On 11 March 2020 the new Chancellor Rishi Sunak unveiled the first budget of the new Government. Along with a fiscal package to help mitigate against the economic and social costs of COVID-19 the budget also contained a large number of announcements for the tech sector.
Throughout the general election the Prime Minister consistently put making the UK the best place in the world for research and science as central to his economic pitch to the nation.
After being returned with an increased majority pledge was woven through a number of his and the Government’s objectives, from their vision on the future relationship with the EU to the levelling up agenda.
The budget therefore provided the first opportunity to assess their willingness to walk the talk on R&D and science. So, what was in the R&D budget?
£22 billion per year for R&D by 2024-25:
The set out plans to increase public R&D investment to £22 billion per year by 2024‑25. This is a sizable investment, the largest and fastest expansion of ever expansion of public financial support for R&D. The funds will be rolled out between this year and the financial year 2023-2024, aiming to take direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations ahead of the USA, Japan, France and China.
£800 million of this new funding is going towards the set up a new high-risk high-reward research agency modelled on the American Defense Advanced Research Projects Agency (DARPA), and £900 million to supporting nuclear fusion technology, the National Space Strategy and Space Innovation Fund, and the e-vehicle supply chain.
The creation of a high-risk, high-reward research agency is extremely welcome. A UK ARPA offers an opportunity to fundamentally change the way R&D is done in this country. To succeed, it must be challenge-focused, agile, and ambitious. For long-term success, it requires cross-party support that stands by it through failure as well as success. techUK has a unique insight into ARPA through our membership and we look forward to working with Government to ensure that a UK ARPA is a long-term success.
The rest of the allocation of this funding will be set out in the spending review. Researchers across industry and academia will need to set out their case to the Government for funding, with a focus on returns on investment and where new innovations can help crowd in further private investment.
Building up Government’s ability to support innovation:
Ensuring that cutting-edge science and innovation is deployed within Government is vital to ensuring it is equipped to foresee challenges and opportunities and improve public services.
Funding allocated in the Budget will provide £2 million in 2020-21 to expand the cross‑cutting strategic science and resilience capabilities provided by the Government Chief Scientific Adviser and the Government Office for Science. This will be vital to allowing the Government to do innovation better and techUK would encourage the Government to consider further expanding this investment over time.
Levelling up through R&D:
To help level up the country and ensure innovation grows outside the golden triangle the Budget provides an immediate funding boost of up to £400 million in
2020‑21 for world-leading research, infrastructure and equipment. This will help build excellence in research institutes and universities right across the UK, particularly in basic research and physical sciences.
The Budget will also provide £300 million for experimental mathematical research to attract the very best global talent over the next five years.
These are encouraging steps, however we urge the Government to ensure that funds are truly spread across the country. The UK has an invaluable knowledge infrastructure with world leading universities in nearly every region across the four nations. Leveraging the benefits of the this knowledge infrastructure is vital to the Government’s levelling up agenda.
Supporting business invest in R&D:
techUK welcomes the Budgets commitment to increasing the rate of Research & Development Expenditure Credit from 12% to 13% and consult on whether qualifying R&D tax credit costs should include investments in data and cloud computing.
The inclusion of data and cloud computing is something techUK has long called for. The adoption of digital technology by firms—whether large or small, is key to driving productive development and innovation. 70% of companies have used cloud to develop products, services, or new business models; to enter new markets; or to enable other product or service innovations. Digital adoption also makes a strong case for investment, with an average net return of $2.5 for every $1 invested in cloud services, with higher returns possible, especially for SMEs.
We strongly encourage the Government to expand the coverage of the R&D tax credit to cloud and data and stand ready to help inform these consultations.
Bringing in private investment will be crucial to meeting the government’s objective of increasing economy-wide investment in R&D to 2.4% of GDP by 2027, and to creating an innovation intensive and technology-driven economy. The Government’s next step therefore must be to increase the user friendliness of the R&D tax credit system, a many company find the current application process, slow and burdensome, discouraging use.