Understanding social sciences, humanities and arts for people and the economy (SHAPE) R&D in the UK and internationally (RAND Europe)

The British Academy has a long history of research on research & development (R&D), from a joint four-Academy study – with the Academy of Medical Sciences, the Royal Academy of Engineering and the Royal Society – of UK R&D investment by sector funding, sector performance, and region, to R&D explainers and support for initial work into how R&D is measured. This work has highlighted several key issues, not least the exclusion of SHAPE (Social Sciences, Humanities and Arts for People and the Economy) R&D from official statistics, and the possible impact of this exclusion on our understanding of the full breadth of the evidence base. As a result, our recent research endeavours have focussed on a central issue: “How well do we understand SHAPE R&D and innovation in the UK?”.

This report by RAND Europe was commissioned by the British Academy in 2022 to further investigate concerns about the breadth of the evidence base for understanding R&D and to develop a fuller picture of the way SHAPE R&D is understood and captured in the UK economy and more widely. The report uses a mixed methods approach, including a literature review, interviews conducted across R&D experts in the UK and internationally, and data analysis. For the international comparative analysis, interviews and data analyses were conducted across five countries based on the inclusiveness of their R&D definitions – Denmark, Netherlands, Portugal, Spain and Switzerland.

Several cross-cutting themes were identified, including but not limited to:

R&D spend in the UK is growing, and business R&D makes up a significant proportion of expenditure.

The business sector accounts for 54% of all UK R&D funding and 67% of all R&D performed in the UK.

Business R&D is concentrated in a small number of key sectors, most of which employ large numbers of ‘non-science’ graduates.

Estimates show across the top five R&D performing sectors, four employed more ‘non-science’ than ‘science’ graduates in 2020. As SHAPE subjects are included within ‘non-science’ graduates, this points to the importance of SHAPE to R&D-intensive sectors.

A person-centric approach to R&D, which recognises and measures human capital with the UK’s R&D ecosystem, may be a way of recognising the importance of SHAPE R&D.

Within the UK’s R&D tax filing process, human capital (e.g., salaries) is identified as a key ‘indirect cost’ and is a place where the contributions of SHAPE expertise can be claimed under the tax relief system. Understanding who contributes to R&D projects and the wider R&D ecosystem is a way of identifying the contributions of SHAPE subjects and expertise.

Several sectors in which SHAPE plays an important role have a low level of engagement with R&D tax credits.

Several sectors where SHAPE R&D may be occurring (e.g., arts, entertainment, and recreation; and wholesale and retail trade sectors) have lower levels of engagement with R&D tax credits. This may be due to low levels of awareness and engagement with R&D support mechanisms. This suggests that R&D in these sectors may be under-captured in official datasets.

Tax credits are commonly used and provide a useful dataset on R&D expenditure.

Across the comparator countries analysed, R&D tax credits were the key mechanism used to incentivise business R&D investment, although direct research funding and other forms of incentive likely also play a role in shaping R&D activities. As SHAPE subjects are often included in tax relief schemes in comparator countries, this type of R&D is also incentivised, although the degree to which this is practically claimed likely differs by sector.

Very few countries produce breakdowns of SHAPE and non-SHAPE R&D, which makes international comparisons difficult.

There are very limited data on SHAPE R&D specifically at the international level, as only a small number of countries capture information at this granular level. The data that is available indicates a relatively low level of activity within SHAPE R&D relative to STEM R&D, accounting for 5% or less of both R&D expenditure and employment. Although reliable data is not available, limited evidence suggests that the UK may be particularly active in SHAPE R&D relative to international comparators. This is an area for further exploration.