does not appear in the list of the top 25 companies internationally in this sector.