The UK’s technology sector believes Labour would have a positive impact on innovation, according to a new report.
Ayming’s UK Innovation Barometer 2024, based on a survey of 100 industry leaders, found that 75% of tech firms think a Labour government will have a positive impact on UK innovation. Only 9% expect the impact to be negative.
The UK’s R&D landscape has suffered some setbacks in recent years. HMRC has pursued an aggressive compliance programme in reaction to cases of fraud in the R&D tax credit schemes, causing friction with some businesses.
19% say HMRC has put them off from claiming R&D tax credits and 17% say they are no longer sure what is eligible so will not be claiming.
Beyond this, there has also been a lack of stability. The UK’s temporary exclusion from Horizon Europe stopped British firms from both receiving funding and being involved in prestigious international collaborations. In addition, the last detailed Innovation Strategy was published three years ago and since then there have been two changes of Government, five different ministers responsible for innovation, and the department that published the initial strategy has been disbanded as part of reforms.
Other key findings
Lack of awareness on reforms: 62% of businesses are not aware of the reforms to the UK’s R&D tax credit scheme, which is likely to cause further friction once rules change on April 1st.
Funding: On average the sector is spending 5.3% of revenue to R&D. R&D tax credits are the most popular source of funding with 29% of the industry making use of them.
Mass-outsourcing: Half (49%) of the tech sector is outsourcing R&D projects – around the same as the cross-sector average. However, tech firms are least likely to collaborate, with 34% collaborating compared to the sector average of 42%.
Offshoring: 61% of firms are undertaking R&D activity in Europe. Unlike other sectors, the most popular reason to offshore for tech firms is to move activity closer to head office, with 27% selecting it, whereas it is to collaborate with a company abroad across the sectors.
Obstacles to grant funding: The biggest obstacle to securing grant funding for the technology sector is ‘expertise in applying’, with nearly a fifth (18%) of businesses citing this as its main barrier.
Call for more generous R&D tax credits: The Government action tech firms think is most important to support UK innovation is to increase the generosity of R&D tax credits, with 95% seeing it as important.
Enhance international collaborations: The Government action tech firms think is most important to support the transition to Net Zero is to enhance collaborations with other countries, with 96% seeing it as important.
Mark Herrity, senior manager at Ayming UK, commented: “With nine in ten technology businesses offshoring R&D, it’s clear the UK has to seriously rethink its innovation strategy. The UK prides itself on its homegrown tech firms, but the reality is that R&D in the tech sector can be easily moved to other regions.
“If it wants to compete with international rivals and stem the outflow of talent to the US and Europe, we need to do everything we can to encourage tech firms to do their R&D in the UK. Above all, it’s essential that tech companies can rely on all-important government funding.”