Continuing Innovation After Brexit
Brexit still brings a huge amount of uncertainty for businesses across the UK as well as the wider EU. Indeed, what the future has in store for UK industrial innovation post-Brexit is still anyone’s guess and there will no doubt be ripple effects not yet considered.
The impact of Brexit is still anyone’s guess but when it comes to research and innovation, not much should change on the surface at least. Although the R&D Tax Credit scheme is subject to EU rules, it’s still a UK government initiative that’s offered by HMRC. This means it’s highly likely that the funding available for innovative projects will not be affected.
One thing’s for certain though: Brexit will likely bring substantial changes to the entire UK business landscape which could indirectly affect those looking to innovate.
Funding for R&D
According to the most recent figures from the Office for National Statistics, R&D spending in the UK rose by £1.6 billion to £34.8 billion in 2017. By way of R&D expenditure as a percentage of GDP, this places us at 11th in the EU. However, despite the fact that on average £527 was spent for every person in Britain - which isn’t too shabby - EU regulations make this spending very restrictive. R&D Tax Credits are considered to be ‘state aid’ by the EU, which currently necessitates a limit on how much the government can offer companies. Once the UK exits the EU the cap will then be removed which opens the door to less strict qualification criteria and more generous handouts. SMEs across the country would welcome such a move, signalling to the world that the UK is open to innovation. Strategies to boost funding are already in the finishing stages, with the government’s industrial plan longer term being to bolster R&D investment to 2.4% of GDP by the year 2027.
Future innovative efforts
There’s still much concern about the impact Brexit will have on British industry and the government is under huge pressure to keep the economy buoyant. A healthy amount of innovative investment would send a clear message that the country is thriving even against a backdrop of dramatic political change. With the government clawing back money previously given to Brussels, the plan is that more funding will subsequently become available.
Irrespective of the kind of trading relation the UK will have with the EU after Brexit, innovation will always be vital to company survival in an increasingly competitive world. Indeed, if trade deals end up being unfavourable to the UK, then creativity and innovation will be more crucial than ever.
Collaboration across the world
While there’s been a decrease in recent years in international funding for UK research, down to £5 billion in 2017 from £5.6 billion in 2014, it still makes up around 14% of all investment in innovation. However, it’s not simply the relationship UK companies will have with their EU counterparts that needs to be considered post-Brexit, but the amount of continental collaboration that will exist between research centres and universities across the country.
The UK is highly regarded across the globe for its innovative efforts, with British institutions producing world-class work in every industry. Such breakthroughs can only come about when people from across Europe and the rest of the world collaborate together. In future, Brexit could well make it more difficult for companies to recruit staff from overseas which in turn will make cross-country projects very impractical, or perhaps impossible. There has been talk of plans to only allow immigrants earning more than £30,000 to stay in the UK, which could make it hard to recruit skilled international research assistants and graduates. This is because salaries for such jobs are typically under this threshold.
For this reason alone, companies are likely to need to look elsewhere. Even British businesses might decide to carry out innovative work overseas, honing in on countries that have both excellent R&D incentives and less complex immigration policies. Asian nations for example could benefit substantially, with South Korea and China being potentially strong candidates. Over the last couple of decades in particular, South Korea has been a massive global investor in R&D, and UK businesses could take advantage of this.
Positivity for the future
As typical of Brexit, nobody can really say how the UK’s exit from the EU will impact on home-grown innovation. Although some policies are not expected to change - the general R&D claims process itself for example - there are broader ramifications which may affect British researchers in particular.
Britain enjoys an outstanding reputation for innovation and this could well be our trump card. If Brexit is detrimental to the country’s economy, the value of the pound will drop against other global currencies. Because of this, international businesses could see British enterprises as attractive investments, as their high quality projects and services will suddenly cost less. This could potentially bridge the gap left by EU funding currently in existence.
R&D Tax Credits along with Patent Box relief will play a critical role in establishing Britain as an epicentre for creativity post-Brexit. Once EU cash for projects is no longer available, the importance of this lucrative tax incentive will become even clearer, potentially leading to a substantially higher number of applications.
After Brexit, the continuation and improvement of the financial incentives for companies to invest in R&D will ensure that Britain remains at the forefront of innovation. Tax Cloud UK (developed by the R&D experts at Myriad Associates) will offer guidance on both the R&D Tax Credit scheme and Patent Box relief will help you see exactly how much your company could claim.
Get in touch with the R&D experts
Tax Cloud UK is a cutting-edge, effective online portal designed to take the pain out of claiming R&D tax relief. Developed by the expert R&D tax team at Myriad Associates, there are separate sections for both businesses and accountants where your own figures can be added to easily see what you could claim.
Tax Cloud are specialists in all aspects of R&D tax relief assistance for UK companies. Made up of skilled accountants and tax experts, we have a proven track record in making successful R&D Tax Credit claims so you can rest assured you won’t miss out. If you think you may be eligible, contact us today on 0207 118 6045 or use our contact page. You could well be surprised at what you can claim.
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