In the last twelve months, an overwhelming majority (94%) of life sciences companies in the United Kingdom have relocated their operations abroad.
Research from business performance consultancy Ayming UK has revealed that British companies are transferring their research and development operations overseas.
Last year, according to the UK Innovation Barometer created by Ayming, 69 per cent of companies had shifted their research and development operations overseas. Additionally, 70 per cent of them are intending to do the same in the upcoming year of 2023.
In the two-year period of 2022 and 2023, a minimum of 63% of British companies chose to shift their R&D operations to other European countries, with Germany and France being the two most picked destinations for 27% and 13% of the firms, respectively. The US was the chosen destination for 28% of UK-based R&D firms.
The Government declared its aim to make the UK a "science superpower", but figures show that 94% of life sciences companies have shifted operations abroad in the last year, with more than half of those heading to Germany.
Ayming UK partner Mark Smith expressed that in order to reach the ambition of becoming a "science superpower", the UK must compete with countries such as the US and Germany in drawing in R&D activity.
Failure to act will result in UK businesses relocating their research and development abroad to places with convenient access to capital and personnel, enabling other regions to surpass the UK as a research and development centre.
Firms have likely been attracted to other markets based on a variety of considerations, but the availability of funding and more advantageous R&D tax credits likely played a primary role.
Recently, the Government has put forth a proposal to make changes to the R&D tax credits that apply to small businesses.
In his Autumn Statement last November, Chancellor Jeremy Hunt declared that he would be pushing for greater incentives for Research & Development to be provided to larger companies.
For bigger businesses, the Research and Development Expenditure Credit (RDEC) rate jumped up by 7 percent, while the extra deduction for small and medium-sized enterprises dropped from 130 percent to 86 percent.
From April, the generosity of R&D tax credits for small companies is set to be reduced.
In the beginning of the month, the Government presented a consultation document in which they admitted that the steps taken may have been too much and suggested that there was worth in providing additional help to small and medium-sized businesses.
In 2021, small businesses invested a total of £24bn in research and development - an increase of 4% compared to the previous year.
Tech and biotech firms generally resort to credits as a form of payment.
Smith also noted, "We must assess and address a variety of positive aspects that exist. Our atmosphere is quite appealing, however, we understand more steps must be taken.
I humbly urge the British Government to take a second look at the reduction of the SME scheme and come up with a different plan to address the issue of fraud instead of cutting back on R&D incentives at this moment in time.
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