This content is part of the GBCC’s Invest to Grow campaign. Invest to Grow aims to help businesses boost productivity through investment in innovation, R&D, technology & machinery. This section focuses on innovation and R&D. Click here for more information on the full campaign.
Most businesses invest in innovation and research and development (R&D) in order to gain competitive edge by improving the quality or range of their products or services. It can also be driven by reducing costs, improving business processes or looking to enter a new market or grow market share.
Firms which persistently invest in research and development have on average 13 percent higher productivity than non-innovative firms. Around half of businesses in the UK actively innovate. However, the UK lags behind international competitors in levels of investment in R&D.
Innovation and R&D are not just about new inventions. For most businesses they can involve using research to drive changes in strategy or the adaption and application of approaches, ideas, technologies or other activities seen elsewhere in a way that is unique or new to their organisation.
Innovation and R&D
University of Birmingham
R&D Tax North West
The R&D tax credit regime effectively provides significant tax reliefs to all types and sizes of companies partaking in almost all development work, including software development and the new application of existing technologies. It is likely to be available wherever there is experimentation, prototyping and testing. Intellectual property ownership is not a requirement for claiming tax credits. Even if the work is done under a contract or grant-subsidised, a company may still make a claim for a credit under the R&D Expenditure Credit Regime.
It has been widely reported that R&D tax credits are not taken full advantage of, yet they can be very valuable to a business. The tax credits can be claimed under two mutually exclusive regimes, against associated costs including those for staff (or external contractors) and software licences and utilities.
Broadly, R&D Tax Relief for Small and Medium Sized Enterprises is available for SMEs with less than 500 employees and either turnover of no more than €100m or gross assets of no more than €86m. However, classification for these purposes is based on an EU recommendation and can be more complex. The allowable tax relief on R&D costs is 230%, meaning that for each £100 of qualifying costs, a company could reduce its corporation tax by a further £130, on top of the £100 spent.
Alternatively, the Research and Development Expenditure Credit is available to large companies for R&D expenditure and to R&D Tax Relief qualifying SMEs for subsidised or funded R&D expenditure. This is an above the line taxable credit calculated as 11% of qualifying R&D expenditure, which can be offset against existing tax liabilities.
For more information on R&D Tax Reliefs: click here.
The Patent Box allows qualifying companies to benefit from a lower rate of Corporation tax - 10% - on profits earned from their patented technologies, and certain medicinal and botanic innovation rights.
To benefit from the relief, a company must own or have an exclusive licence in a patent or patents and have undertaken a qualifying development of them. A qualifying development may be the creation of or a contribution to the creation of the patented invention, or, alternatively, significantly developing it, or any product or process incorporating it. Click here for more information.
Income from exploiting patented inventions for the purposes of this relief must come under: selling patented products, products incorporating them or bespoke spare parts; licensing or selling rights to third parties; infringement income; or related damages, insurance or other compensation. Companies earning income from exploiting a patented manufacturing process or a service using a patented tool must calculate a notional royalty. Click here for details.
The Patent Box must be elected within 2 years after the accounting period in which the relevant profits and income arose ended. Click here for details on how to claim.
Innovation Vouchers are distributed through a scheme managed by Aston University, in partnership with Birmingham City University. An Innovation Voucher is £2,500 of part-funding offered to eligible companies by the European Regional Development Fund (ERDF) to spend on business innovation and business growth activities. The Innovation Vouchers scheme targets SMART specialisation sectors and aims to develop new processes and systems to improve efficiency of small to medium-sized companies (SMEs) and to bring new products and services to market. Click here for details.
The Government’s principle agency for innovation funding in the UK, Innovate UK delivers funding of between £25,000 and £10m through competition rounds, to businesses of all sizes, including pre-startups. Projects are encouraged to be collaborative, but must be led by a UK based company.
Funding is available where a business or group of businesses is seeking to test a new idea and ensure it will work; create a new product, process or service or improve an existing one, through R&D; and/or work with other organisations on collaborative projects.
Some funding competitions through Innovate UK are regional, and/or industry-specific. Beyond these however, Innovate UK also offers an open programme for innovative businesses in any sector or technology with high growth potential. 2 rounds of open funding competitions are run each year. Furthermore, Innovate UK awards funding for Knowledge Transfer Partnerships (see below), and runs funding competitions on behalf of other organisations.
Innovate UK are also currently delivering the Industrial Strategy Challenge Fund. The Fund aims to bring together the UK’s world-leading research with business to meet the major industrial and societal challenges as outlined in the Industrial Strategy’s 4 grand challenges.
Click here for a maintained database of Innovate UK’s funding competitions. Entrepreneurs and businesses can sign up for email notifications from Innovate UK here. For more information on the Industrial Strategy click here.
Delivered by Innovate UK, The Knowledge Transfer Network (KTN) helps UK businesses with the potential to grow through their innovations. It seeks to optimise creativity, ideas and the latest discoveries. The network links new ideas and opportunities with the relevant expertise, markets and financing through extensive networks of businesses, universities, funders and investors. It combines in-depth knowledge in all sectors, and specialises in cross-sector collaboration.
Full information on the Knowledge Transfer Network and the industries it supports can be found here.
The Catapult Programme was established by Innovate UK to support innovation by UK businesses. It comprises a network of physical, world-leading centres, designed to transform the UK’s capability for innovation in specific areas and help drive future economic growth.
Catapult Centres are not for profit and service all sizes of business. They connect these businesses with the UK’s research and academic institutions, in order to provide access to expert technical knowledge and equipment, and additional resources necessary to develop commercial ideas from concept to reality.
Catapult Centres can tailor the support offered to suit the requirements and objectives of individual businesses on their programmes. As well as on-going programmes, the centres will also run individual and specific events such as walk-in surgeries, hackathons and networking sessions.
Each Catapult Centre has a particular focus. Information on the Catapult Centres can be found here.
Horizon 2020 is a European Union scheme and the largest funding programme for R&D and Innovation in Europe, with a budget of €79bn until 2020. It is available across a wide range of sectors and principally supports collaborative projects in response to technological and societal changes. The programme has three focus areas, which involve: providing scientific researchers with access to research infrastructure; stimulating the growth potential of European companies by encouraging private investment in R&D and offering support for innovative SMEs; and overcoming societal challenges at all stages of research and innovation. Funding is available to both educational bodes and private companies.
Horizon 2020 funding is available primarily to consortiums, usually of at least 3 organisations from different countries. Eligible projects will involve: ground breaking research or new technologies; improving research training and development or infrastructure; creating growth factors in certain sectors; increasing private investment in research; and/or responding to challenges like climate change, food security or healthcare for an aging population. All grants are 70% match funded, meaning the remaining 30% must be privately funded. In exceptional circumstances projects may be 100% EU funded. Coaches and mentors are also available to SMEs.
The Government has pledged to underwrite Horizon 2020 projects that continue beyond the UK leaving the EU, so long as they are judged to be good value for money and in line with domestic strategic priorities. Post Brexit, it is not yet confirmed whether UK businesses will be entitled to apply for EU funds, however the UK and the EU have jointly announced that they fully intend UK entities’ eligibility in Horizon 2020 to remain unchanged for the duration of the programme. This includes eligibility to participate in all Horizon 2020 projects and to receive Horizon 2020 funding for the lifetime of projects.
The SME instrument provides EU funding and support for breakthrough innovation projects with market-creating potential. It is part of the European Innovation Council (EIC) pilot and includes staged funding and business acceleration services.
Between 2018 and 2020, SME instrument will support 4000 SMEs with ground breaking innovative ideas for products, services or processes that are ready to conquer global markets, with a total e1.6billion. There are no pre-defined topics for funding, they will be selected on impact.
SME instrument offers business innovation grants of up to 70% for feasibility assessments and development and demonstration purposes, alongside free-of-charge business coaching and access to additional business acceleration services and facilitated access to risk finance to support commercial exploration.
Further information on SME instrument can be found here.
The Government has pledged to underwrite Horizon 2020 projects that continue beyond the UK leaving the EU, so long as they are judged to be good value for money and in line with domestic strategic priorities. So long as the UK is associated with Horizon 2020 UK SMEs will have access to SME instrument.
Post Brexit, it is not yet confirmed whether UK businesses will be entitled to apply for EU funds, however the UK and the EU have jointly announced that they fully intend UK entities’ eligibility in Horizon 2020 to remain unchanged for the duration of the programme. This includes eligibility to participate in all Horizon 2020 projects and to receive Horizon 2020 funding for the lifetime of projects.
Growth Hubs are local public-private sector partnerships led by the Local Enterprise Partnerships (LEPs). They exist to join up national and local business support and offer free support for business development.
The Greater Birmingham Chambers of Commerce are a delivery partner for the Greater Birmingham and Solihull (GBS) LEP Growth Hub, which exists to provide co-ordinated, effective first-class business advice, funding and support services across Greater Birmingham.
The GBS LEP Growth Hub is a single point of contact for business advice, funding and support for any business across Greater Birmingham. It brings together all services and partners offering business support in the region through a web portal and expert advisers. The Growth Hub will either provide support directly to businesses or refer them to specialist advice through partner organisations.
Click here for more information and to contact the GBS LEP Growth Hub.
Direct partnerships between businesses and universities drive innovation through shared expertise and resources. Chamber Patrons, Aston University, Birmingham City University and the University of Birmingham all regularly collaborate with local businesses on transformative projects.
Opportunities for industry university partnerships are available for all sizes of business, and across a diverse range of sectors. While offering businesses access to specialist knowledge, research and facilities, Industry University Partnerships can also support the education of future workforces.
While investment in innovation and R&D is important, in order for it to achieve effective results it needs to be delivered in a way that is clearly aligned to an organisations’ overall business strategy. What works for one company, is unlikely to work for all. We hope that this campaign helps inspire businesses to consider what investment in innovation and R&D would most benefit their business.
Our recommendations for stakeholders:
Our recommendations for businesses:
For the full GBCC position on investing in innovation and R&D click here.
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