The UK risks falling behind other countries and losing out on the many benefits from investment in research and development (R&D) unless the UK Government creates better incentives for businesses to invest. That’s the finding of a new report, released today by the Campaign for Science and Engineering (CaSE).

LifeArc has sponsored the ‘Backing Business R&D’ report, which says that investment in R&D could boost the UK economy, improve the quality of the NHS and unleash potential cutting-edge technologies.

In the UK, businesses are the main funders and performers of R&D; in 2021 they performed 71% of all UK R&D worth £46.9 billion. However, recently released data from the ONS on Business Enterprise Research and Development (BERD) shows that high inflation has contributed to a stagnation in business R&D investment in the UK since 2018.

Today’s report sets out some of the most challenging barriers UK businesses face when investing in R&D, and actions the Government should take to overcome them. Recommendations from the report include:

Ensuring that the policy landscape is predictable and fit for purpose

Clarify tax credits and incentives

A stable policy environment is vital to enable effective long-term planning and investment by businesses in R&D. For example, recent successive policy changes to R&D tax credits, including the level at which they are set, has led to a lack of clarity and certainty for businesses. The report calls for a statement of intent from the UK Government on the purpose and focus of R&D tax credits to stop this happening in future.

Improve regulation

The report reinforces existing calls for system-level changes to support innovationand address regulatory uncertainty for new and emerging technologies. It calls for developing standards to drive and guide new technology development and encourages using cross-sector external experts to support regulatory resourcing.

Increasing and improving support across different stages of research and innovation

Improve funding and financial support

Evidence shows that financial support for scale-up businesses is a particular issue. The report recommends using the Mansion House reforms in close collaboration with R&D-led businesses to unlock pension funds for investment in R&D industries, increasing and promoting the number of funding opportunities for SME-university collaborations, and setting long-term budgets for funding bodies.

Support R&D infrastructure

R&D infrastructure must be part of wider discussions about regional infrastructure and other policy considerations such as planning processes, housing, transport, and utility supply.

Leveraging regional strengths in R&D

Support regions and maximise regional R&D capacity

Regions should be given the freedom to make decisions about local innovation programmes. Our evidence shows that there is plenty of scope to further strengthen local innovation ecosystems to improve R&D investment opportunities, creating opportunities for new jobs and industries across all parts of the UK.

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“We want to make life science life changing and our success in doing that, as a nation, depends on whether the fundamentals of our R&D ecosystem are working as they should be. This report shows that action is desperately needed in the UK and we hope that these recommendations will unite the rest of the R&D community to collectively ensure that UK really does become a go-to destination for companies looking to invest in R&D.”

Stéphane Maikovsky, Interim CEO at LifeArc

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“Over the last year we have engaged with experts and professionals from across the business R&D landscape. Our evidence shows that the UK is not as attractive as it could be for business R&D.

“To create an attractive environment, all the fundamentals of the R&D system need to be working. The UK Government must use all the levers available to create and enable an environment that incentivises businesses to invest in R&D in the UK.

“In this report, we consider actions the Government could take to support the rapid unlocking of barriers to business R&D investment. We also recommend measures that will strengthen the UK business R&D environment in the longer term, building a stable and predictable policy landscape.”

Dr Camilla d’Angelo, Project Lead and Policy Manager, Campaign for Science and Engineering

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