Construction is full of challenges, so R&D spending is a necessity. Having committed to raising R&D investment, the UK government is keen to keep the construction sector competitive and industry-leading. In fact, government targets for R&D spending are set to reach 2.4% of GDP by 2027 and 3% in the longer term. These goals are certainly ambitious and will rely on a combination of both public and business investment.
The two categories that spur government investment in R&D are firstly building on strengths, and secondly, action needed. The impetus for investment is therefore to retain a global market-leading status or to improve standards so as to better compete.
As R&D tax incentive advisers, we have our ear to the ground when it comes to government R&D investment. This article will look at R&D investment in the construction industry for a brief overview of the current and predicted levels of innovation.
Current R&D in Construction
The construction industry is one with perennial challenges. Many of these can benefit from innovative new solutions. Some such challenges relate to overcoming problems onsite, such as manoeuvring heavy or awkward materials, and also the development of new and innovative materials. Relatively unusual, bespoke and site-specific solutions are often required.
In 2018, the UK total R&D expenditure was £37.1 billion, the equivalent of 1.7% of GDP. The government aims to increase this, as mentioned above, and supported by the March 2020 Budget, which promised to “Get Britain Building”. COVID compounds the logistical difficulties already expected from Brexit, but the government cast these in a positive light. The “Get Britain Building” campaign was sold as:
“A unique opportunity to build for the future and, in doing so, create jobs, promote inclusive growth, deliver a balanced economy and promote a greener environment”.
This supports the significant drive for increased efficiency and innovation the construction sector has been tasked with over the past few years.
R&D spend in Construction for 2021
The use of innovative approaches to infrastructure as well as digital technologies will likely be a key focus for future R&D spending. Homes England, the government’s housing accelerator, are also driving innovation in the sector with their own study into modern methods of construction (MMC).
The focus on new processes, MMC, and design for manufacture and assembly (DFMA) means that the planned investment here is unlikely to be curtailed despite the current economic landscape. Among other areas likely to spur on innovation investment are:
Transforming Cities Fund – Investment into intra-city development, including increasing connectivity through sustainable and public transport. The fund was originally announced as part of the Autumn 2017 Budget with over 1.7bn in pounds allocated.
Introduction of cost-saving techniques – including volumetric construction (the assembly of parts, rooms and small-buildings offsite), offsite frame-manufacturing and modular construction.
Green Construction Board – The creation of a body that sets and overseas sustainable building standards along with the Construction Industry Training Board by the CLC. These are likely to expedite the development of industry-shaping techniques and processes to meet a new and much-needed benchmark for sustainability.
AI and Smart home integration – From modelling building usage to optimising temperature to building smarter homes that are fully integrated with technologies such as voice and facial recognition, there are many opportunities for firms and companies to create innovative solutions.
Grenfell fallout – The after-effect of the fatal cladding incident at Grenfell Tower and the ensuing inquiry has pressured the industry to prioritise safety in building construction and maintenance. As a result, safer materials, processes and building site regulation have all been called for.
R&D tax credits in construction
The need for innovation in construction means there’s an opportunity for companies to claim tax relief on R&D costs. That can provide cash flow benefits and funding to further plough into industry innovation. R&D tax credits are also designed to reward the risk-taking involved in innovation investment – regardless if your project is successful or not.
The potential for an R&D tax claim in construction is high due to the technically demanding nature of the sector. Types of activities that might qualify include working with new materials as well as industry-changing techniques and processes (or improvements to existing ones).