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Why the UK is Still the Best Place for Innovation – But it Needs to Take More Risks


The OECD announced recently that the UK is facing the worst downturn of any advanced economy and that GDP will fall by 0.3%. The economic outlook might not be great but that doesn’t mean the innovation outlook is as bad.

The UK still ranks fourth in the Global Innovation Index, it boasts a world-class intellectual property (IP) regime that protects innovative ideas and it is home to four of the world’s top ten universities; Oxford, Cambridge, University College London and Imperial College London.

Recently the UK government committed £1.84bn for important space programmes at this year’s European Space Agency Council of Ministers meeting. Moreover, the Business Secretary also announced £484b in targeted investment to support UK research.

The UK has the best superfast broadband service of any major European economy and our digital infrastructure network is robust. Innovation is key in the R&D sector. The more innovation, the more R&D and business investment in R&D is essential if Britain is to exit its current situation.

HMRC recently published its new changes for R&D tax credit relief. According to the UK 2022 Innovation Report, the UK still spends less on R&D than the OECD average. At 1.74%, the UK’s gross domestic expenditure on R&D remained well below the 2019 OECD average of 2.5%.

However, the government has set an ambitious target to raise investment in R&D to 2.4% UK GDP by 2027. The government believes that reducing the cost of research, development and innovation within UK businesses will help them achieve their target.

Businesses claiming under any of the two schemes (SME or RDEC) will be impacted by the budget adjustments, which will take effect for accounting periods starting on or after 1 April 2023. For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the SME additional deduction will decrease from 130% to 86%, and the small and medium (SME) sized company credit rate will decrease from 14.5% to 10%.

One of the most fundamental changes in the Autumn budget was to refocus the R&D reliefs provided to activities performed in the UK. For accounting periods beginning on or after 1 April 2023, subcontracted R&D work and the cost of externally provided workers (EPWs) will be limited to work undertaken in the UK.

There are specific exemptions where work outside the UK is permitted for geographical, environmental, social, or regulatory/legal requirements. HMRC’s statement published with the legislation gives examples such as deep ocean research and clinical trials, and, by inference, could include medical-tech trials in specific patient groups, international telecoms testing, or technology designed for extreme environments.

This landscape opens itself up to significant innovation, but uncertainty around legislation is causing problems and sending innovation to other jurisdictions.

We know that SMEs often lack the resources needed to invest in riskier R&D activities and this makes them more reliant on external sources of knowledge and R&D capabilities. Competition is fierce and global resources are diminishing so innovation is increasingly harder without some degree of risk.

However, innovation isn’t just about researching a single product and sending it to market. It’s about changing how we do things, it’s about changing how we achieve growth. This must involve embracing uncertainty and risk. We know that public investment is simply not following private investment and this reinforces existing cultural prejudices and economic structures that are holding us back.

Mark Joyner at Research and Development Specialists Ltd. heads up a company dedicated to helping firms navigate the HMRC Tax Incentive. He wants to spread the word that businesses who are innovating, could be accessing vital funds.

Whether it’s reinvesting in staff and services, or literally keeping the doors open while riding out the current economic storm, companies who are innovating should definitely be looking into whether they qualify for R&D tax credits. We need more awareness about how this scheme can help those businesses who are thinking outside the box.

Mark Joyner, MD at Research and Development Specialists Ltd

“We’re not talking about small sums of money here; our average claim is over £50,000. That’s money that could be funnelled back into your business and working for you in whichever way it needs to be. Innovation if often an expensive outlay, receiving R&D tax credits can look to bring cash into the business, when you need it most.”

For more information and to find if you are eligible visit or call 0161 823 5281.