R&D tax credits contribute £8.2 billion to the UK economy

A total of £3.5 billion was claimed in R&D tax credits by innovative UK businesses in 2016-17. Based on analysis carried out by HMRC, this £3.5 billion could go on to stimulate up to £8.2 billion of additional investment in R&D.

At ForrestBrown, we advise thousands of businesses each year and many of them tell us that they use the R&D tax credit benefit that they receive to hire new staff and grow their business. If a STEM employee is paid on average £38,000, this additional £8.2 billion could fund 215,789 new STEM jobs.

Do R&D tax credits represent value for money for the government?

The government has put innovation at the heart of its Industrial Strategy as a means to transform the UK economy and as one solution to the UK’s productivity problems. But how does investing in R&D tax credits help?

In a working paper, Evaluation of Research and Development Tax Credit, HMRC reviewed the impact of R&D tax credits on investment made by UK businesses. They estimate that for every £1 awarded to innovative businesses via R&D tax credits, between £1.53 and £2.35 is stimulated in R&D expenditure. The chart below shows the cost of support claimed from 2000-01 to 2016-17 and the additional investment in R&D that could have been stimulated as a result.