Which investments give Britain the biggest return?

Three different questions get called “the return on investment”. What does more public investment in general do to the economy? — answered by the OBR and IMF as an effect on output. Was this programme worth it? — answered by departments as a benefit-cost ratio, usually before the money is spent. What does research pay back? — answered by academic studies as a rate of return. The figures below are grouped by question, because a 2.4% rise in output, a benefit-cost ratio of 2 and a 20% rate of return are not the same kind of number and cannot be ranked against each other.

Nothing here is UK Facts’ own estimate, and nothing is added up. Programmes compete for the same workers, sites and budgets, so the return to doing everything at once is not the sum of the returns to each.

The official estimates agree on direction and disagree on size. The OBR’s central estimate is that a sustained rise of 1% of GDP — about £31bn a year at today’s GDP — raises the economy’s potential output by about 0.4% after five years and 2.4% after fifty. Most of the gain is slow: it comes from the new capital accumulating, not from the spending itself. The IMF’s cross-country evidence is similar in the medium term but highly conditional: large when there is slack in the economy and projects are well managed, close to nothing when investment is badly managed or paid for by cutting elsewhere.

Studies of UK public R&D find high average returns — about 20% a year in the 2014 government-commissioned review, up to 40% in a 2024 update — and that public R&D attracts private R&D over time. The authors of each warn against using these averages to predict the return on an extra pound. The one recent programme evaluation, of Innovate UK Smart Grants, found about £2 of extra output per £1 so far. What happens to research after it is done is covered on the innovation page.