Budget ‘short on R&D detail and STEM investment’

Meanwhile, one leading engineering sector advocate has said hopes that the Government’s hints of renewed focus on encouraging STEM careers within school would see significant changes have been disappointed by the Exchequer’s response this week.

In his Budget speech this week, the Chancellor committed to £20 billion in annual R&D spend by the end of the present Parliament in May 2024. However this fell short of a vow last year to reach £22 billion by that date. Instead, Sunak has now said the latter figure would be achieved in the 2026-27 financial year.

Senior manager, R&D tax incentives at Ayming, Benjamin Craig applauded Sunak’s commitment to increase annual R&D spend but he warned there was a significant lack of information on how this was to be achieved.

“It’s always encouraging to see the Government place such a strong emphasis on research and development, recognising its significance in stimulating economic growth,” commented Craig.

“But while today’s numbers sound impressive - £20 billion a year spent on R&D by the end of this parliament – the announcement may leave many in our industry scratching their heads as to where that investment is going to come from.

“There is further ambiguity around the Government’s projection for a 1.1% of GDP spend on R&D investment by 2027. Although we welcome any increase, we are a very long way off the target of 2.4% by 2027, which looks increasingly unlikely the closer that date appears.”

The announcement may leave many in our industry scratching their heads as to where that investment is going to come from

Benjamin Craig, senior manager, R&D tax incentives, Ayming

Michael Jaeger, partner and patent attorney at European intellectual property firm, Withers & Rogers, offered a more positive response:

“The Government’s focus on investing in driving economic growth is good news for innovative businesses. In particular, the decision to boost spending on R&D activity in the UK by £22bn and extend the scope of the R&D tax relief scheme to include investments in cloud computing and data costs, will encourage businesses to invest in improvements that will drive UK productivity,” he remarked. 

Jaeger added that the new £1.4 billion Global Britain Investment Fund will also help to attract investment from overseas into rich seams of research in areas such as life sciences and electric vehicle technologies.”

Craig acknowledged that changes to R&D tax relief, which allows cloud computing and data costs to be included from April 2022 was welcome news, yet overdue.

“There is however room for concern over the Government’s pledge to incentivise greater investment at home, which may mean a crackdown on overseas sub-contracting. This could be bad news for some companies who are used to innovating in this way and, rather than bringing innovation home, could encourage them to carry on doing their R&D abroad.”

He went on to welcome the Chancellor’s planned focus on innovation is promising but said industry needed to see the detail to ensure that its views canvassed during consultation on R&D tax relief earlier this year and still being analysed by the Treasury, had been incorporated.

There was also a strongly worded statement from the organisation EngineeringUK, criticising Sunak for a missed opportunity to boost STEM-related careers provision in schools.

‘The government has big ambitions to make the UK a green science superpower and achieve net zero by 2050. To make this a reality, the UK needs many more engineers. This requires a long-term investment in education and skills and a clear STEM education strategy with careers provision at its heart,” emphaised the statement. 

Engineering UK added that, while investment in education and skills outlined in the Comprehensive Spending Review was a step in the right direction, some of the funding announced to skills in particular is money that has already been committed.

Government must be ambitious and strategic in its approach to education and skills, it continued, ensuring that more investment is forthcoming for careers provision.

‘We are disappointed to learn that the government has decided to not take forward our call for £40 million additional annual funding for careers provision aimed at ensuring schools and colleges are better enabled to deliver meaningful careers provision to their students so they know about the green jobs of the future.”