Dutch agritech investment proves the UK can still compete
Two of the country’s leading tax experts says new investment by Dutch companies proves the UK can still compete internationally, but British SMEs need better backing to maintain a long-term global appeal.
At a recent British Embassy event at The Hague, enthusiasm among Dutch firms in the agritech sector to invest in new and continuing UK operations was high, suggesting foreign investment into Britain remains strong.
Recent figures from the Department for International Trade evidence this, with latest data to June 2022 showing foreign direct investment (FDI) into the UK was up 3% in the previous 12 months, despite many predicting it would suffer after Brexit.
However, Melanie Prestwich, tax partner at Azets, the UK Top 10 accounting firm, has urged cautious optimism, warning that recent changes to the UK’s research and development (R&D) tax credit system, announced by chancellor Jeremy Hunt in his Autumn Statement, could still deter foreign investors.
She said: “Agritech is an area with huge growth potential and the ability to drive innovation, and it’s wonderful to see Dutch companies choosing to invest in the UK. It’s clear the UK is still an attractive option in some niche sectors. However, access to technical specialists, particularly through strong university science and innovation park links, was seen by foreign investors as a big draw to the UK, as was the R&D tax credit system.”
Britain’s most innovative SMEs are also facing lengthy delays in the processing of R&D tax relief claims, as HMRC conducts additional checks to counter fraud.
This, along with the changes to the system, is making it harder for SMEs to access the scheme that was designed by the government to stimulate growth and keep Britain competitive.
Tim Croft, national head of R&D tax at Azets, said: “Recent changes to the R&D tax credit scheme mean reduction of more than 30% in the tax benefit to companies undertaking R&D in the UK from April 2023 – at a time when the government claims it wants ‘to turn Britain into the world’s next Silicon Valley’.
“By reducing one of the only meaningful incentives for innovative SMES, the R&D tax credit scheme will no longer stimulate growth among British SMEs, nor will it help position the UK as an attractive proposition for foreign investment in the long-term.”
SMEs have been hit particularly hard by the economic downturn, with many struggling to cope with the increased cost of debt, rising inflation, soaring operating costs, and disruption to the supply chain.
Melanie Prestwich added: “SMEs are the lifeblood of our economy and have a critical role to play in the UK’s fiscal recovery. We rely on Great British innovation to drive our economy forward, attract investment, and keep the UK competitive. SME owners and entrepreneurs are not receiving the appropriate level of backing or incentives required to achieve this, which will impact the UK’s overall global appeal.”