Real estate: Encouraging innovation in housing & infrastructure

How the Government can encourage innovation in housing and infrastructure.

During the summer, the House of Lords Science and Technology Select Committee published its report entitled ‘Off-site manufacture for construction: Building for change’, which argued that the UK’s construction cannot meet the current demand for housing and infrastructure. In the face of labour shortages and a significant dip in productivity, the report argued, the Government and construction industry must work together to seek solutions.

However, our experts in research & development (R&D) tax and government grants argue that if the Government wants to really encourage innovation within the sector, then it should consider:

• Redefining the R&D tax eligibility criteria. The current definition is archaic, having been established more than 30 years ago, which often means that construction and engineering businesses simply don’t understand its applicability and therefore fail to get the most out of the financial support Government provides. With Brexit looming, the UK has an opportunity to lead the conversation and to introduce a definition that is more suited to the modern world.
• Clarifying and redefining outsourced R&D – namely, subcontractors versus externally provided workers - which remains a notoriously grey area. Large main contractors bear the risk associated with design and build works but are not entitled to claim any support if they subcontract work. This cannot be sustainable. If these contractors agree to bear the risk, surely they should reap the rewards of Government support?
• Introducing an advance assurance regime for large companies. As things stand, due to the lack of certainty, large organisations will not factor incentives (R&D tax) into any investment decisions or tenders. If large organisations could prospectively apply for Government support, just imagine the additional value and the overall increase in productivity.
• Providing greater lead time on Innovate UK grant calls & applications, which is currently between six to eight weeks. In reality, very few organisations have projects or ideas that are fit for purpose, which means that applications are often rushed. In essence, this time constraint means that as it stands organisations are probably not submitting their best, most coherent or innovative ideas or projects.

By considering these straightforward changes, the Government could swiftly provide the sector with the much-needed clarity and certainty it so desperately requires over a period of unprecedented change.

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DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.