The latest figures from business and financial adviser Grant Thornton UK LLP’s Agents of Growth* series suggest that the UK’s mid-sized businesses** (MSBs) will continue to drive the country’s R&D agenda in the year ahead and be the largest investor in new technologies.
The research, produced in partnership with the Centre of Economic and Business Research (CEBR), finds that over the past 12 months, MSB expenditure on R&D has grown by 2.7%; marginally (0.3pp) ahead of the 2.4% growth reported by their larger and smaller counterparts. Over the next year, nearly a quarter (23%) of UK MSBs are expected to increase their investment in R&D.
Trevor Shaw, Business Tax Director at Grant Thornton’s Leicester office and a member of the firm’s specialist Central Innovation Team, explains: “Innovation and innovative companies play an important role in the UK and regional economies. There’s strong evidence that the vast majority of the East Midlands’ 2,465 MSBs operating in a broad range of industries are actively involved in developing new, innovative products and services, but many don’t appreciate these may qualify for R&D tax relief and so are missing out on government support and the tax relief available to them.
“The research findings are good news for the region’s MSBs, its economy and local community.
“In the East Midlands we are seeing strong innovation amongst the vast majority of MSBs, particularly those operating in the food and drink, manufacturing and engineering sectors, all of which are working towards creating products and services in a new and different way.”
The research found that the number of MSBs in the East Midlands has remained fairly level during the period 2011 to 2014. “Turnover of the region’s MSBs is up by approximately 10 percent,” says Trevor, “rising from £36,190 million in 2011 to £41,189 million in 2014.”
The number of people employed by MSBs in the East Midlands has remained static, settling at 304,000 in 2014, up from 299,000 in 2013, which Trevor says is “as we would expect”.
“Many MSBs in the region retained their skilled workforce throughout the economic downturn in order to avoid losing the key skills they had established,” he adds. “With business now picking-up, many are able to fully utilise this ‘surplus’ and are fast reaching the point at which they need to recruit, which can only be positive for the local economy.
“The government’s pledge announced in the Autumn Statement to abolish employer’s National Insurance Contributions for apprentices aged under 25 presents MSBs with tangible financial benefits for their commitment to nurturing and supporting young talent,” adds Trevor, “and has the potential to further boost their recruitment plans in the region.”
Although improving, national figures still suggest the UK remains far behind other developed economies in terms of its R&D expenditure. With some reports*** ranking the UK as low as 19th amongst peer economies in the OECD, many will wonder whether the impact of the current R&D tax credit regimes will be sufficient in helping the country meet EU R&D intensity targets of 3% of GDP by 2020.
Grant Thornton’s research also suggests the UK’s MSB population is anticipating faster growth in turnover (6.7%), exports (4.5%), capital investment (2.8%), and employment (2.7%) than the UK business population as a whole.
Trevor adds: “Innovation lies at the heart of leadership and the UK has for generations been looked at as a leader in developing new technologies, processes and ways of thinking. It now risks losing this significantly invaluable trait to other economies which are proactively offering their business communities more support and encouragement to invest in R&D.
“In order for the UK to remain a relevant contender amongst global business hubs, more needs to be done to support its critical mass of MSBs in developing the processes and technologies which strengthen the competitiveness of British businesses. No other segment of the business community is as well placed as the UK’s MSBs to deliver cutting edge technologies, innovative ideas and transformative operational processes – all they need is just a bit of extra support and encouragement from the Government to do so. This support**** could also extend beyond the initial parameters of research and patented technologies, and into the actual manufacturing and development stages to further strengthen the UK economy.”
For more information about Grant Thornton’s Agents of growth summit and research, contact: [email protected].
Grant Thornton’s Leicester office has approximately 120 staff providing business and financial advice across Corporate and Personal Tax, audit and assurance, employer solutions, corporate finance, and sustainability, to organisations across the East Midlands.
