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Scotland’s share of business R&D expenditure on the rise

Better awareness of the tax credits system north of the border could explain a rise in business investment in research and development (R&D) by companies based in Scotland, according to law firm HBJ Gateley.

The Scottish Government yesterday (December 18) released its annual statistics on Business Enterprise Research and Development (BERD) expenditure which showed that R&D expenditure by companies in Scotland increased 2.1 per cent on 2011 in real terms, while the equivalent UK figure dropped 4.0 per cent.

Overall, BERD spending rose to £707 million in 2012, from £689 million the year before.

As a percentage of GDP, Scotland’s BERD spend still lagged behind the overall UK figure which stands at 1.09 per cent. Scotland’s businesses spent the equivalent of 0.59 per cent of GDP on R&D in 2013, a 0.03 rise on the previous year’s figure.

Andrew Walker, Corporate Partner at HBJ Gateley, said that this could be put down to Scottish companies having a better understanding of the incentives available to those investing in R&D.

Andrew said: "Scotland has a reputation as being a tech hub in the UK and that helps encourage these kinds of companies, which are more likely to invest in R&D, to set up here.

"They are likely to have a better understanding of the tax incentives available to businesses that are ready and willing to invest in R&D.

"This is no doubt enhanced by the presence of specialist companies, such as Jumpstart, that help businesses through the process of applying for these tax breaks."

Although a comparable figure of the latest statistics for the EU 27 average is not yet available, according to long-term trends, Scotland has performed consistently poorly on BERD expenditure.

The country rated among the bottom quartile of OECD members in terms of BERD. In 2010, the latest data available, the EU 27 average was 1.16 per cent of GDP, while Germany’s BERD spend was 1.92 per cent.

In the UK, Scotland accounts for just 4.1 per cent of the UK’s £17.1 billion R&D spend by businesses and 8.38 per cent of the UK’s population. This places it eighth among the UK’s regions.

However, the latest statistics showed a notable increase in the number of R&D staff employed in Scotland’s business community, rising from 7,472 in 2011 to 8,343, 11.66 per cent.

Andrew Walker said that while the increase was welcome news, there was still plenty to be done to boost Scotland-based businesses’ expenditure on R&D.

He added: "These figures suggest that, in Scotland at least, businesses are more willing to invest in R&D as they see a brighter future and better potential returns on the horizon from investment at this time.

"This is perhaps underlined by the fact that there has been a significant increase in the number of staff employed in R&D functions.

"Although the statistics suggest we are heading in the right direction, there is still plenty to be done to cement Scotland’s reputation as a place for R&D activity to thrive. Further communication of the incentives available to businesses, will be important in doing this."

The full report is available through the following link: http://www.scotland.gov.uk/Resource/0044/00440905.pdf

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