Driving R&D investment through the R&D tax credits system

At the current pace of investment the UK will miss its R&D investment target by £19 billion in 2027. It’s crucial that the R&D tax credit keeps pace with the changing nature of R&D and our international competitors, as it will help spur private sector investment to close the gap. 

The CBI’s new report – ‘Untapped Investment’ – shows policymakers how to improve the current research and development (R&D) tax credit to help the UK meet its 2.4% investment target.

The CBI is calling on the government to:

• Widen the scope of eligibility for the R&D tax credit to ensure it keeps pace with modern R&D practices
• Review the availability of data on R&D expenditure to ensure the R&D tax credit’s effectiveness continues to be monitored appropriately
• Ensure the R&D tax credit is internationally recognised as world-class by regularly benchmarking the UK’s regime against international peers.

R&D business investment is a key enabler of productivity growth. But, as shown in the CBI’s Catching the Peloton report published last year, the UK has sat at the bottom of the G7 table for business investment since 2001. This weakness in business investment is limiting the UK’s ability to reach productivity growth rates observed prior to the financial crisis. Government action to improve the R&D tax incentive regime can move the dial to improve business investment in R&D to reach the 2.4% target.

For many businesses the significant upfront capital costs are stopping them from investing more in R&D.  Pound for pound, the R&D tax credit drives more investment by business than it costs the Government. The tax credit could be the motor to propel the economy forward - but only if it keeps pace with the changing nature of R&D, so it must widen in scope, if the UK is to remain a world-leader in innovation

Please contact Matthew Lewis for further information on the CBI’s future R&D tax credit work, and how you can get involved.