Guest Post By: Lauren Olson, Myriad Associates
The uncertainty of the UK’s future relationship with the EU, after the Brexit referendum vote in June, has not resulted in major economic turmoil. As the UK economy has held up better than expected, and the Chancellor’s autumn statement focused on investment in broadband, infrastructure, and exporting, the UK may continue to be a great place to invest in innovation.
Some investments have already been announced, as Facebook Inc. will add 500 employees in the UK in 2017, and Google’s parent company, Alphabet Inc., plans on expanding its London campus. In the autumn statement, Phillip Hammond, Chancellor of the Exchequer, announced a new National Productivity Investment Fund (NPIF) of £23 billion to provide additional spending for transport, digital communications, research and development, and housing. The £2 billion extra for research and development by 2020-21 is in addition to the research and development tax credit scheme, which provides nearly £2.5 billion in tax credit incentives to businesses investing in research and development, and Innovate UK, which has £561 million in 2016-17 available through its funding competitions to help drive innovation and grow the UK economy.
Although it seems obvious, it is important to remember that innovation, whether in technology or the life sciences, in manufacturing or in communication, is happening internationally, not just in the European Union. UK-based companies may need to look for partners and opportunities outside the borders of the EU, but these types of diverse opportunities all over the world can only be good for innovative UK companies, and will make further advancements possible.
The amount of bureaucracy UK companies face may also be reduced as the UK seeks to make a clean break with the EU. This will give companies the opportunity to build more efficient and advanced systems for work such as clinical trials. These new systems will give overseas companies even more reasons to want to work in the UK, further increasing the prospects for investments in innovation. Any opportunities to make efficiency and effectiveness gains will be favourably viewed by investors and raise the UK’s profile among businesses looking to expand into new areas or new markets.
The government will also review the tax environment for research and development to ensure that the UK tax system is strongly pro-innovation and builds on the introduction of the ‘above the line’ R&D tax credit to make the UK an even more competitive place for companies to do research and development. The Chancellor’s announced boost for research and development is a welcome reassurance for companies who may have been concerned about funding after the referendum vote. The favourable tax incentives give companies the chance to do more with their current workforce, provide funds to hire new employees, and make it possible to build new facilities and buy or create new, state of the art equipment and materials. Some of these expenditures can release cash into businesses through research and development capital allowances, which are not capped. These R&D capital allowances are applicable for companies that have built or refurbished research and development facilities, developed an IT system for internal use, or invested in plant machinery, fixtures, or fittings to support research and development activities.
While the UK’s continued participation in the EU’s Horizon 2020 programme, with its budget of nearly €80 billion for the seven years from 2014 to 2020, is still a topic for negotiation, until the UK actually leaves the EU, all obligations and rights of the member states continue to apply, which includes eligibility for Horizon 2020 funding.
While there may be deficits in funding for certain areas, such as in academia, due to Brexit, this can also lead to stronger partnerships with industry, and ultimately result in stronger courses and better prospects for students when they are looking for work after graduation. If UK universities maintain their world-class reputation, they will continue to attract the best and brightest from all over the world, continuing the virtuous cycle as the increased quality of the scientific and technical community in the UK will attract money and investment both from within Europe and from other countries across the world.
As the uncertainties following the Brexit referendum vote continue, the UK will need to build on its strengths in science and technological innovation to ensure the success of its economy in the future. The incentives provided by the government give strong advantages to companies ready to start or continue investing in research and development and innovation. UK-based companies should see Brexit as an opportunity instead of a threat. It may be the push some UK companies need to start to look beyond business as usual and to shape the businesses, and innovations, of the future. It is easy to get caught up in the negative, but those companies that can see the opportunities change presents will always be more successful, and more profitable, than their counterparts stuck in the past.
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