July 20, 2024

Construction innovation cut back during Pandemic

According to new data and forecasts released by HMRC, there was a decrease in the amount spent on research and development (R&D) by construction firms in 2021, compared to previous years. 

The amount spent on innovation by construction firms is forecast to fall by 17% to £2bn, down from £2.4bn invested in 2020. The decrease follows the shutdowns and supply chain disruptions caused by Covid-19. 

Of the R&D tax credit claims made for the year, 8% are expected to be made by construction firms (6,365), with the average claim worth £46,347, compared to the national average of £54,000 for SMEs.

Across the UK, innovation spending that qualifies for tax relief also fell 11% to £38.1bn in 2020/21 – down from £42.8bn in 2019/20. The provisional estimated amount of total R&D tax relief support claimed for the tax year 2020/21 was £6.6bn – a decrease of 4% on the previous year.

According to the data, the highest number of R&D tax credit claims will be made by businesses in the Information and Communication (22%), Manufacturing (21%) and Professional, Scientific and Technical (19%) sectors. 

Adam Park, director at tax consultancy firm Zest R&D, said: “The pandemic has inevitably setback innovation spending in Construction, as work ground to a halt through lockdowns, and issues with getting hold of materials created huge challenges. But it is encouraging to see that spend is still at 83% of the 2020 levels, and is likely set to recover fully in 2022. The work being encouraged by the R&D tax credit is vital to innovation in the construction industry, and the skilled employment opportunities they bring. “

Mr Park added: “Innovation expenditure is recovering after the pandemic, and awareness of the tax relief available will continue to encourage this in the coming years.”