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One in five engineering firms missing out on R&D funding

29 October 2019

Engineering companies in the UK are potentially missing out on over £10 billion of R&D funding each year, according to new research.

The study, commissioned by MPA for Advanced Engineering 2019, has found that one in five (21%) eligible engineering companies aren't claiming the R&D funding potentially available to them under the government's R&D Tax Credit scheme, which allows companies to claim back up to 33p for every £1 spent on R&D activity.

On average, engineering companies invest £386,000 a year on R&D activity. With over 100,000 UK engineering firms not claiming, despite describing their company as "innovation active", the authors of the report have estimated that £10.2 billion is going unclaimed each year.

Reasons for not claiming the funding vary, but the most common answer given by engineers is that they don't believe their companies are eligible (10%).

However, the research finds that many engineering companies qualify because they are involved in activities such as: developing new processes to improve efficiency, quality or performance; overcoming unplanned technical difficulties; and creating bespoke solutions for clients.

Two-thirds (67%) of workers think that their firms are "innovation active", which is the most accurate indicator that a company is eligible for the R&D Tax Credit scheme. Despite this, only a third (37%) say that their companies claim the available funding.

Another barrier blocking engineers from claiming is a lack of awareness about the initiative. Nearly a quarter (24%) of the surveyed engineers who aren't claiming admitted that they didn't even know that the scheme exists. Even among those who think they are innovation active, 7% said that they were completely unaware of R&D tax credits.

While many are yet to take advantage of the scheme, engineering companies in the UK are planning on investing heavily in R&D. Over the next year, over one in five (22%) businesses in the industry are planning on spending over £1 million on innovative projects.

Nigel Urquhart, senior technical analyst at MPA, said: "Our research has highlighted that more work needs to be done to raise awareness of the R&D Tax Credit scheme, as these innovative companies could save themselves hundreds of thousands of pounds. This money could then be reinvested to fund further innovation, which would ensure UK engineering stays at the forefront of the industry."

Also this week, the Small Business Charter (SBC) has been awarded funding to support over 700 micro-businesses to make better use of technology to boost their productivity. A consortium of SBC-accredited business schools will deliver the Leading to Grow Programme to firms with less than nine employees, providing workshops on using technology to improve efficiency and profitability. The funding has been made available through the government's £9m Business Basics Programme run by the Department of Business, Energy and Industrial Strategy (BEIS) and Innovate UK.

Written by Rachel Miller.

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