With private R&D investment outpacing public spending, is it time for a bigger commitment to R&D?

Without R&D tax reliefs, smaller innovative businesses would likely struggle to embark on the often financially risky process of seeking innovation.

Instead, they would rely on specific Government programmes or the assistance of larger businesses that would stand to benefit more from the R&D work than the smaller business.

However, there is a view that more public commitment needs to be made to R&D investment, as even the recent announcements may not go far enough.

With the R&D spend of a few major companies eclipsing that of many countries, is it time for the Government to increase R&D investment?

Why are private companies outpacing public R&D spend?

If you had to guess which of the major companies were able to outspend entire countries, there are only a few that would fit the bill.

Amazon and Alphabet, the parent company of Google, both have the capability to invest more in their own R&D than many European companies.

The UK, France, Germany, Italy and Spain were all outspent by these massive corporations, meaning that innovation risks being captured entirely by two companies rather than made accessible for smaller businesses.

While it may not be possible for countries to fully match the spending of private companies, it is not wise for them to shirk the responsibility to create a competitive R&D environment.

When R&D is pooled into a small number of companies, it can be challenging to emphasise the importance of innovation.

We recently observed how public perception of R&D is falling, with many people unable to say how innovation was impacting their lives.

Having some success stories of public R&D funding could be the key to strengthening public trust in the process and inspire future funding.

Will this impact the future of R&D tax reliefs?

The Government continue to verbally commit to the future of UK R&D and this does sometimes extend to new investment strategies and global R&D treaties.

It may be that countries working together to fund R&D could become more common going forward, as only together would they be able to compete with the funding available to major multinational companies.

For innovative businesses in the UK, it is important to continue to seek new advances and continue demonstrating the significance of R&D.

If accountants are looking to help their clients with R&D, then they should try to maximise the R&D tax relief claims by covering the full spectrum of qualifying costs.

As R&D tax consultants, we want to help empower innovative businesses to make the most of R&D tax relief claims so that they can continue to make new advances in spite of the vast funding tied up in a few companies.

This is only possible if the quality of R&D tax reliefs is kept high, as this will reassure future Governments that the investment continues to be worthwhile.

Speak to our team if you would like to make the most of R&D tax reliefs.

Adam Bointon