October saw growth in UK manufacturing at a three month high in what is being called a ‘mini-recovery’ by leading economists.
The Markit manufacturing PMI survey, compiled monthly from the data collected from questionnaires answered by 600 companies, shows October experiencing a sharp upturn from September where there was a 17-month-low in growth. It was also reported that the number of jobs within manufacturing also rose within October.
While manufacture for the domestic market is healthy, exports are doing less well, which is slowing Britain’s overall recovery. The currently ‘stagnant’ Eurozone economy, where Germany and France have avoided sinking into recession – but only just – while Italy has fared less well, slipping back beneath the surface, is attributing to a drop in demand for UK products, which isn’t helped by the sterling-euro exchange. As well as this UK exports to other important markets, such as China and the US experienced a lull.
Overall the October PMI survey is encouraging but it does show that the UK is being affected by the wider global economy. This current stronger-than-expected position in manufacture is being linked to the increase in spending on R&D in the sector. While it has been a tough few years it hasn’t stopped the manufacturing industry from investing in innovation. The Manufacturers’ Organisation (EEF)’s chief economist Lee Hopley said that, "Business expenditure on R&D has now returned to pre-recession peaks.” However she also added that “though we're back to where we were, we're not yet where we want to be. R&D expenditure remains low compared with international levels."
As encouraging as it is to see that investment in innovation is paying off, it is certainly no time for complacency. As made clear at the Innovation UK conference in early November 2014, latching onto the global market is essential to the UK’s success and requires big investment and even bigger ideas.
The government has put many schemes in place to encourage UK businesses to think big but often the businesses can find the application process can be off putting. As Sue Nelson, director of Rift Research and Development, explained on the Business Bunker radio show on Channel Radio in November, R&D tax credits are the most painless way for an innovative business to recoup a tasty chunk of their expenditure on R&D activities.
Nelson made it clear that she sees ‘tax credits’ is a poor term as it doesn’t promote what it actually is. Cutting through the jargon, she said that: ‘If you’re doing something innovative we can get you money back from the government.’ With this candid approach she went on to dispel some of the misconceptions surrounding the incentive. Many are not aware that more often than not the outcome of an R&D claim is a cash payment, ranging from 7,000 – 100,000 pounds, dependant on a company’s qualifying expenditure. RIFT Research & Development also recognises that time for an innovating business is precious so they make the process as easy as possible; all that RIFT require is for a business to explain what it is they do and how much they have spent on salaries and materials in the process, and RIFT will do the rest.
Any businesses in manufacturing or other industries interested in claiming for R&D will naturally want to know exactly what activities qualify. HMRC provide a broad definition for R&D tax credit eligible costs, but generally if what a company is developing can’t be found on the market already, then it may qualify. Sue Nelson told Business Bunker that a good way of thinking of it is, “If your closest competitor wants to steal it – that’s R&D.”
Click here for the full podcast and listen to Sue Nelson from RIFT Research and Development at 53 minutes.
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