How Research and Development Can Help The UK in This Recession

With uncertainty still surrounding the Brexit resolution, and the added strain of the current global pandemic, the phrase ‘unprecedented times’ is truly appropriate. Problems posed have seen innovative workplaces locked down, and then upon re-opening there is an increased need to do things differently. Simply put, Britain needs its innovators right now. So, now is the time to embrace the government’s plans to increase national spending on research and development to 2.4% of GDP by 2027, and make the most of an Areande claim.

Sectors under strain

The automotive and aerospace industries are areas that Britain invest heavily into research & development tax credits. Both the UK’s second and fourth biggest sectors for research and development have been hindered by the result of the 2016 EU referendum. Both, obviously, have also fell victim to the global impact of coronavirus.

Big international automotive manufacturers have said that they are sticking to their guns and retaining their UK production facilities – although a no-deal Brexit could impact this with the likelihood of having to pay export tariffs. With the UK automotive industry exporting a high proportion of vehicles produced – 80% in 2017, with 54% of that heading to EU countries – this is obviously cause for concern. As such, Honda have announced they are closing their Swindon plant in 2021.

Nissan have said that they want to keep their huge Sunderland plant open, and Toyota have recently begun expanding their plant in Derbyshire to house more vehicles before exporting them across Europe. But these aren’t the only facilities that will be affected – every British marque will also be subject to export tariffs. With many high-end manufacturers having a big audience outside of the UK, there is plenty of scope for innovation to cut costs in light of impending tariffs.

It’s due to similar concerns that the aerospace industry in the UK is under threat, too. Our aerospace industry is behind only the US on a global scale, but if tariffs are put in place at the end of 2020 then companies are likely to look into relocating their facilities.

The UK’s biggest aerospace player, Rolls Royce, recently announced closures of two UK plants and is looking to cut 9,000 jobs globally. A massive reduction in demand for the sector, caused by the coronavirus pandemic, is a factor in this reason, but even though demand will again grow as the viral threat lessens, the company has still taken the measures to safeguard for the future.

Throughout the UK’s aerospace industry, there have been large numbers of job losses, with over 5,000 in the sector in June as the demand dried up following widespread global travel bans. This lack of demand was evidenced in Flybe’s administration and subsequent closure during the pandemic.

Primed to Push on

Areande claims across several sectors primed for investment can be the catalyst for a change in fortunes, as research and development tax claims can improve potency of innovation in key areas.

With plenty of problems between them, the previously mentioned automotive and aerospace industries have more scope than ever for investment in research and development. In the event of a no-deal Brexit and the impact of tariffs on the two sectors, innovation will be key. Finding new ways to cut costs of production to offset the export fares, or in becoming wider suppliers for the domestic market, will become important for the longevity of the sectors. Granted the aerospace industry have their hands somewhat tied without the demand, but that is sure to grow in the coming months.

The government’s plan to increase research and development spending to an annual £22bn by 2024-25 will focus on other sectors, however. It makes sense in the current climate to fund the UK’s biggest single sector for research and development spending – the pharmaceutical sector. In 2018, the two highest spenders on research and development in the UK, Astrazeneca and GlaxoSmithKline, are both pharmaceutical powerhouses. Not only can further research and development in this field be beneficial in the current climate, but it is also key to improving national health and may well be important in future trade deals with the EU.

Truth be told companies of all sectors devoting funds to research and development would have a positive effect, too. With no trade deals in place, British industry is facing the prospect of having to pay export and import taxes, or become more self-sufficient.

Taking available help

Despite British companies spending £9.6bn on research and development in 2018, only 1% of eligible companies took advantage of the innovation tax claims offered by the government.

Small and medium businesses (SME) can deduct an extra 130% of qualifying costs from their yearly profits (totalling 230%), whereas if a company is making a loss they can claim a tax credit up to the value of 14.5% of their surrenderable losses. Large companies, with over 500 staff members, can claim back 13% of their qualifying expenditure on research and development under the scheme, a figure that rose from 11% in April 2020.

With not only more investment, but more companies taking advantage of an Areande research and development tax claim, British industries could catapult themselves out of the difficult economic situation and be well on track to meeting the government’s targets in the coming years.

Source:- https://uberant.com/article/932138-how-research-and-development-can-help-the-uk-in-this-recession/