With expenditure on R&D exceeding 2-3% of total GDP across the region, the area is developing quickly. Being located in the South helps, as it means the South West is close to established tech clusters and cultures in Oxford, Reading, Cambridge, South Wales and London.
A lot of the development, though, is due to the South West’s own unique qualities and history, making it the perfect home for innovation and research.
The aerospace tech cluster is well established in the South West, with huge depth and international significance.
The South West of England is home to over nine hundred aerospace companies. This makes use of the historic presence of the aerospace industry in the area as well as the strong ‘vertical clustering’ in the region. It’s not just the top tier that have flocked to the South West (Rolls Royce, GKN and BAE Systems have well established bases in the region), hundreds of other smaller firms a little further down the food chain have found a home in the South West. The Centre for Economics & Business Research found that the UK aerospace industry grew by 9.4% in 2013. While major players like BAE Systems are leading the development of the £230bn F-35 project, over 500 British firms have been involved in the aircrafts development.
Barry Warburton of the West of England Aerospace Forum (WEAF) gives us some idea of the scale of the South West aerospace tech cluster, which “contributes £2.3 billion directly to the economy and supports 41,000 jobs”.
The marine tech cluster is essential to the South West, with historic references to the area as a location for maritime trade going back centuries.
In a less proud moment, Bristol was one of the first places in England to be affected by the Black Death – again, because the maritime sector played such a significant role in the growth of the city.
In the South West, marine technology is less focused around gas and oil and more about shipbuilding and repair. The large amounts of turbines and engines, including marine diesel engines and turbines, also makes this a good place to start a company specialising in maritime technologies.
The instrumentation sector in the South West has grown by more than 40% since 1991.
Closely tied to the aerospace industry, the electronic instruments sector (based around Plymouth) accounts for 250 companies and more than 8000 jobs. R&D in the sector is well funded.
Other forms of instrumentation, including non-electronic instruments and medical and surgical equipment, are not quite as significant but still account for a combined total of between 3000 and 7000 jobs in the region.
IT and communications
Information technology and communications is a relatively small sector compared to some of the giant industries which have been around in the South West since time immemorial. However, the IT and communications businesses that do have a presence in the South West are often larger, more-established businesses which have a strong focus on research and development and are well-placed to take advantage of R&D tax credits.
Major players like HP and STMicroelectronics have for a long time had major R&D bases in the region. Recent significant announcements that Chinese mobile giants Huawei and the wireless technology innovators CSR are to open new R&D centres in the region, helping to cement the regions position as a R&D hotspot.
Being close to the coast, relatively warm (at times) and relatively windy, the South West is the ideal place for many environmental industries to set up.
The most common types of environmental industry in the area are consultancies and recycling technologies, the latter making vast leaps and bounds in efficiency and profitability as time goes by. Much of the hard work begins in the regions universities, Bristol University scientists were pioneers behind the revolutionary ‘Magnetic Soap’ technology which is set to transform the clean-up of future oil spills.
Digital production, animation & moving image
It’s not surprising that the birthplace of Wallace and Gromit has a strong media presence. Anyone who’s spent any time in the area will likely have noticed a large concentration of broadcast companies, marketing agencies and associated media companies.
Production companies, advertising agencies, creative agencies, animators and digital studios all encourage and support each other, making for a prominent and robust creative technology presence.
There has been a common misconception amongst companies in the sector that the work they do will not qualify for R&D tax relief because the majority of R&D projects they handle are typically for clients. In fact, quite the opposite is true. As the number of companies we work with in this space can testify, it all comes down to the question of risk, and which company shoulders that burden.
Creative technology businesses handling client R&D projects may well be able to benefit from the significant tax reliefs available regardless of their position in the food chain. It’s important to note that whilst these projects tend to be creatively innovative, qualifying R&D projects within these sectors will relate to technological innovation and the development of tech to achieve this creative innovation. Creative thinking and innovative campaigns do not qualify for R&D tax credits.
There are other, smaller clusters of tech industry in the South West, centering around Swindon but distributed from Devon to Cheltenham.
- Plastics technology around Peyton and Exeter University
- The National Composites Centre – world leading research into the development and exploitation of composite materials
- Multiple military towns providing industry jobs relating to military tech creation and maintenance
- A huge number of medical and pharmaceutical technology companies spread throughout the region
- Equipment for generating and distributing electricity in North Wiltshire
- Microelectronics in the region has received a significant boost over the past few years from the Microelectronics iNet, with ERDF funding running until 2015
- Quarrying and mining industries across parts of Cornwall
These clusters often form part of the supply chain for the larger clusters in the area, reinforcing the virtuous circle and encouraging further tech investment in the South West. They also have a huge amount of potential when it comes to research and development, as their niche expertise and tight focus means that they can spend a lot of time on problems which are often given less attention in broader industries.
Fit into one of these clusters?
If you fit into one of these tech clusters, the chances are good that you are spending a significant amount on R&D. If you’re doing something that stands out as being different from your industry peers then it can most certainly qualify for tax relief. It may be that you have clearly identifiable R&D functions within your organisation, but more frequently we find that those individuals carrying out significant levels of R&D activity often fail to recognise what they do as research and development, and therefore fail to take advantage of the benefits made available from HMRC.
If you’re not claiming R&D tax credits on the research and development you’re currently working on, aren’t sure what counts as research and development for tax purposes, or are claiming R&D tax credits but don’t feel confident that the value of your claims have been optimised, then get in touch!
ForrestBrown can help with your R&D tax credit claim, and we’ve helped our clients secure many millions of pounds worth of tax relief over the past year alone.