Widen tax credit to boost R&D, says CBI

The UK government is being urged to "turbo charge" the current programme of research and development tax credits to help the nation meet its R&D investment target by 2027.

A woman scientist at work in the lab illustrates an article about UK R&D investment and tax credits
The call in a report from the Confederation of Business Industry (CBI) warns that, at the current pace of investment, the UK will miss its target of spending 2.4% of gross domestic product on R&D by £19 billion in 2027.

Untapped Investment report

In its Untapped Investment report, the CBI says that "ensuring the R&D tax credit keeps pace with the changing nature of R&D and our international competitors will help spur private sector investment to close this gap".It adds, "Business investment in R&D is helping to tackle the biggest issues of our generation, from climate change to the future of transport."The CBI says the tax credit has already proved to be effective in spurring private investment with government incentives costing £3.4 billion in 2016-17 supporting a return of £24.9 billion of expenditure.

Read about US and Asian investment in the UK


To meet the 2027 target, the CBI is calling on government to widen the scope of eligibility for the R&D tax credit to include capital expenditure; data-driven innovation; outsourcing of R&D activities, where they are not already captured; and the upskilling and retraining of staff."As the country prepares to leave the EU, against the backdrop of slowing global growth and declining business investment, it has never been more pressing to support firms to innovate and get the UK economy firing on all cylinders," said the CBI.

R&D tax credit could jump start lagging UK productivity

Annie Gascoyne, the organisation's director of economic policy, added, “For the past ten years the UK’s productivity has been severely lagging behind its international peers. With productivity proven to have a knock-on effect on pay and living standards, boosting it cannot be put on the backburner any longer. Part of the answer is to kickstart business investment, and one area of untapped investment is R&D."For many businesses the significant upfront capital costs are stopping them from investing more in R&D. Pound for pound, the R&D tax credit drives more investment by business than it costs the government."The tax credit could be the motor to propel the economy forward - but only if it keeps pace with the changing nature of R&D, so it must widen in scope, if the UK is to remain a world-leader in innovation."Improving the R&D tax credit is only one part of the story, and the CBI will be looking to government at the spending review to set out a roadmap of how to meet the 2.4% target.”Read the full CBI report: Untapped Investment

For more news, visit our Enterprise and United Kingdom sections.

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