Future of Engineering 2018

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04 FUTURE OF ENGINEERING Projects at risk unless funding continues I f proof were needed that UK engi- neering businesses are short of research and development fund- ing, the demise of the Bloodhound SSC project should serve as a warning. Plans to create a car that could race at more than 1,000mph were recently scuppered after the com- pany behind the project went into administration. Despite the car being close to completion, it ran into a brick wall after £25 million, needed for the final stages of R&D, failed to materialise. "Despite overwhelming public support, and engagement with a wide range of potential and credi - ble investors, it has not been pos- sible to secure a purchaser for the business and assets," says joint administrator Andrew Sheridan. This despite the fact that the £25 million over which the project foundered is insignificant com- pared with the cost of, say, finish- ing last in a F1 season. Research shows that the project is not alone in being starved of research funding. Earlier this year, a report from the Office for National Statistics revealed that the UK spent just 1.67 per cent of GDP on R&D in 2016, compared with an EU average of just over 2 per cent. The UK, in fact, is 22nd on the R&D funding list. than others. For example, a gov - ernment grant scheme for R&D in agritech is restricted to Cornwall and the Isles of Scilly, while innova- tion support is offered to companies developing transport equipment in the East Midlands. Sonali Parekh, head of policy at the Federation of Small Businesses, says she would like to see some of these schemes expanded. "The Jürgen Mayer Review led to a government funding pilot in the North West to accelerate digital technologies," she says. "It's a step in the right direction and we would like to see more initiatives like that adopted in more sectors." In fact, says Ms Parekh, many small businesses are unaware of the help available. "Forty six per cent of small business innovators who don't use government support didn't know it was available in the first place," she says. "We'd like to see increasing awareness of R&D tax credits in particular, where there is a small firm that's not actually got a new- to-market product, but is depend - ing on the transfer of existing ideas to improve its productivity." R&D tax credits come in several forms, but essentially consist of either a payment or a reduction in corporation tax. "The scheme is relatively well known now, so awareness really shouldn't be an issue. However, roughly half of our new clients every year come from businesses that have never claimed under the scheme," says Steven Garrod, managing direc - tor at tax credit specialist MPA Group. "There are some simple and under- standable reasons for this. Something we regularly hear from new clients is that they never considered their work as 'R&D' or 'innovation'; they're sim- ply trying to improve a product or meet their customer's need." Alongside tax credits comes the Patent Box scheme which, says Mr Garrod, is equally underused. It can reduce corporation tax on a qualify- ing product line by 10 per cent. "It is designed to work alongside R&D tax credits to further reward UK's innovative businesses. If a company is already claiming under that scheme it may well have a claim under this scheme, but only if they have a patent," Mr Garrod explains. "It's a major opportunity for busi - ness, but HMRC statistics show that 97 per cent of companies engaging in R&D are missing out on it." So UK research funding is set to increase. But as for European Union funding, who knows? Until now, the UK has been able to benefit from the Horizon 2020 programme, which is the biggest ever EU research and innovation programme, making nearly €80 billion of funding avail - able between 2014 and 2020. While the government has agreed to continue payments that have already been approved up to the end of 2020, it's not clear how it will be involved after that. "Horizon 2020 in the UK has always been a success and it's great the government has agreed to fund the bits that have already been assigned, but in terms of the future, there's some uncertainty," says Ms During. Additional funding for research and development is key to UK innovation and engineering excellence The shortage of research funding in the engineering sector is par- ticularly marked when it comes to the development part of the cycle. A recent report for the Royal Academy of Engineering (R AENG) concluded that this is holding back the potential of an otherwise strong system of innovation in the UK. "The UK undoubtedly has many attributes that already attract engi- neering businesses to locate their high-quality, early-stage R&D activities here, not least our world- class academic research base and its excellent collaboration with industry," says RAENG president Professor Dame Ann Dowling. "Unfortunately, this is under- mined by gaps in the R&D and inno- vation system at a highly risky and expensive time in the development cycle. Plugging these gaps would help innovative engineering busi- nesses, boost productivity, and cre- ate better jobs and social outcomes in the UK." There are plans, under the gov- ernment's Industrial Strategy, to increase research funding to 2.4 per cent of GDP by 2027. The govern- ment says it will start with an extra investment of £2.3 billion in 2021- 22, raising total public investment in R&D to £12.5 billion that year. "Domestically, one of the key things is that we're waiting for the UK Research and Innovation roadmap to say how the UK is going to reach that 2.4 per cent target," says Lorraine During, business environment pol - icy adviser for EEF, formerly the Engineering Employers' Federation. Ms During cites initiatives includ- ing the government's Catapult Network, which was recently awarded an extra £780 million in funding to help deliver the Grand Challenges set out in the Industrial Strategy, as extremely encouraging. A problem for engineering busi- nesses is that support for R&D is available in a somewhat patchy way, with some UK regions and business sectors eligible for more Carl Court/Getty Images Until now, the UK has been able to benefit from the Horizon 2020 programme, which is the biggest ever EU research and innovation programme EMMA WOOLLACOTT R&D FUNDING R&D funding in the UK Funding has grown, but remained stagnant relative to GDP Gross spending on R&D (£bn) Gross spending on R&D as a percentage of GDP Office for National Statistics 2018 The Bloodhound SSC on a test run at Newquay Airport last year 1990 1% 1.5% 10 20 30 40 2% 1998 1994 1992 2000 2008 2004 2012 2002 2010 2006 2014 2001 2009 2005 2013 2003 2011 2007 2016 2015 1996 1991 1999 1995 1993 1997

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