by Ayming UK
Jul 31st, 2023
8 mins

I share the concerns raised by Tony Danker, the Director-General of the CBI, regarding the world’s entry into a subsidy arms race that could harm investment in green technology in the UK. The US’ Inflation Reduction Act, the European Recovery Fund and Horizon Europe are all leading the way globally at putting investment back into R&D and whilst the UK Government has certainly made bold commitments, we’re yet to see that translated into similar levels of action.

The UK’s exclusion from the Horizon Programme is certainly a factor as to why innovation may be leaving the UK. The fundamental driver of this exodus is uncertainty, exacerbated by the changes to the SME R&D scheme announced in the Chancellor’s Autumn Statement.

This line of thought is closely aligned with the findings of our first UK Innovation Barometer. In this barometer, we carried out a survey of 200 senior executives in innovation, finance, tax, and CEOs/MDs in the UK. 69% of the businesses surveyed reported moving their R&D activities overseas in the last year, and 70% plan to do so in the upcoming year. The US and Germany proved to be the most popular destinations for these R&D shifts, receiving 28% and 27% of the responses respectively.

This alone is already supporting the earlier point that Tony Danker had brought up. The absence of a compelling incentive for green innovation from the UK government is a clear and present threat to the nation’s position as a leader in this field. Without the necessary support and encouragement, it is only a matter of time before we see a significant shift in the epicentre of innovation away from the UK, which would be a detrimental outcome for all UK business.

The Green agenda and net zero

Chris Skidmore has recently released a report that highlights the fact that the transition to a green economy is an opportunity, not a burden. It is an opportunity to create new and innovative products and services that will drive economic growth, while also addressing the pressing issue of climate change. The report emphasizes the need for the UK government to provide the necessary support and incentives to encourage green innovation, such as investment in research and development, tax incentives, and access to financing.

In addition, by investing in green innovation, the UK will be better equipped to compete in the global marketplace. The demand for green products and services is growing, and by developing a strong and vibrant green innovation sector, the UK will be well-positioned to capture a significant share of this growing market.

A new scheme that could be focused more to green innovation within the UK is also likely to stem the flow of businesses leaving our shores to carry our R&D abroad. 95% of respondents in the UK Innovation Barometer said it was important to have a scheme focused on green innovation, with half of total respondents saying it is very important.

The House of Lords Finance Bill Subcommittee report

It’s encouraging the House of Lords has recognised that HMRC’s over-zealous activity has not actually done much to combat fraud. Action was definitely needed, but the approach until now has been counterproductive. Whilst fraudulent claims are a problem that must be confronted for the longevity of the scheme, forestalling legitimate innovation will not serve the UK’s ambitions for becoming a genuine science superpower.

This is heavily impacting the UK’s ability to incentivise new tech start-ups to stay in the country rather than heading elsewhere. A recent Financial Times article, published by Ian Johnston supports Ayming’s findings within the UK Innovation Barometer. Founders of early-stage tech companies in the UK have said that due to the budget cuts, as well as the impact of Brexit and a decrease in venture capital funding, they are now considering international opportunities more seriously.

In conclusion, the UK’s exclusion from the Horizon Programme and changes to the SME scheme announced in the Chancellor’s Autumn Statement have led to uncertainty and a potential shift of innovation away from the UK. This is further supported by the findings of the UK Innovation Barometer, which showed that a significant number of businesses surveyed have moved their R&D activities overseas or plan to do so in the near future. We must continue to support innovation and green technology development to create a better future for the UK and the world.


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