“A new plan to make the UK a global centre for the development, commercialisation and adoption of responsible AI will be published this year”.
These are the words of Digital Secretary, Oliver Dowden: “Designed to encourage the widespread use of AI technologies, The Government envisages ethical, safe, and trustworthy development of responsible AI, with resilience in the face of change through an emphasis on skills, talent, and R&D.”
Oliver Dowden continued: “The National AI Strategy will align with the government’s plans to support jobs and economic growth through significant investment in infrastructure, skills and innovation. This comes as the UK sees a boost in R&D investment through the government’s Research and Development Roadmap, to reach 2.4 per cent of GDP by 2027.”
AI R&D TAX Credits
Let’s take these words and understand them against the “Tech Nation Report 2021”. The report indicated that overall, the UK is getting a good slice of private sector investment into tech companies. It also highlighted the following:
“UK tech VC investment is third in the world, hitting a record high of £15bn in 2020 in the face of challenging conditions”.
Initially, this sounds great, but once you look at it in more detail it is not all positive. This is because the research also found that investment in seed-stage companies is decreasing as a proportion of overall tech VC investment, falling from 14% to 6% over 5 years.”
Given seeding new companies is essential for sustained and long-term growth, this could indicate trouble ahead. Especially when you consider that investment went into just 10 companies, which is stated here: “10 superstar scaleups accounted for a fifth (£3.5bn) of UK tech VC investment between them in 2020”.
In conclusion, it is interesting and concerning to view the government’s R&D investment target considering The Tech Nation Report 2021.
R&D Tax Credit and Tax Relief will remain a vital source of funding for innovative companies. This is because it is becoming increasingly more challenging to gain the essentials skills and funding for AI innovation through the UK government.
David Fribbins, Owner/Director of Randee Advisers Ltd, is an R&D expert and was very interested in understanding the points above. He commented:
“There is a major legislative change to R&D that will hit tech this year and next. I can see a few companies going bust because they have not changed their spending strategies on development works. For the last 5 to 6 years loss-making companies have been able to surrender their losses as well as the R&D enhancement. So, technically, a £100k spend and £100k loss would see a 14.5% return on the full £230k. From April 2021, the rule changes so that a loss-making company can only claim £20k + 3x their PAYE and NI contributions. This will have an enormous effect on cash flow for companies who utilise the R&D tax credit as a safety net. Companies with an April year-end are already 2 months into their 21/22 year, so if they haven’t revisited their R&D strategy, then they are potentially heading towards a pretty sharp cliff edge”.
David was also interested by some key figures in The Tech Nation Report surrounding technology that will affect the construction sector:
“It is shocking to see the Nordic investment in tech down 40%. Sweden has been outputting enormous tech into the construction scene over the last few years”.
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