UK Innovation Strategy
A recent government paper was published on 22nd July 2021 – titled ‘UK Innovation Strategy: leading the future by creating it’
What is the purpose of this strategy?
The government’s vision is for the UK to be a leading light for companies carrying out innovation.
The government had announced that in the Budget 2021, it would aim for a target to increase the amount of investment in research and development to 2.4% of UK GDP by 2027. This is a welcome return after decades of under investment in R&D spending – both public and private. In the UK, R&D investment declined steadily between 1990 and 2004, from 1.7% to 1.5% of GDP, and gradually returned to be 1.7% in 2018.
The purpose of the current R&D tax relief schemes is to play a key role in incentivising companies, by reducing the costs of carrying out innovation. This is evidenced by the amount of spending on R&D in 2021 to 2022 at £14.9 billion, its highest level in four decades.
The government advised that ‘Increasing innovation will enhance productivity across the economy, and in turn bring jobs, growth and prosperity to all parts of the UK’. This will include all types of businesses, government, R&D-performing organisations, finance providers, funders and others to successfully work together.
Why is this strategy necessary?
The paper states that ‘Innovation is crucial to the UK building back better’. The government sees that innovation is a key element in achieving its aims to be overcome the global challenges on climate, biodiversity, prosperity and security. They want businesses to invest in innovation, which in turn will hopefully lead to British firms being seen as the standard bearers for innovation.
The timing of this strategy is underpinned by the following four factors;
1. Having left the European Union – the need to create products and services that are successful in the international market.
2. Covid-19 pandemic – The pandemic has shown UK innovators what they can deliver with great results when given ambitious support, freedom, and risk tolerance.
3. There is increasing competition in the global innovation race – Countries such as South Korea, Israel and the USA have shown that we must meet the need for private sector to support investment in innovation.
4. Technological advance – Artificial Intelligence (AI) is looking at developing machines that can even exceed human intelligence and one day will compute the current incomputable.
How will the strategy take place?
The government have stated that there are 4 key pillars, which will support the achievement of the vision:
Pillar 1: Unleashing business – they will fuel businesses who want to innovate.
Pillar 2: People – looking to make the UK the most exciting place for innovation talent.
Pillar 3: Institutions and places – we will ensure our research, development and innovation institutions serve the needs of businesses and places across the UK.
Pillar 4: Missions and technologies – we will stimulate innovation to tackle major challenges faced by the UK and the world and drive capability in key technologies.
The ‘UK Innovation Strategy’ is not the end of the journey. There is a clear plan for this to be the initial step as the paper talks about ‘Vision 2035: The UK as a global hub for innovation’ and to achieve this the government are committed to increasing direct public expenditure on R&D to £22 billion per year. It accepts there will be a need for UK Finance to raise awareness and understanding of business innovation, the impact it has on business risk and the availability of different types of finance. Current schemes by lenders such as Barclays, whose Funding Readiness Programme part of its Eagle Labs platform – aims to demystify funding options available to entrepreneurs and provide the skills required to fund business growth.
These are exciting times for a business to be carrying out innovation, and we at Counting King R&D Tax Consultants can provide the expert assistance in ensuring that you maximise your benefit when claiming for R&D Tax reliefs.
For more information please get in touch by calling 0161 667 5069 or emailing firstname.lastname@example.org
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