There are some limitations inherent in the approach used in preparing the data which underpin the R&D Scoreboard
The main limitation is the reliance on disclosure of R&D investment in published annual reports and accounts. A significant minority of companies with evidence of R&D activities disclose no figures for R&D investment. In some cases, the R&D investment is not material enough to warrant disclosure; in others (e.g. small companies), this is permitted by current accounting standards.
Some significant European owned companies do not appear in the UK850 because they have taken advantage of certain accounting provisions which allow them to not prepare consolidated accounts if their results are reflected in the consolidated accounts of a parent company within another member country of the European Union. Where there are no meaningful figures at group level, the accounts of the major UK operating subsidiary are used if these disclose R&D.
A few foreign-owned UK companies are known to have significant R&D investment but do not disclose this investment in their accounts and cannot, therefore, be included. Companies occasionally change the basis on which they calculate R&D and/or disclose it in their reports.
For many diversified groups, the R&D investment disclosed in their accounts arises from only part of their activities, whereas sales, operating profit and market capitalisation are in respect of all their activities. Unless all such companies disclose additionally their R&D investment with the other information in segmental analyses, it is not possible to relate the R&D more closely to the results of the individual activities which give rise to it. The impact of this is that some statistics for these companies, e.g. R&D as a % of sales, will be understated for the divisions that are active in R&D.
The focus of the R&D Scoreboard on the R&D investment reported in company accounts means that the results are independent of the location of the R&D activity. The UK850 indicates the overall level of R&D funded by UK companies, not all of which is carried out in the UK. This approach enables inputs such as R&D investment and capital expenditure to be related to outputs such as sales, value added, profitability, productivity ratios and market capitalisation.
The information in the R&D Scoreboard differs, however, from other information such as the Business Enterprise R&D (BERD) data generated by the Office for National Statistics (ONS). The ONS data focus on R&D activity within the UK, independent of the source of funding, and exclude R&D carried out by UK companies in other countries.
The companies of some countries are less likely than others to disclose R&D investment, or to disclose it consistently. As a result, the G1400 cannot capture systematically all companies with R&D activity. There is evidence to suggest that the distribution of R&D activity is highly skewed towards larger companies. The Scoreboard captures the more significant R&D investing companies and, in any case, the minimum R&D needed for inclusion in the G1400 is over £18.5m. The R&D Scoreboard, therefore, allows reasonable comparisons to be made.
Where companies have disclosed discontinued operations separately, the figures have been added to the continuing operations to give the aggregated figures for the fiscal year. Less detail may be given in the discontinued operations disclosure and this may lead to an underestimated R&D figure.
