In the wake of hardline economic posturing and the sledgehammer of tariffs, many countries and businesses are capitulating to Donald Trump’s wishes – and the pharmaceutical industry is not exempt.
Following a threat of astronomical tariffs, many medical research companies are now retreating to the other side of the Atlantic and taking jobs and innovation with them.
Is this truly all the work of Trump or has the UK miscalculated just how incentivising R&D tax relief claims are for innovative businesses?
Why are pharmaceutical companies leaving the UK?
The exodus of pharmaceutical companies is driven by two main factors.
The first is outside of the control of the Government and is more connected with the foreign and economic policies of the United States of America.
However, there is a risk that the other driving force may be overlooked.
The UK is not currently an attractive enough space to retain major pharmaceutical companies who would rather conduct their R&D in different countries with better investment strategies.
This is troubling for a Government that has claimed a renewal in science and technology funding to be a key part of its economic strategy.
The Association of the British Pharmaceutical Industry claimed that “since 2018, UK Pharmaceutical R&D investment has underperformed against global trends, with a significant slowdown starting in 2020, when UK growth fell to 1.9 per cent per year, behind the global average of 6.6 per cent annual growth.
“Pharmaceutical industry investment in R&D actually fell in 2023 by nearly £100 million.”
With such declining figures, it is no wonder that big pharmaceutical companies are looking elsewhere.
The UK no longer has the carrot, and with Trump wielding the stick the move to the US seems unavoidable.
What might the pharmaceutical exodus mean for R&D tax relief?
There is a concern that pharmaceutical companies are canaries down the coal mine and that other industries may be feeling similarly disenfranchised with the UK’s current R&D tax relief offerings.
It is possible that a more generous rate of R&D tax relief could be introduced to win back some of the larger global innovators if more companies decide to move along.
However, there may be an opening for smaller businesses to take advantage of the situation.
As mentioned, the Government wants to invest in science and technology, and with the big players gone, smaller pharmaceutical companies could make some significant headway in the UK.
Whether this would be enough to bolster the UK’s R&D to make it a global competitor remains to be seen, but companies that wish to continue operating in the UK should not be too disheartened by the departure of competitors.
We believe that there is still a great amount of potential for innovation that can be achieved through the utilisation of R&D tax relief claims.
As such, we are on hand to advise accountants and innovative businesses to ensure that they maximise their fully compliant R&D tax relief claims and continue to invest in the UK.
If you want to find out how to make the most of the R&D investment opportunities in the UK, speak to our team today!
