Telling the truth about SME life today

Business investment picks up, but UK lacks behind

Emerging markets are fueling up for long-term growth, while businesses in developed economies shy away from investment, so the findings of the latest Grant Thornton International Business Report (IBR).

The good news is that business investment is in general picking up. The proportion of businesses looking to increase investment in new buildings has risen from 15 per cent to 21 per cent over the past 18 months, and in plant and machinery from 35 per cent to 38 per cent. Expenditure on R&D is also set to climb.

But the UK is lacking behind while businesses in emerging markets are taking a longer-term approach to growth and increasing levels of investment.

The survey, which was based on interviews with 3,000 CEOs, managing directors, and senior executives from all industry sectors across the globe, clearly shows that businesses in emerging markets are leading the race and leaving the UK behind in a cloud of dust: 45 per cent of businesses in the BRIC countries plan to increase investment in research and development over the next year, compared to just 18 per cent of businesses in the G7. Similarly, 47 per cent of BRIC businesses plan to increase investment in plant & machinery, compared to 37 per cent in the G7.

What are the reasons for such a significant investment gap” ?With the eurozone still to work through its financial issues and businesses in the US awaiting possible changes in policy following the November elections, it may take some time for the current economic uncertainty to reduce,” said Scott Barnes, CEO of Grant Thornton UK LLP in a press release. In this climate, businesses in mature markets are sitting on trillions of dollars, wary of spending and hiring. Here in the UK, businesses are sitting on over £130bn.”

But the reluctance to invest might also be proof that most British businesses fail to claim the money they are entitled to for their R&D investment. Richard Cullum, Managing Partner of tax specialists R&T Consultants, believes that companies across the region are missing out the tax relief available to SMEs, because they are unfamiliar with the latest tax and grant incentives.

“In the current economic climate, businesses need all the help that they can get,” he commented. There is actually a substantial amount of money available to companies of all sizes and from a range of commercial sectors for R&D. However, it seems that many SMEs are failing to claim tax relief for their research and development activities believing that it doesn’t apply to them – or that it is too much hassle.

?Furthermore, the time limit for claiming credits is two years from the relevant Corporation Tax year and companies can back date their claims, so payments can be considerable.

Changes in the April 2012 Budget increased the amount of tax deduction allowed for R&D activities from 200 per cent to 225 per cent relief. Those changes were part of the government’s strategy to encourage the innovation and investment needed to promote economic growth across the UK – although it will hardly be enough to help the UK mid-market keep up with their competitors in emerging markets, it is a good start.


Related Stories

More From

Most Read


If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!