27 September 2022
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Why businesses should continue to invest

Now is a worrying time for many businesses, with the Bank of England expecting inflation to increase above 11% by the end of the year. This can have a profound impact on your business. In times like these, the most common action to take is to stop investing in your business. However, this might be an opportunity loss. It is times like these that can inspire new innovations, as companies must explore ways to remain competitive. The Government encourages these efforts with research and development projects (R&D) tax incentives.

In this article, we will look at:

  • Five different ways to stop inflation from affecting your business.
  • How R&D Tax and Grants can help during the cost-of-living crisis.

Ways to stop inflation affecting your business

Continue to invest in your business

As previously mentioned, investing might feel counterintuitive; however, spending money can actually be a catalyst for beating inflation and making your business more efficient.

Plan for inflation

We are currently experiencing inflation that has not been seen in more than four decades, up to 9.9%, and will continue to increase. However, if businesses are aware of inflation, they can plan on how to deal with it and thus save cash in reserves.

Continue with your innovative projects

Many companies may stop their innovative research and development projects due to costs. However, this is where R&D tax credits and available grants and funding comes in and can support you in your projects. Stopping your investment can stop your business from becoming competitive. As a result, your business may stagnate without launching new services, products and processes.

R&D tax credits inflation and grants

How R&D incentives can help during inflation

However, this is where the R&D Tax credit comes in, offering up to 33% of eligible R&D costs, which can be reinvested back into the company. Either as a Corporation Tax rebate or cash. This is available to both small to medium enterprises (SMEs) and larger companies, regardless of industry, as long as innovative research and development activities are eligible. This can help cover expenditures on things such as utilities, staff, materials and even software. Even small claims can add up to thousands of pounds.   

Industry examples of eligible R&D activities

The R&D tax incentive scheme comes in different forms. This might look like food manufacturers seeking a reduction in cost increases for various raw ingredients. Similarly, food companies reformulating products may require a small-scale laboratory trial by food scientists.

In addition, energy industries have a more compelling business case for substituting fossil fuels at inflated prices than the UK’s 2050 net-zero targets. Here, tests and trials are essential to establish parameters such as caloric value, potential corrosion, thermal properties, and feedback consistency. 

Furthermore, companies are innovating to streamline their operations and expose costs to inflation in other sectors, such as manufacturing and construction services. The supply chain crisis further drives businesses to develop digital twins – virtual simulations of logistics and assets to identify bottlenecks and reduce costs. As a result, businesses can indeed expect an R&D Expenditure Credit (RDEC) boost; with better margins and sustainable profits, R&D projects do deliver cost savings.

Farm tech use case

In fact, a farming tech project got government funding of £16.5m to improve fruit farming and the use of artificial intelligence (AI) to improve pigs’ welfare. The funding is part of a Farming Innovation Programme of £270m to partner with UK Research and Innovation (UKRI).

With this in mind, although we are entering a living crisis, the future and opportunities for new innovations and businesses’ ability for further funding continue. Therefore, businesses should keep investing and market for sustainability and growth.

Is your company eligible for R&D tax relief?

Although it is possible to claim your own, we at FI Group highly recommend that you work with an R&D specialist like FI Group. If your company is doing any form of an innovative project with research and development activities, you may be eligible for R&D tax credits and grants. This may help your business buy essential equipment and finance activities that help your business survive.

Eligible R&D expenditures include:

  • Payment to the subject of clinical trials.
  • Software.
  • Staffing costs.
  • Consumables.
  • Externally provided workers (EPWs).

You can learn more about R&D tax relief here.

Get in touch

We at FI Group firmly believe that companies doing the right thing and helping society evolve through innovation should be encouraged and able to access R&D tax credits to offset some of their costs. If you and your company are in the process of innovative drone R&D projects, contact us here to find out how we can help. We look forward to speaking with you and guiding your business through the R&D process.

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