R&D spending in the UK utilities industry has fallen 11.1% annually, analysis of the latest ONS data by R&D tax relief specialists Catax shows.

Total spending on R&D in the electricity, gas and water supply sector dropped to £136m last year, a decline of £17 million from the £153 million recorded a year earlier, according to data released on Friday.

However, the rate of decline in R&D spending has slowed from the 13.6% fall recorded in 2018. The industry now employs 1,000 people directly involved in R&D.

Uncertainty surrounds what impact the Covid-19 pandemic will have on the level of investment this year, and the sector is still some way off its all-time high of £197 million recorded in 2015.

The amount that UK businesses across all sectors have invested in R&D continues to grow, rising 3.3% to £25.9 billion but this was the slowest rate of growth since 2012.

The pharmaceutical sector posted the largest increase in R&D expenditure, with an increase of £306m (6.9%) to £4.8bn.

The largest percentage terms increase in R&D spending was achieved by the printing, pulp and paper industry, which saw a 31.4% increase to £92m.

The number of people employed by UK businesses to perform R&D also continued to grow, rising 4.4% annually to reach 263,000 full-time equivalents.

Mark Tighe, chief executive of R&D tax relief specialists Catax, said:

“The utilities industry is a relative minnow in terms of R&D spending but that doesn’t mean it’s not extremely important to the future success of this sector.

“It has now experienced two successive years of serious declines in spending on R&D and the industry needs to look very closely at this.

“While companies typically take a very long term view on R&D, laying the ground work for the future, the disruption to the economy and working life this year has been so dramatic that this sector could well post another large decrease in spending. That will have consequences over the long term, and it would be beneficial to turn this trend around.”