Research shows the North East has the most innovative businesses in the UK

The North East has the most innovative businesses in the UK, the latest HMRC data shows. More businesses are claiming R&D tax relief in the North East than anywhere else in the UK, according to analysis by innovation funding specialists Catax.

Almost 17 claims for R&D tax credits were made per 1,000 businesses in the region in the latest year — 17.4 per cent higher than the UK average1. On average, 14.4 claims are made per 1,000 businesses in the UK. In contrast, the South West — the region with the lowest proportion of businesses claiming for innovation — businesses made 11.5 claims per 1,000 companies.

This means businesses in the North East are 47.4 per cent more likely to claim R&D tax credits compared with the South West. R&D projects play an important role in economic growth, as they attract inward investment, boost exports and lead to the creation of more skilled jobs locally.

R&D tax relief was introduced by the government in 2000 to incentivise innovation, and results in either a reduction in a limited company’s corporation tax bill or a cash lump sum.

Many firms don’t realise the work they do qualifies as R&D, which is defined as any work that seeks to resolve a scientific or technological uncertainty, whether that’s a new process, product or service. Crucially, R&D work does not need to have been successful to qualify and claims can be made up to two years beyond the end of the tax year in which the work took place.

Mark Tighe, CEO of innovation funding specialists Catax, comments, “North East businesses are leading the way on innovation, leaving some parts of the UK trailing far behind. It bodes well for levelling up in the region, as innovation has a positive impact on economic prosperity and can lead to the creation of highly skilled jobs.

“Despite these positive figures, we know so many more businesses, especially SMEs, are carrying out R&D work without claiming for the valuable tax reliefs they are entitled to. Millions of companies have faced financial difficulties during the pandemic, and this is money that can create a virtuous circle of growth for both businesses and local economies.”