How R&D-intensive businesses can boost the UK’s science superpower ambitions

UK Science Superpower: how R&D-intensive businesses can help make it a reality

Now is the time of year when we’ve had the opportunity to test our new year’s resolutions. Judging by the flurry of policy pronouncements since January, this spirit of self-improvement doesn’t only apply to individuals but government as well.

George Freeman – UK Minister of State for Science, Research, Technology, and Innovation – has been leading the charge by restating ambitions for the UK to become a ‘science superpower’. But what does this really mean, and how can R&D-intensive companies play a part in making this resolution a reality?

In January, speaking at an event hosted by centre-right think tank Onward (which made its own contribution to the debate with a report on Incentivising Innovation last November), Freeman doubled down on the ‘science superpower’ slogan, throwing ‘innovation nation’ into the mix for good measure.

Horizon Europe Plan B

Freeman also used his speech to set out ‘plan B’ – an alternative to membership of the EU Horizon Europe programme. But he also looked beyond university research, arguing that it’s not enough to be an academic powerhouse. British businesses need to be driving innovation too.

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10 factors for science superpower success

At ForrestBrown we are passionate about the transformative power of innovation tax reliefs. Through our work with some of the UK’s most innovative businesses, we have direct insight into R&D investment and the impact of innovation incentives across a range of R&D-intensive sectors.

Based on this experience gathered during a decade at the forefront of R&D funding, we’ve identified 10 factors which could unleash the real value of innovation, helping the UK achieve ‘science superpower’ status.  

Strong government support and funding for R&D

R&D tax relief is part of a wider ecosystem of innovation incentives which support businesses to take risks by seeking advances in technology. But the current system is complex, leaving it open to errors and abuse. The current R&D tax consultation on a single scheme to replace the existing two-track regime is a step in the right direction (although it should not come at the expense of reduced generosity for R&D-intensive SMEs).

This presents an opportunity for streamlining the rule base. For example, in designing the single relief structure, care should be taken to define clearly where relief should be awarded when more than one company is involved in an R&D project, either via genuine collaboration, provision of services or sale of the outcome of an R&D project. Relief should be targeted to the businesses where it can actively influence behaviours and drive investment decisions.

Stable and predictable innovation policy environment

The one constant for innovation policy over the last 12 months has been change. Businesses need a stable and predictable policy environment to enable effective long-term planning and investment in R&D. Piecemeal adjustments to legislation designed to incentivise innovative businesses to invest in their UK R&D activity can often achieve the opposite.

The new Department for Science, Innovation and Technology (DSIT) has been established with the intention of spurring stronger growth. A stable policy platform will be key for this objective to be met. 

Clear statement of intent for R&D tax relief

An effective R&D tax relief system starts with a clear statement of intent from the government on the purpose and focus of R&D tax reliefs. This should include target sectors, examples of the types of commercial R&D projects which should benefit from the incentive, and what measures of success will be applied in reviewing the incentive.

Modernised R&D definition

This statement of intent would provide a foundation for a modernised definition of R&D, which is more accessible for businesses. Businesses across a diverse range of sectors access the incentive, but there is little formal guidance on the application of the definition of R&D to different sectors, leading to uncertainty, errors, disputes and abuse.

Updated, clear and well publicised examples and case studies would not only improve awareness of R&D tax relief in less traditional R&D sectors, but also help to reduce errors and disputes in the application of the definition.

These examples and case studies should be produced in collaboration with other relevant government bodies. In particular, DSIT has responsibility for the UK’s innovation strategy and public funding for R&D, as well as the definition of R&D which still governs tax credits today. A joined-up approach between DSIT, HM Treasury and HMRC is essential to safeguard the policy intent of the relief.

Modern infrastructure

Strong infrastructure, including transportation, telecommunications and energy, is essential for supporting a modern economy and driving innovation. This will also aid innovative start-ups and scale-ups to commercialise and communicate their products and processes more successfully, as well as helping to form and foster technology clusters.

Public-private collaboration

Encouraging collaboration between business, government and academia can help accelerate innovation and commercialisation of new technologies. Relationships created through grant funding for start-ups, for example, could be followed through to ensure knowledge-sharing continues as businesses grow. A roadmap to guide innovative businesses on their growth journey would signpost funding and other incentives available along the way.

A responsive regulatory environment

A regulatory environment that can respond to the needs of the science and technology sector can help attract investment and encourage innovation. For example, planning regulation can often present an issue for those businesses pushing the boundaries of innovation when they are looking to make capital investment in world-class facilities for UK R&D.

Strong education system

Investing and incentivising STEM education is crucial for developing the next generation of scientists and engineers and fostering a diverse and resilient workforce. This is key to resolving STEM skills shortages in the long term. At ForrestBrown we partner with organisations such as Bristol WORKS to offer meaningful experiences of work for young people.

International collaboration

The UK should be open to international collaboration and establish research partnerships, trade agreements and encourage the flow of talents and ideas across borders. This reflects the global nature of R&D programmes for many large companies who manage R&D from the UK but undertake activity across the world. The UK’s failure to remain in the Horizon programme presents a big challenge for the government, especially when faced with the prospect of matching this funding.

The Home Office’s plan to reduce immigration by targeting overseas students could have far reaching and unintended consequences for the knowledge economy. The considerable financial boost that British universities receive from international   students, as well as the potential for improving the size and influence of the UK’s STEM skills base are reason alone to emphasise the importance of international academic innovation collaborations. 

Attracting and retaining top talent

To truly become a science superpower the UK needs to attract and retain super-talented people in science and technology disciplines. This is not only about providing competitive salaries and benefits. Opportunities for professional development are also important, as is an inclusive and welcoming environment for foreign talent to thrive. Innovation incentives such as R&D tax relief can also play a part. By reinvesting funding in further research, businesses foster a culture of innovation which keeps R&D teams stimulated and makes them feel valued.

ForrestBrown’s view – unleashing the real value of innovation

Achieving the status of a science and technology superpower is a long-term process that requires consistent and persistent effort from public and private sector players. The current consultation on a single system for R&D tax relief offers a great place to start. By simplifying the incentive, government can take an important step towards unleashing the real value of innovation – and becoming a global science superpower.