Few, if any tech businesses have been unaffected by Covid-19 over the past few months.
Some have been fortunate enough to see an upsurge in demand and to have been already working in a largely virtual way. Many others however, have had to struggle with reduced demand and the disruption caused by moving out of offices and furloughing staff.
On top of that, cash flow problems may have necessitated cut-backs in essential R&D programmes and the taking on of more debt through accessing government support.
Now, as we slowly start to surface from this crisis, there is a real opportunity for the tech industry to shape this ‘new normal’ or, as some people are saying, ‘kick-start’ the fourth industrial revolution. However, to achieve this, Research and Innovation must not only get back to where it was, but grow significantly in the areas where it can add most value in creating the UK economy of the future.
Prior to Covid-19, total UK spend on R&D had already stagnated, not recovering fully from the 2008 crash.
This was due to a number of ‘push’ and ‘pull’ problems e.g.
- Lack of management time – Not having the time to work ‘on’ the business rather than ‘in’ it.
- lack of a clear commercialisation strategy – increasing risk aversity
- lack of awareness of the funding options available and the time scales involved
- lack of understanding of how to formulate propositions that lenders will buy into – which results in sub-optimal funding decisions being made on an ad-hoc, short-term basis.
Not having the time to work ‘on’ the business rather than ‘in’, combined with a tendency to overestimate what R&D can be achieved in a year and underestimate what can be achieved over a five year period, means that businesses find it very difficult to effectively map out their R&D funding requirements. For example, R&D grants are a great potential source of ‘free’ R&D funding and can also act as leverage when looking for further funding. However, when you are typically working to 3/6 month time horizons, how do you take advantage of a grant funding programme that can have a 6-9 month led time?
According to HMRC statistics, some 45,000 SMEs claim R&D Tax Credits, receiving c£2.3bn relief on an estimated R&D spend of c£8bn. The ICT sector alone accounts for around 20% of this.
This means that almost £6bn of R&D expenditure is already having to be funded (and in many cases at a high cost) – and this figure needs to increase in order for the UK to regain its position as the place to innovate.
To do this, companies must start to take a longer term and realistic view of their R&D plans, quantify and map out their funding needs and gain a better understanding of the funding options available – in particular the likely lead times. Only by doing this will they be able to plan ahead with confidence.
MSC R&D has thirty years’ experience in helping tech businesses gain R&D funding – we can provide strategic insight, a knowledge of the R&D funding landscape and practical support in accessing R&D funding.
Why not contact us to discuss your R&D funding needs?
0114 230 8401
