Breaking Down the Latest UK R&D Statistics
During September, the UK Office of National Statistics released its annual report on R&D activity between March 2019 and March 2020. These R&D statistics provide key insights into research and development activity in the UK economy over the previous financial year, including data on how much has been invested, who’s invested it, and R&D intensity, which is the total economic activity devoted to R&D.
The latest UK R&D statistics report indicates a 16% increase in the number of R&D claims compared to the previous year. There were a total number of 89,500 claims, of which this growth has primarily been driven by SME’s, accounting for 16% of all claims. 12% of claims fall within the RDEC scheme that’s targeted at larger companies, in which 5,305 of these claims came from subcontractors. In addition, there was a 19% increase in the number of R&D tax relief support claims for the year ending March 2020, totalling £7.4 billion.
What do the latest UK R&D statistics mean?
The rise in UK R&D claims can be attributed to an increase of awareness amongst SME’s who may qualify for relief. Since the relief a company can claim increased by 230% in 2015, the UK government have continued to support SME’s in claiming financial support, in order to promote an increase in UK R&D activity.
The total qualifying R&D expenditure for March 2019 to March 2020 was £47.5 billion, indicating a 15% increase from the previous year. Comparing this to R&D activities of countries in the EU, Germany and France are currently outperforming the UK, in which Germany is predicted to invest £93.36 billion over FY21 and France are predicted to invest £49.18 billion.
While still lagging behind our EU counterparts, the growth indicated in the latest UK R&D statistics report shows that the HMRC R&D tax relief scheme is paying off. As a key driver of the economy and future prosperity of the country, R&D activity is crucial in driving improvements in living standards across the UK. In the current financial year, the UK are ahead of the likes of Brazil, Canada and Taiwan when it comes to R&D expenditure while being on a similar growth level to Russia.
Key regions for UK R&D activity
As expected, this year’s UK R&D statistics show a concentration of R&D activity in the capital, as well as the South East Region. Claims from businesses with a registered address in the capital amounted to 20% of total claims and 31% of the amount claimed, while the South East accounted for 15% of total claims and 18% of the total figure claimed.
The Golden Triangle
Previous data suggests that much of this activity in the capital is being driven by Patent Box claims; a tax relief incentive available to help firms develop intellectual property. In correlation with previous data, this year’s UK R&D statistics continue to indicate a concentration of R&D spending within the ‘Golden Triangle’, encompassing the areas between London, Oxford and Cambridge.
In the North
The data also showed a hub of activity in the North West, in which the region had the third-largest number of claims. While the number of claims was high in this region, data shows that the financial amount claimed was relatively low when compared to London, the South East, the East and the West Midlands.
Regions currently showing the least aptitude for R&D activity include the North East, Wales and Northern Ireland. These areas are currently considered as the least able to grow their innovative capacity, based on the people, facilities, and skills in place. The data highlights a focus area for where the government need to continue to invest further resources to promote their capacity for growth.
The below figure by the Centre for Cities indicates areas of the UK with the strongest and weakest innovative capacities, based on data from the infobox. Census, 2011. ONS, 2017. ONS, 2018. TechNation, 2020. REF, HESA, 2014-2018. Intellectual Property Office, 2017. European Patent Office, 2017-2018.
Key industries for UK R&D activity
The latest UK R&D statistics for the year ending March 2020 indicate that the sectors which submitted the most R&D claims were Communication (22%), Manufacturing (22%) and Professional, Scientific, and Technical (19%), accounting for 20%, 25% and 24% of the total amount claimed. Similarly, to other leading developed countries, the UK’s manufacturing sector is steaming ahead with pharmaceuticals, automotive, aerospace and machinery companies being the most significant contributors.
Trade analysis indicates that the UK was the fourth largest exporter of aerospace products in 2018, while we’re still outranked by other developed countries when it comes to automotive and machinery production.
What does this mean for talent acquisition?
The data from the latest UK R&D statistics report indicate several continuing and emerging trends that are crucial in the decision making of acquiring new talent. Based on this data, we can draw the following conclusions that will affect talent acquisition within the R&D tax consultancy sector over the next year.
Regional concentration of R&D Tax professionals
- The data indicates increased growth in R&D activity which could generate opportunities for R&D consultancies to strategically expand.
- Areas within the ‘Golden Triangle’ (between Oxford, Cambridge, and London) is where the majority of R&D tax consultancy talent is located. These regions offer competitive salary and benefits, which could pose a challenge to consultancies hiring outside these regions.
Specialist background knowledge required
- As the manufacturing, Information & Communication, and Professional, Scientific, and Technical service sectors indicate the most R&D activity, there could be an increased demand for professionals with background knowledge within these sectors.
- Candidates with backgrounds in aerospace, automotive and manufacturing are prime candidates for transferring to the R&D tax consultancy sector.
How can Leonid help?
As one of the only talent acquisition partners in the UK to specialise in the R&D Tax Consultancy sector, Leonid is primed to act as an extension of your business to facilitate the partnering of talent.
Our specialist sector knowledge enables us to conduct the most thorough of searches, scouting transferable talent from other sectors when traditional recruitment agencies dip into a limited pool of available talent. Through our client-led business model, we conduct retained searches using the Magic Month Principle, creating results that are rare to find in the industry.
Looking to expand your team? Find out more on how we can help.