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Why invest in R&D?/Why R&D matters

Why invest in R&D?

Right now, the UK is arguably the best place in the world to do R&D as a result of the outstanding science, engineering and technology base and stable macroeconomic environment. We have seen an increase in the levels of overseas business investment for commercial R&D conducted in the UK. This investment is a good indicator of the continued competitiveness of the UK as a location of choice for the increasing globalisation of corporate R&D.

More importantly, R&D plays an important role in the innovation process which is increasingly vital to current and future profits for UK companies. It results in the technology that brings new products and services to the market place. Innovation results in high quality jobs, successful businesses, better goods and services and more efficient processes. International research has consistently demonstrated the positive correlation between R&D investment intensity and company performance measures such as sales growth and share price in the sectors where R&D is important. Businesses are in a better position to achieve and maintain competitive advantage in the increasingly global market place with sustained R&D and other related investment at the right levels. DIUS's Benchmarking Tools can help you understand what the right level for your company might be.

Furthermore, companies that carry out R&D may be in a position to claim tax relief through R&D tax credits schemes. R&D tax credits works by allowing companies to deduct 150% under the SME scheme or 125% under the large company scheme of qualifying expenditure on R&D activities when calculating their profit for tax purposes.

Other R&D Support such as Grant for Research and Development and Knowledge Transfer Partnerships are available to help companies fulfil their R&D aspirations.

Why R&D matters

R&D plays an important role in the innovation process. It results in the technology that brings new products and services to the market place or underpins better processes. Innovation results in high quality jobs, successful businesses, better goods and services and more efficient processes. That is why R&D matters.

International research has consistently demonstrated the positive correlation between R&D investment intensity and company performance measures such as sales growth and share price in the sectors where R&D is important. The consistent message emerging from the DIUS R&D Scoreboards is that the companies which concentrate on sustained growth through investment in R&D are most likely to achieve increased shareholder return. More information on this issue can be found in the DIUS R&D Scoreboard

Businesses are in a better position to achieve and maintain competitive advantage in the increasingly global market place with sustained R&D and other related investment at the right levels. To maximise the benefits, investment in R&D should be combined with appropriate investment in capital equipment, market development, new business processes, and other key drivers of productivity. These factors are looked at more closely in the Value Added Scoreboard, which helps firms understand how much value their activities generate, how they currently use it and how this compares to their competitors.

R&D and Intellectual Property

R&D results in valuable inventions, ideas and designs which can be a source of potential value when it comes to gaining competitive advantage. A variety of Intellectual Property Rights exists to help a company protect these valuable assets. For example, a patent can be used to protect products or processes that possess new functional or technical aspects. Patent rights make it illegal for an unauthorised person to profit from an invention. Contact UK Intellectual Property Office for more information about Intellectual Property Rights.