Research and development (R&D) spending by UK businesses has reached a “record” high in the past year, jumping by 15% to £47bn, up from £41bn the year before.
According to new research from UHY Hacker Young, UK businesses also claimed a record £7.4bn in R&D tax relief last year, rising 19% from £6.3bn the prior year.
The R&D tax credit scheme incentivises businesses to undertake R&D by allowing them to offset costs against their corporation tax bill.
According to UHY, SMEs accounted for £4.4bn of these R&D tax credit claims in 2019/20, up from £3.5bn the year before.
Industries spending the most on R&D include:
- Manufacturing – up 8% to £14.1bn in 2019/20, up from £13.1bn in 2018/19
- Tech (information and communication) – up 26% to £7.7bn in 2019/20, from £6.2bn in 2018/19
- Wholesale and retail – up 11% to £2.7bn in 2019/20, from £2.4bn in 2018/19
UHY said that an increasing number of businesses “now understand just how powerful R&D can be in promoting long-term growth”.
It added that R&D spending often helps “kick start” innovation, allowing businesses to “gain or maintain their competitive advantage”.
Sasha Talbot, R&D tax manager at UHY Hacker Young, said: “The increase in R&D spending is a great sign for the UK economy. It suggests more businesses see the value of innovation in helping to increase turnover, productivity and employment.
“The R&D tax relief is a long-term driver of growth within businesses. This tax break is going to play a key role in getting the UK’s economy back to health, following the pandemic-related hit.”
She added: “The R&D tax credit scheme has already helped thousands of businesses – however, we suspect some businesses are still unaware that they qualify for the tax relief.”