Robin Taylor is a technical specialist at ForrestBrown, a leading research and development (R&D) tax consultancy.
“At ForrestBrown, I work alongside our team of chartered tax advisers to help innovative businesses in the manufacturing sector identify and articulate their R&D, securing vital funding to accelerate their growth plans.”
Previously, Taylor has shared his thoughts on the importance of digital transformation in manufacturing. Now, he discusses how the recent changes to R&D tax relief are going to impact manufacturing firms.
Manufacturers net zero targets require innovation
With an annual output of £183bn, the UK remains the ninth largest manufacturing nation in the world. 64% of all R&D taking place in the UK is manufacturing innovation, which Taylor says goes to show the crucial role it plays in the UK’s growth story.
“For the sector to harness its full potential and become the powerhouse of the UK’s post-COVID economy, it’s currently contending with a trilemma:
- Low productivity
- Supply chain issues
- The skills shortage
“Like any sector, an extensive set of ambitious Net Zero targets. Meeting this triple threat will require a great deal of innovation, whether that’s developing more sustainable manufacturing practices or leaning on AI to facilitate more accurate demand forecasting and less material waste,” Taylor says.
R&D tax relief can help manufacturing firms manage the conflict between cost and innovation. However, in order to apply for relief with confidence - and for manufacturers to gain a competitive advantage - the sector needs to start adopting a more strategic approach to the scheme.
“Currently, many businesses are falling into the trap of obsessing over the destination, i.e., the end product, rather than the journey they took to get there. It’s the novel processes, such as robotics, adaptive machining, or advanced vision systems that can form a critical component of R&D, rather than the outcome of the project alone.”
Taking a step back: R&D claims beyond the product
Innovation is often as much about the process as well as the product. Therefore, the steps taken to reach the finished result shouldn’t be dismissed as they are often as important as the result itself when it comes to an R&D claim.
“With this in mind, firms should consider the R&D that goes into developing various manufacturing techniques. Shifting the perspective to look at how an innovative product was made can give firms a strategic advantage and help unleash the full value of their innovation through the incentive,” Taylor says.
So, what are these ‘behind-the-scenes’ processes that qualify as R&D expenditure but tend to be overlooked?
“The simple answer is that it doesn’t always have to be the development of new hardware. In many instances, it can consist of how a firm has made an existing manufacturing process more efficient, cost-effective, or sustainable. For example, the introduction of condition monitoring in an existing strategy can help identify and prevent problems before they occur.”
Condition monitoring uses data from sensors and other devices to predict when a machine is likely to fail or require servicing, streamlining processes in both an efficient and innovative way.
Other examples of challenges faced that often require process innovation can be found when working with new or switching to sustainable materials, significantly increasing production throughput with existing limited machinery or reducing energy usage without compromising the end product.
“In order to compete with overseas technology, global competitors, and digital advances on the horizon, UK manufacturers are regularly updating their methodology to retain their competitive edge. However, the R&D that comes with amending these methods, and streamlining processes, should not take a backseat when businesses are making a claim.”
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