HMRC figures show a drop in business spending on R&D across the South West

By Nick Batten on 6 October, 2022

Spending on the most valuable forms of innovation by South West businesses fell by nearly a quarter to £1.8bn during the pandemic, according to recent government statistics. 

Despite this drop in spending, analysis by innovation funding specialist Catax shows that the number of tax relief claims for high-reward research and development (R&D) projects made by South West businesses increased in 2020/21, rising 7% from 6,465 claims to 6,915. 

The data is captured by HMRC and is based on claims made for R&D tax credits, which reward businesses for qualifying activity. R&D tax relief was introduced in 2000 and results in either a reduction in a limited company’s corporation tax bill or a cash lump sum for businesses seeking to resolve a scientific or technological uncertainty.

R&D projects carried out by UK businesses introduce new products and services to the marketplace which play a critical role in economic growth, as they attract investment, boost exports and lead to the creation of more skilled jobs.

Figures released by HMRC show that in the South West, spending on this sort of game-changing R&D fell by 22% from £2.3bn in 2019/20 to £1.8bn in 2020/21. 

UK-wide innovation spending that qualifies for tax relief declined by 11% to £38.1bn in 2020/21 — down from £42.8bn in 2019/20.

Mark Tighe, Chief Executive Officer of Catax, said, The pandemic has caused a setback for innovation spending in the South West, but it is encouraging to see that more businesses are making claims for this type of high-reward R&D activity.

“This kind of innovation is of vital importance to local economies, as it helps businesses grow and creates even more skilled jobs. 

“Businesses are already bouncing back from the pandemic and are innovating in earnest, which will kick-start an acceleration in R&D spend.” 

To view the full government statistics, click here.

Catax is the UK’s leading expert in specialist tax relief. Since launch, it has recovered more than £456m of tax relief for its clients in the areas of Research & Development, Capital Allowances, the Patent Box and the Remediation of Contaminated Land.