In October 2023, ForrestBrown, in partnership with Centre for Cities, hosted panels at both the Conservative and Labour Party conferences on the theme of “unlocking innovation across the UK.”
The events featured prominent figures from both policy and industry, including George Freeman MP, Minister for Science, Research and Innovation, and Tan Singh Dhesi MP, Shadow Exchequer Secretary to the Treasury. The goal of these discussions was to explore the importance of innovation and to discuss the roles that government, businesses and civic institutions can play in fostering it.
The key themes: driving economic growth and the role of R&D
Whilst the UK has someway to go to be considered a science and technology superpower, the tenor of discussion at both conference events painted an optimistic vision for the future, albeit not one without challenges. R&D tax relief, as the UK’s industrial flagship policy for innovation is set to play an important role. Read more about the other key themes below.
Risk = reward?
One of the overarching themes that emerged was the interplay between innovation and risk. While the discussions were varied and, at times, politically minded, the prevailing sentiment challenged the notion of the UK being risk-averse historically, with all attendees agreeing that innovation was in the national interest. Calls were made for governments to play a more active role in reducing the risks faced by innovators, and fostering an environment conducive to innovation. The need for clarity in tax policies – particularly regarding R&D tax incentives – was a recurrent point of discussion. Moreover, the impact of reduced fees on universities and the redirection of resources from international to underfunded English students was a matter of concern.
Throughout the discussions, a clear emphasis emerged on the importance of government support for innovators and the need to bridge the gap between research and commercialisation. This was exemplified by the successful introduction of Catapult networks.
The role of R&D tax relief in making the UK a science and technology superpower
At both events, whilst discussing the future of innovation and the role of government support, R&D tax relief emerged as a crucial topic. Prominently highlighted was the influence that R&D tax incentives have on businesses’ decision-making. The debate unveiled the challenges faced by businesses engaged in R&D projects, with mention of difficulties attributed to the resourcing of HMRC. There were also questions of whether the rebalancing of R&D tax relief rates have been based on disputed measures of additionality. The need for better data, as well as clarity and continuity in R&D tax policy, was underscored.
Furthermore, the disconnect between direct funding and tax relief was a focal point, prompting reflection on how these mechanisms can be effectively synchronised to stimulate innovation.
The discussions also touched upon the rising costs of R&D tax credits to HM Treasury and need for a balanced approach that provides return on investment for the taxpayer, whilst rewarding companies of all size who invest in R&D.
Learn more about R&D tax credits here, and its role in the UK’s goal of becoming a tech superpower.
Nurturing innovation and collaboration
At the heart of the discussion was the notion of nurturing innovation and fostering collaboration at various levels. Key points included the role of universities in driving innovation and the challenges they face due to shifting funding dynamics. It was highlighted that universities play a pivotal role in the innovation ecosystem, and their constraints need to be addressed. Additionally, the successful model of the Catapult network, which acts as a bridge between research and commercialisation, was praised, but concerns were raised regarding the UK’s procurement approach, which lacks the risk-bearing mechanisms found in the United States.
Government’s strategic role and regional development
The other major theme of the panels revolved around the strategic role of government in innovation and regional development, and the opportunities open to the UK in the global landscape of scientific and technological innovation.
The need to modernise the economic model and shift the dialogue from spending to investment was highlighted. It was mooted that strengthening interfaces between academic institutions and industries, as well as promoting innovation clusters throughout the country, were central aspects of the government’s role.
Identifying and supporting underrepresented regions, hidden clusters, and potential global players in niche areas of the supply chain were seen as essential for fostering innovation. The importance of international collaboration in technology development and recognising regional strengths and capacities were also emphasised.
The value of R&D tax for economic growth
What these discussions demonstrated more than anything, was that while economic growth remains a key topic across the political spectrum, innovation policy, and in particular, the future development of R&D tax relief, will continue to play a vital role if the UK is to have success in its ambition to become a science and technology superpower – but there is still much work to be done if this is to be achieved.