R&D spending in the logistics and haulage sector fell 8% in the first quarter of the year, analysis of the latest ONS data, released yesterday, by business tax relief consultancy Catax shows1.
The amount invested in R&D by the transportation and storage industry fell from £13m in Q4 2020 to £12m between January and March this year. It represents no change on the same period a year earlier.
The figures are not adjusted for inflation — with CPI running at 0.7% in the year to March 20212 — so this will have also had a marginal negative impact on the annual comparison.
Despite being flat on an annual basis, the logistics industry’s quarterly performance in Q1 was worse than UK industry as a whole. Total R&D spending by UK businesses grew 1% in Q1 vs Q4 2020 to £9.7bn, although this represented a fall of 3% on an annual basis.
The ONS published its Q1 2021 statistics for R&D spending yesterday (Wed). UK GDP for Q1 2021 was down 1.6% on the previous quarter3.
The industry had defied expectations last year overall, recording the same level of R&D investment as it did in 2019 — £50m. This was still lower, however, than the record high of £82m recorded in 2011.
Many of the industry’s members will benefit from R&D tax credits on qualifying spending. This tax relief was introduced by the government in 2000 to incentivise innovation, and results in either a reduction in a limited company’s corporation tax bill or a cash lump sum.
Many firms don’t realise the work they do qualifies as R&D, which is defined as any work that seeks to resolve a scientific or technological uncertainty, whether that’s a new process, product or service. Crucially, R&D work does not need to have been successful to qualify and claims can be made up to two years beyond the end of the tax year in which the work took place.
Mark Tighe, CEO of R&D tax relief consultancy Catax, comments:
“It’s a mixed result for the logistics sector which has outperformed in the past year but markedly underperformed since the previous quarter.
“Logistics companies make a fraction of the investment seen in other industries but that doesn’t mean we shouldn’t expect to see sustained growth year on year. With Brexit fading into the background and the looming end of covid restrictions, the pent up need to grow R&D spending may finally make itself felt in the second half of the year.”
