New research from the Durham University Business School reveals the impact of Coronavirus on R&D.

Research Parameters

This research was carried out by Professor Richard Harris and Dr John Moffat, both economics professors at Durham University Business School.

Between October and November 2020, they interviewed over 4,500 UK companies. Question topics included:

  • Industry the business belongs to
  • Size of the company
  • Background and history of general company
  • Previous investment in R&D projects
  • Current status of R&D activities

What are the research conclusions?

The main statistics of note are, due to the health pandemic:

  • 45% UK companies scaled down their R&D activities
  • 18% stopped R&D projects completely
  • 40% put money into IT

Of course, these are just the bare numbers. Inferences are drawn in their conclusion.

For example, the huge increase in IT investment is at least partly prompted by the necessity of remote working. Just the practicalities of having your employees working from home may well have required some new IT provision. This could also suggest that the way companies do business has had to become more digitised. With many expanding their online offering, or perhaps going online for the first time.

This research suggests that, in a reaction to the pandemic, only 37% of companies continued with their previously planned R&D. The other 63% either slowed their R&D activities or brought them to a halt. The long-term impact of this can only be estimated, at this stage. But we know that any drop in R&D work inevitably slows growth and decreases productivity overall.

Professor Richard Harris said:

“The Covid-19 pandemic has had profound effects on the world economy, and in the UK specifically, Bank of England figures suggest that it has led to the largest fall in GDP since 1709. While the short-run effects of the early stages of the pandemic are now well understood, less is known about its implications for growth in the medium to long-term.

“Our findings clearly show that research and development spending dropped drastically during the pandemic, which likely will have a negative impact on productivity and growth in the medium to longer term.”

What should I do about my R&D projects?

Only you can answer this question for your business, as it depends on the individual position of every company. Right now, things vary dramatically between industries, never mind individual companies. You need to make the right decision for your future.

Just don’t forget to claim your R&D tax relief for projects you’ve already done. In the face of everything else, this kind of claim had to go on the back-burner. But maybe now’s the time to take another look. Maybe you’ve heard that claiming furlough payments and other government financial support rules you out of R&D tax relief. It does complicate things, but it doesn’t mean you shouldn’t make any claim at all.

And if you haven’t considered applying for R&D tax relief before, now’s the time to find out if your projects are eligible. To start with, you need to decide which scheme you’re applying for. There’s the R&D Tax Credit scheme for SMEs and the Research and Development Expenditure Credit (RDEC) scheme for large companies. Then it’s a question of deciphering if your projects are eligible and which of your costs are applicable.

Give us a call and we’ll talk you through the whole thing – and take over the paperwork. It could be just the investment you need to restart a paused project, or get going on a new one. Remember that this is a substantial amount of money – our average R&D Tax Credits claim is £49,000.

Jamie Smith