Reductions to R&D tax credits and lack of access to European innovation funding programmes are driving UK companies to offshore R&D activities, a study by the Ayming Institute has found in its inaugural UK Innovation Barometer 2023.
Three quarters of the companies polled have or are considering moving their R&D activity, with the most popular destinations being the US, Germany and France.
The authors conclude that although there is confidence in the industrial strategy, announcements made in the Chancellor’s Autumn Statement – including significant cuts to R&D tax relief for SMEs – threaten to derail momentum.
Concerns were also raised about the loss of access to the Horizon Europe research and innovation programme, which has a budget of 95.5 billion EU. 75% of respondents agreed that establishing back-up funding to Horizon was at least very important, with over one-in-five citing it as absolutely critical.
Support for blue sky research
There is also support for the Advanced Research & Invention Agency (ARIA) which aims to support high risk, high reward science, with 48% of those polled believing ARIA to be very important to the future of UK innovation. The intention was that ARIA would be led by scientists with the freedom to identify and fund transformational science and technology at speed. However the project was proposed by the Rt Hon Kwasi Kwarteng MP, before his disastrous stint as chancellor, so its future is not certain.
The research took place between 7-11th November 2022, and surveyed 200 senior innovation, finance, tax, and CEOs/MDs in the UK. Survey respondents are all at CXO, director or head of department level, and evenly split across SMEs (companies with 250 employees or fewer) and larger companies.
Mark Smith, Partner of R&D Incentives and Grants at Ayming UK, comments that 54% of companies were increasing their R&D spend. “The number of firms increasing their R&D budget is indicative of a rebalancing of priorities we’re seeing right across the UK.”
More AI than human science?
One of the surprising findings of the research is that companies are more likely to use Artificial Intelligence for research than engage with university researchers. Smith continues: “The popularity of artificial intelligence as a resource to facilitate R&D is a reflection of the technology reaching a level of maturity that has allowed it to enter the mainstream.
“The basic hurdles in the technology have been cleared and now businesses are asking themselves how they can take full advantage.”
The authors conclude that equivalent funding alternatives to the Horizon Programme, the formal launch of ARIA and the introduction of an advanced sustainable R&D tax incentives are all actions that are required to sustain new innovation into the future.