Research & Development, COVID-19, and the Construction Industry

Research and Development has been defined as creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge. The government incentive, which was introduced in 2000, supports companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It has been instrumental in creating new and improved products and services.

The effect of COVID-19 on the economy is visibly calamitous, and every industry has been uniquely challenged. As for the construction industry, the lockdowns have caused a major decrease in output. However, it might come as a surprise to some, but many construction companies are optimistic about 2021 and beyond. The success of construction companies is contingent on the stability and prosperity of many other industries. Sectors such as hospitality and manufacturing have been markedly effected by the pandemic, yet positivity for the future remains plentiful, especially amongst the construction sector.

One of the major reasons for the confidence in the future is due to the increasing commitment to adopting greater innovation and technology. When investing in new technology and innovation, companies will likely be eligible to claim the Research and Development Tax Credits offered by the government. While a portion of the industry are struggling to obtain funding during these unprecedented times, many companies are committed to investing in Research and Development in 2021 and beyond.

It has become apparent that businesses are beginning to expand and develop by investing in different regions of their business – these include: Building Information Modelling and other software, information technology, and Research and Development. Adoption of these methods has triggered increasing confidence within the construction industry.

It is extremely encouraging to see an increased commitment to investing in innovation in this sector as it further inspires other businesses within the sector and others in contrasting sectors to adopt this approach. Construction is truly key in helping drive economic recovery. It accounts for 7% of UK GDP (Gross Domestic Product). In addition, in the recent March 2021 budget, Rishi Sunak stated the government’s target to raise total investment in Research and Development to 4% of UK GDP by 2027. Furthermore, the government announced in 2020 their plans to increase public Research & Development investment from £5 billion (2019) to £22 billion per year by 2024-25. This landmark investment is the largest and fastest ever expansion in support of researchers and innovative businesses.

Companies House’s statistics reveal that that over 500,000 companies were dissolved between 2019-2020 and we are yet to see the true effects of COVID-19 on businesses.  The observed increase in 2020 coincides with the emergence of the coronavirus pandemic. It is apparent that cash flow is one of the main difficulties for businesses – and here is where Research and Development can play a pivotal role. The tax credits can help boost cash flow and finances, whilst providing companies with an appetite for innovation and development.

It has become increasingly clear that this government incentive can greatly benefit the construction industry, which will help further support economic recovery. Therefore, considering the future, it is essential to maintain a powerful and dynamic construction industry.

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Joseph Darby

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