Britain still failing to back the future with R&D spending

A report by the Office for National Statistics shows UK below EU average despite Government rhetoric

R&D: UK continuing to lag behind EU peers

British ministers love to bang on about how they’re investing for the future and helping businesses to do that too.

Critics, such as myself, counter by pointing to the short termism that seems endemic to this nation’s economy while arguing that there’s scant evidence to support their assertions.

Care to guess who’s backed by the latest official report? Who might just have been saying “see I told you so” while tapping out this column?

Trouble is, the UK’s main European rivals are pumping in even bigger numbers and that figure amounts to just 1.67 per cent of GDP compared to the EU average of just over 2 per cent.

Austria, Germany, Denmark, Finland, Belgium, France, the Netherlands and Slovenia are all ahead of it. Sweden's investment is running at about twice that of the UK as a percentage of GDP.

Much has been written about the nation’s productivity problem. The continuing lack of investment in innovation, in enhancing the goods and services it produces, greatly exacerbates it.

The recent hopes of an improvement expressed by the likes of the Bank of England’s governor Mark Carney may be dashed if the situation fails to improve.

Nor does it bode well for Brexit. The chances of making a success of that are already extremely small. They’ll be positively microscopic if the country can’t research and develop a way to pull its socks up.

Justin Arnesen, partner R&D tax incentives & grants at Ayming, a business consultancy, argues that UK businesses “are finding it difficult engaging” with the HM Revenue & Customs programmes designed to support R&D spending through the tax system.

He thinks they need modernising.

It is understandable why the Government might be nervous about doing that.

The tax system, and tax breaks, can easily create perverse incentives that encourage bad behaviour rather than the outcomes you want. The list of examples is long.

However, Mr Arnesen points out that “the document which defines R&D was last updated in 2010, the example it uses is a DVD player - things have definitely moved on”.

Just so, and he’s entirely right to describe it as “disappointing” that government rhetoric is failing to translate into tangible reality.

Last year the PM pledged a decade long push to bring UK R&D spending into line with other rich nations. This indicates that she and her friends have a lot of work to do.

The harsh economic impact that her beloved hard Brexit will have makes investment all the more vital, but will inevitably restrict the funds available for it, leaving her staring at rocks, hard places.

Britain still failing to back the future with R&D spending

A report by the ONS shows UK below EU average despite Government rhetoric