Manufacturing R&D Tax Credits during Covid-19: R&D Investment is Key to Manufacturing Recovery

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Tom Verner

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Manufacturing R&D Tax Credits during Covid-19: R&D Investment is Key to Manufacturing Recovery

RD Investment is Key to Manufacturing

As production starts returning and lockdown easing predicted across a range of sectors, Tom Verner from Momentum Group asks what now for our struggling but vital manufacturers?

There is no doubt about it - manufacturing has never had it so tough.

For many of our most innovative companies, they now face a fight for survival.

Manufacturing companies across Northern Ireland are currently making plans for lockdown easing. As production returns, albeit under very different conditions, what can be done for our most essential industry that is now facing its toughest year in history?

While the Covid-19 pandemic has caused untold tragedy for families, it undoubtedly could be a lot worse had it not been for our fantastic NHS as well as many of our manufacturing companies who switched production and stepped up to the challenge to help produce personal protective equipment (PPE) and other necessities for frontline workers.

On the health front, the fight continues. For the economy, the diagnosis also makes for grim reading. With four out of five of NI manufacturing firms using cash from the business to sustain operations now, they really need to be supported in getting back safely to business.

As well as supporting hundreds of thousands of jobs across Northern Ireland, many of our manufacturers are facing a battle on several fronts. Many rely on a healthy export market to survive and all rely on continued investment in research and development to remain competitive.

With cashflow tougher and supply chain challenges, now more than ever and many manufacturers facing significant new investment in health and safety in order to maintain social distancing within their facilities to protect their workforce, it is an incredibly challenging time.

Prior to Covid-19, challenge around the impact of Brexit were already placing a strain on our manufacturers. Both Westminster and NI Executive recognised that our competitiveness in this post-EU environment would require support.

In Northern Ireland, they pledged a target of achieving a research and development (R&D) spend of £1.2billion by 2025. Is this still realistic?

Certainly, investment in R&D is seen as an important way of building for the future, with innovations in new equipment, products and processes along with investment in people and skills. But if can only be achieved if manufacturing companies get as much support as possible to help them survive this year.

R&D Tax Credits is a government initiative developed to encourage innovation and now more than ever provide a valuable source of financial benefit for manufacturers facing the worst.

A total of £75 million was paid out to businesses in Northern Ireland in R&D Tax Credits during 2017-18. But many businesses are still missing out on potentially tens of thousands of pounds.

Yesterday I spoke to Stephen Kelly, Chief Executive of Manufacturing NI who confirmed the pressure his members are under at this time: "Hundreds of our manufacturers are providing life-sustaining, priority goods for consumption at home and as part of international supply chains. A significant number of our members have repurposed during the Covid-19 pandemic; changes have been made to products and services as well as to processes as many have had to adapt to changing staffing levels.

R&D is critical to all of this and we are keen to alert manufacturers to claim the benefits these tax credits provide.

With 4 out of 5 of our currently firms using cash from the business to sustain operations now, R&D tax credits should be considered a very legitimate and accessible way to get additional cash into your business at this time.”

The rebuilding of our economy relies on our manufacturing companies who rely strongly on R&D. There is support available for companies of all shapes, sizes and sectors but many companies are not claiming their full legitimate entitlement and could be losing out on tens of thousands of pounds.

We are working closely with Manufacturing NI and a broad range of companies across Northern Ireland to help them get their slice of the millions that the government has made available.

At such a time it is also vital that when claims are submitted the government moves quickly with payments. In helping Northern Ireland companies claim for tens of thousands in recent weeks, it is reassuring to see that HMRC are clearly making this happen that for many within the manufacturing industry are proving vital as they fight for survival.

With even more R&D promised in the most recent UK Budget, we are calling for all companies large or small to seek advice in this area. We are all in this together and working together I hope we not only survive but thrive in the years ahead.

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