The UK Research & Development (R&D) Roadmap is a series of proposals put forward by the government in 2020 (updated Jan 2021) as part of a commitment to boost UK R&D investment to 2.4% of GDP by the year 2027. It also aims to grow public R&D funding to £22bn a year by 2024/25.
With the current level of R&D investment at 1.7%, that equates to a 41% increase in spending by Large Enterprises and tech SMEs.
From a SME perspective, and assuming the increase was proportional, R&D Tax Credit relief awarded under the SME scheme would therefore increase from £4.4bn (2019-20) to £6.2bn – a massive £1.8bn difference.
This growth would come from more tech SMEs claiming and more spend per tech SME.
So, what does the R&D Roadmap include, and how would tech SMEs be affected?
What does the R&D roadmap include?
The UK R&D Roadmap is broad in scale, covering multiple goals across multiple sectors of the economy. In brief, these goals cover the following.
- Increasing public investment in Research & Development
- Securing more economic and social benefits that come from research
- Giving greater support for start-ups and entrepreneurs carrying out R&D
- Developing and retaining a diverse and talented R&D workforce
- Improving research collaboration between funders, researchers, practitioners, and civic leaders to improve local outcomes from R&D
- Providing “long-term flexible investment” into institutions and infrastructure
- Strengthening international R&D partnerships
- Engaging in new ways to ensure science and technology adapts to the changing needs and aspirations of the UK
This is an ambitious and far-reaching set of objectives, and the UK R&D roadmap explains how the government will attempt to make them a reality.
Improving the UK’s R&D talent pool
A major step in the government’s R&D roadmap is to try and ensure the UK is a world leader for talented people working in R&D.
This would include attracting talented and experienced people from overseas and being able to train and retain top-class R&D professionals and teams from the UK. The roadmap also includes a target for greater diversity and inclusion within R&D.
This is particularly relevant to tech SMEs as the government has proposed limiting qualifying R&D activity under the SME R&D Tax Credit scheme to the UK from 2023.
Improving R&D productivity
Next, the R&D roadmap sets out its goals in “driving up innovation and productivity”. A key challenge highlighted is the lower levels of R&D activity in business when compared to competitor countries.
In order to improve R&D productivity, the government has set out the following objectives:
- Make sure R&D rules and regulations promote innovation, competition, and diffusion
- Leverage the economic and social benefits of R&D
- Enhance the UK’s existing innovation infrastructure
- Highlight key voices that speak out in favour of innovation
- Improve demand for innovation through policy and incentives
The first example of this has been the proposal to include data sets and cloud computing in the R&D Tax Credit qualifying activity. However, the limitation to UK activity is a risk, not an incentive.
“Levelling up” R&D in the UK
The government’s ‘Levelling Up’ plans have been widely discussed in political news, and these plans include ambitions around improving R&D across the whole country. Certain areas of the UK have much greater relative R&D investment than others, and these areas benefit from more intensive R&D.
As part of the ‘Levelling Up’ agenda, the government aims to improve R&D investment and expenditure in areas outside of the current R&D hotspots.
Whether this will increase R&D investment overall, or just reallocate it is yet to be known.
Improving international R&D collaboration
International collaboration is another key area of the R&D roadmap, and the government wants the UK to benefit from international partnerships with a wide range of countries at differing stages of economic development.
The planned actions to improve this area include new funding approaches and strengthening existing overseas collaborations, while protecting the UK’s own IP, personal data, and sensitive research.
At the moment, this is going the other way from the R&D grant perspective (another key government incentive), as Innovate SMART grants now exclude overseas partners, and the UK is yet to be accepted as a participant within Horizon Europe.
Improving R&D infrastructure and institutions
The UK has a wealth of innovative people and organisations, with extensive collective experience and success in R&D across multiple sectors. In order to further improve R&D in the UK, the government aims to significantly improve R&D infrastructure and institutions.
This includes plans to improve long-term investment in infrastructure, improving sustainability, greater investment in sought after skills (including data science) and improving digital research capability, such as data, software, and computing.
What impact on tech SMEs is yet to be understood – a bit vague.
Improve R&D decision making
A final major area of the R&D roadmap of the UK relates to strategic decision making. The whitepaper cites systemic challenges relating to what it calls “unnecessary bureaucracy” and “risk averse” attitudes that cause inefficiencies. The government states that “It can take too long for funding or approvals decisions to be made, slowing and frustrating the discovery process.”
The roadmap’s aims include “minimising bureaucracy”, improving collaboration across institutions, and making greater use of PSREs (Public Sector Research Establishments).
Unlikely to have a significant impact on SMEs
There is no doubt R&D Tax Credits are one of the key enablers of R&D investment, reducing the cost by at least 25%, and ‘guaranteed’ as long the work meets government qualifying guidelines.
That last point will become increasingly more important as the government has stated its intention to crack down on fraudulent claims following recent reviews – and has already put in place a number of measures ,with more to come.
Serious concerns now exist as to the amount of R&D Tax Credit relief that is being paid out with no good reason.
Basically the attractiveness of the R&D Tax Credits scheme should continue to increase, but only to those who deserve it! And doing the work in the UK can only be a reality if the talent is there at the right cost.
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