East Midlands business spending on the most valuable forms of innovation has fallen more than almost any other region of the UK, according to analysis of new Government statistics by Ryan, a global tax services and software provider.
Expenditure on high-reward research and development (R&D) fell in the region by 4.4% from £1.94 billion in 2020/21 to £1.86 billion in 2021/22. Only the North East had a bigger fall in spending.
The data is captured by HMRC and is based on claims made for R&D tax relief, which rewards businesses for qualifying activity.
The number of tax relief claims for R&D projects made by East Midlands businesses also shrank, falling by 1.6% to 5,790 claims. In total, East Midlands businesses claimed £335 million in R&D tax relief, with an average claim value of £57,858.
Overall, UK-wide innovation spending that qualifies for tax relief rose 8% to £44.1bn in 2021/22. However, the number of first-time claimants has fallen for the second year running.
R&D projects carried out by UK companies introduce new products and services to the marketplace, which play a critical role in economic growth as they attract investment, boost exports and lead to the creation of more skilled jobs.
R&D tax relief was introduced in 2000 to encourage and reward innovation and results in either a reduction in a limited company’s corporation tax bill or a cash lump sum for companies seeking to resolve a scientific or technological uncertainty.
Nigel Holmes, director, research and development at Ryan, said: “While business spending on R&D has bounced back quickly from the pandemic, the East Midlands lags behind most of the country. It is also the only region to see both a fall in spending and a fall in claims.
“Unlocking innovation plays a big role in driving economic growth and employment, and so it is important that business leaders do what they can to encourage research and development in their region.”
