Government intervention needed to boost R&D investment

The UK automotive industry could miss out unless the Government does more to attract manufacturers to invest.

A leading academic has said that Europe’s carmakers are increasingly choosing to spend research and development cash in their own economies.

And, if the UK is to change this worrying trend, urgent Government support is needed in terms of tax policy and investment in infrastructure.

Professor Tim Donnelly said: “The problem in the UK is, while some of the innovation here is good, we don’t have enough of it and if you look at the trend in innovation and R&D spend in the UK since the year 2000, it’s actually been in relative decline, because the foreign companies here carry out their main R&D in their own economies, not in the UK.

“What we have to get the British Government to do is to help the car industry to target innovation in the industry here, so that the foreign multinationals become increasingly embedded in the UK, rather than use the UK simply as a place for assembly and nothing else.”

Donnelly, who is professor of automotive business and head of the Motor Industry Observatory, Centre for Sustainable Regeneration (SURGE), at Coventry University, was giving his assessment of the future of the automotive industry at the Westminster Energy, Environment and Transport Forum.

His sentiments were echoed by Konstanze Scharring, head of public policy and vehicle legislation at the Society of Motor Manufacturers and Traders (SMMT), who said there are three or four areas where the Government needs to focus on.

“I think there’s a real need to reform the R&D tax relief for large companies to make it more internationally competitive,” she explained.

“Our members tell us they would potentially take more advantage of R&D over here, but currently that R&D tax relief doesn’t provide any incentive going forward.

“We also think, given that the investment has to be in plants, machinery and tools, the current trend to reduce capital allowances really doesn’t suit our sector or manufacturing in general, we are a high capital intensive and cyclical industry, we need these capital allowances to try and unlock private sector investment.”

Meanwhile, the need for more competitive business rates and better training are also key considerations, Scharring suggests.

Donnelly continued: “The automotive industry, especially on the volume side, is becoming more reliant on foreign, direct investment and it depends what the foreign, direct investors see in the UK.

“In other words we have to make it attractive for them to locate their R&D in the UK as well as their assembly.”