In late January the Government published it’s Green Paper on ‘Building Our Industrial Strategy’ – this was one of the key documents that Philip Hammond mentioned in his maiden (and last) Autumn Statement in November last year.
You can access Government’s web page with a variety of information on this subject, including the Green Paper, here – https://beisgovuk.citizenspace.com/strategy/industrial-strategy/
The industrial strategy paper itself focuses on ten pillars upon which the strategy will be built. They are:
- Investing in science, research and innovation
- Developing skills
- Upgrading infrastructure
- Supporting business to start and grow
- Improving procurement
- Encouraging trade and inward investment
- Delivering affordable energy and clean growth
- Cultivating world leading sectors
- Driving growth across the whole country
- Creating the right institutions to bring together sectors and places
Of particular interest to me as someone who advises a lot of tech and advanced manufacturing companies was the mention of increased focus on R&D – the UK’s R&D tax regime is one of the key tools that has been used in the last fifteen years to encourage innovation in business and remains an area of great growth for our practice.
In terms of R&D spend the paper notes that the UK invests 1.7% of GDP in R&D whereas other advanced economies of the OECD (on average) spend 2.4% of GDP, and a select group of leading countries (including Japan, Sweden and Finland) who spend in excess of 3% of GDP.
From a tax perspective the main news is that the Government plans to increase investment in R&D by £4.7billion by 2021, and part of this number will seemingly cover improvements to be made to the current R&D regime. What improvements are not yet clear, or whether merely what is planned is an increase to the enhancement rates of 30% (large) and 130% (SME) respectively.
My hope is that we get some clarity (or indication at the very least) from HM Treasury during the Budget process as to where these changes to the R&D regime are going.
There is also a clear focus within the document around attracting and retaining talent. That is likely to necessitate a focus on long term equity incentives, such as EMI options, and it will be interesting to see if following the employee shareholder status (ESS) debacle there are any new moves to improve the tax advantaged share schemes portfolio or process in the context of this paper. In fact what we are actually seeing is the possibility that advance assurance and valuation agreement for EMI schemes are actually under threat as HMRC looks to cut operating costs. There are similar issues with the enterprise investment scheme (EIS), and generally for those business which this paper is looking to encourage that is worrying news.
On a more pleasing note the Green Paper confirms that UK Export Finance will double its risk appetite limit from £2.5billion to £5billion. Similarly the new ‘Exporting is Great’ website has been launched and this looks to be a much better resource than previous Government efforts – http://www.exportingisgreat.gov.uk/
There is much more in the documents and anyone operating in or with tech businesses or advanced manufacturers are advised to spend the time to read it in depth and keep their eyes peeled for related announcements on 8 March.