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When considering the effectiveness of R&D tax relief claims in the UK, it is often worth considering how innovation in the UK compares to that around the world.
This can often be an indicator of things going well or highlight areas where the Government can focus to improve innovation.
A recent report about the EU has highlighted some failings in R&D and could indicate a strengthening of the UK’s R&D position on the global stage.
Why is the EU struggling with R&D?
The 2026 Annual Single Market and Competitiveness Report highlights the ways in which R&D investment, patent applications and technology adoption are flatlining.
The report indicates that a big problem centres around the scalability and the longevity of start-up businesses that can often fuel innovation when able to flourish.
Despite committing to an R&D investment of three per cent of GDP, the EU is only currently investing 2.2 per cent of GDP.
This disparity is potentially limiting the ability of businesses to take the financial risks that are often so important when seeking an advance.
Further issues seem to centre on the ability to hire and retain the staff with the skills required to make innovation possible.
When compared to the UK and Japan, the EU falls below both, with it only managing to match the levels achieved by the US.
It is not all doom and gloom over on the continent as the report found that “the EU is a frontrunner in green inventions and performs well in health, biotech and pharmaceuticals.”
However, there is a notable weakness in the EU’s ability to match digital innovation when compared with other countries.
Whether the EU is able to invigorate the presence of R&D and get more innovation flowing remains to be seen, but it may need to rethink how R&D is managed if this goal is to become achievable.
How does the UK compare to the EU for R&D?
One of the main issues with the way in which R&D is managed in the EU is the lack of funding that seems to hold back innovation.
This is why understanding the UK R&D system is vital for ensuring that businesses can achieve advances and continue to do so in the future.
R&D tax relief claims can provide the funding needed to embolden research to take place, given that they can be awarded for abortive or failed projects with no need for commercial success.
With the EU struggling to keep pace with the demands of R&D, it could be expected that more countries will seek to form research agreements with the UK in the same style as Germany and Japan.
As R&D tax consultants, we will continue to monitor not just the way in which R&D is managed in the UK but also how global trends may inform the future of innovation.
To stay confident in supporting UK innovation, speak to our team today.
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