Post Brexit Resolution for Founders: Innovate, innovate… innovate
As the UK approaches its “divorce” from the EU, a loud and clear message was sent by the Chancellor of the Exchequer during the presentation of the 2017 Autumn Budget. There will be an increase of R&D tax relief from 11% to 12%. The change will not impact small and medium sized companies this time — it will only impact large companies — but this increase is still conveying the right message across the board.
The R&D tax relief scheme for small and medium sized companies in the UK is already quite attractive as the government has been playing a direct and active role in fostering innovation since 2000 with more than 35,000 companies applying for this tax relief since then. This is mainly because the UK government seems to understand that countries prosper when their businesses thrive; that innovation drives growth and that investment in innovation continues after that initial period of growth. It is also clear to the UK that business that innovate not only employ a significant number of high calibre people, but they also drive the employment of the businesses that surround them — providing significant socio-economic benefits. This level of understanding has been translated for the UK into one of the most attractive R&D tax incentives in the world.
As a recent example in the middle of Brexit, Spotify has revealed its plans to build one of its major R&D hubs in the UK capital where they will be housing key investment areas including expansion of their subscription-commerce capabilities and employing talent across all functions in engineering, machine learning, data and leadership. Additionally, companies like Google, Apple and Facebook have also confirmed they will continue to invest in the UK despite the Brexit vote.
In parallel, when small and medium sized companies develop a new tool, a new product or a new service using technology; when they attempt to improve existing products through technical changes; when they have found more efficient ways to produce a product or offer a service; when they have experimented with new equipment or production techniques; when they have simply overcome a scientific or technological uncertainty… they are inevitably improving the country’s productivity.
Now the challenge remains for founders of small and medium sized companies not to confuse innovation with ideation. It is a requirement that value from these ideas is created for the UK economy. The journey behind the translation of ideas into -social and/or commercial- value might not necessarily be the shortest or the easiest but it will certainly be the most rewarding, including from a tax relief standpoint.
The future is undoubtedly bright for the UK as none could argue that incentivising innovative businesses is not the right strategy when it comes to economic growth — specially under the current climate for the UK — it is what can truly move the productivity curve upwards and bring prosperity to a country in the long run.