Autumn Statement: key R&D policies

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Chancellor Jeremy Hunt announced several measures to support the UK’s tech sector in the 2023 Autumn Statement, including new investment zones, simplified R&D tax credits and additional AI computing resources. 

New R&D funding

£4.5 billion investment plan

The government has announced a five-year £4.5 billion investment plan for large-scale funding to attract investment to strategic manufacturing sectors, including green energy, aerospace, life sciences, and zero-emission vehicles.

The package, available from 2025 and running for five years, is part of a wider approach to advanced manufacturing, and includes:

• £2 billion earmarked for the automotive industry;
• £1 billion each for aerospace and a Green Industries Growth Accelerator (to support clean energy manufacturing);
• £520 million for life sciences manufacturing.

AI innovation centres

Key to the UK creating a world-leading AI ecosystem is access to computing, which powers the development of AI models.

The government has committed a further £500 million over the next two years to fund AI innovation centres, bringing the total planned investment in computing to more than £1.5 billion.

These investments will allow researchers and SMEs to develop new foundation models and maximise the UK’s potential in AI.

Investment zones to boost growth

Launched in the Spring Budget 2023, the Investment Zones Programme has been extended from five years to ten.

This extension will double the envelope of funding and tax reliefs available in each Investment Zone from £80 million to £160 million to provide greater certainty to investors. The government is also extending the duration of the tax reliefs available in Freeports from five to ten years to maximise the programme’s impact.

New investment zones announced:

• The West Midlands Investment Zone – focused on advanced manufacturing
• The East Midlands Investment Zone – focused on green industries and advanced manufacturing
• The Greater Manchester Investment Zone – focused on advanced manufacturing and materials
• The West Yorkshire Investment Zone – focused on health tech and life sciences

Simplification of the R&D tax credit scheme

The chancellor announced a merging of the two existing UK R&D tax relief schemes (SME & Research and Development Expenditure (RDEC)).

Full expenditure on grant-funded projects will be fully eligible for R&D tax relief under the new combined scheme, which will take effect in April 2024.

The new scheme will also see increased support for “R&D intensive SMEs”, including:

• Higher payable credit rate of 14.5% for loss-making companies
• Easier qualification (proportion of R&D expenditure required to qualify reduced from 40% to 30%), which, according to the treasury, will make an additional 5,000 SMEs eligible for R&D tax relief

Other headlines:

• Five new Quantum Missions aimed at securing the UK’s status as a world leader in the technology, by setting clear milestones for inward investment and research in areas like computing, healthcare and navigation
• Funding of £5 million for Imperial College and Imperial College Healthcare NHS Trust to set up Fleming Centre to work on health innovations
• “Full expensing” Capital Allowance tax break made permanent – allowing companies to claim tax relief by deducting spending on new qualifying machinery and equipment expenditure from their profits
• A new Growth Fund run by the British Business Bank
• An extension of the Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) by ten years to 2035
• Long-term investment for technology and science (LIFTS) initiative, aiming to encourage the establishment of new funds and investment structures to support UK institutional investment into tech firms

Expert advice

If you want to understand what grant funding your project could be eligible for, how to build grants into your innovation or financial plan, or ensure a stable cash flow to your already funded project – get in touch.

Sources:
BBC, KPMG, UKTN, gov.uk