The determinants of investment in industrial research and development in the United Kingdom and in Germany

Investment in R&D has long been recognised as one of the main determinants of innovation and economic growth. This has led to the adoption of ambitious targets for increased R&D in the Lisbon agenda. But the UK’s chances of meeting those targets are receding: R&D intensity in the UK has actually declined since their adoption. In Germany, over the same period, it has risen significantly and consistently. This report seeks to identify the reasons behind the R&D intensity gap between the two countries and to suggest policies which could increase the amount of investment in R&D undertaken by business enterprises.