It’s clear that money invested into research in universities should contribute to the successful commercialisation of Research and Development (R&D). In the UK it’s often said that we are not very good at making knowledge transfer happen. However Alice Frost, Director of Knowledge Exchange, Research England (UKRI) has looked at the facts and come up with some interesting findings in her blog: The truth behind the myth of Silicon Valley.
Alice found that Silicon Valley faces the same challenges, but in some areas the UK is actually more successful. For example:
“The London university system is more efficient in turning research and development expenditure into spinout companies, producing a spinout for every £35.35 million invested in research and development compared with £60.42 million, £42.6 million and £54.5 million for Boston, Los Angeles and New York.”
One highlighted issue is that the picture is not easy to paint, because the metrics and data need improvement. But what is seen as important is how much is being invested.
“However, scale matters in economic development. Start-up ecosystems are places that attract risk-takers, who may fail but then move on to new opportunities. Larger hubs create better environments for risk-taking. Improving entrepreneurial activity in the UK means scaling up, including in research and innovation investment.”
UK Government Research & Development Tax Reliefs are an important element contributing to the scale of investment available to spinout companies. However it does sometimes appear that there is a disconnect when evaluating the importance of the range of funding strands available. I’ve not seen much attention paid to evaluating the importance of R&D Tax Reliefs as an additional stream of support for fledgling and successful University spinout companies.
Where a UK company receives innovation grant funding, such as from Innovate UK, or where it provides subcontracted R&D services to a large company (over 500 employees) its activity is classified as subsidised R&D. In this instance it can often still get R&D Tax Relief, but under the less generous RDEC (large company) scheme. Interestingly according to latest government statistics for the tax year 2020 to 2021 there was a 20% growth of SME claims within the RDEC scheme, with the total number of claims being 6,485. This could indicate a greater level plurality in funding sources being utilised by innovative SMEs.
If you aren't sure which scheme to claim under, discuss your R&D tax credit claim with our expert R&D tax consultants.
I believe there is need for broader research, that looks across the board at all funding sources supporting University spinouts and other entrepreneurial ecosystems in the UK, to enable the drawing of a fully-fledged picture of what is working.
All quote taken from: https://www.ukri.org/blog/voices-the-truth-behind-the-myth-of-silicon-valley/
Latest government statistics can be found here: https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2022
Blog by Linda Eziquiel, Regional Director, RandDTax