Capitalising research and development: towards the new System of National Accounts

This article extends the earlier work on capitalisation of R&D in response to the proposals in the new System of National Accounts (SNA). Major improvements include: R&D deflators, depreciation rate for non-market R&D, rate of return, and estimates of R&D capital stocks. In addition, the article highlights areas for future improvements and presents preliminary estimates for the impact of capitalisation on the UK National Accounts. R&D capitalisation raises the level of UK GDP by approximately 1.6 per cent and gross capital formation by about 9 per cent. These changes are due to capitalisation of R&D rather than an actual improvement to GDP growth, which is estimated to be minimal. These figures are preliminary, based on experimental methods, and should therefore be interpreted with caution. The authors welcome comments and complementary evidence that can be used to substantiate or revise the assumptions made throughout this article.