How & Why the Government is Supporting Agricultural R&D

3rd Sep 2021
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The UK spent 1.74% of its gross domestic product on R&D in 2019. But, to keep up with innovative countries such as the USA, which spends 2.8% of its GDP on R&D, or Germany that spends 3.1%, the UK government has plans to increase its R&D spend to 2.4% of the total GDP by 2027.

One of the industries that is set to benefit from this increase in R&D spend is agriculture.

All sectors will contribute to that increase…but with more focus on environmental management as well as more efficient food production, agriculture will be a key area for support.” – Farmers Guardian

How will the government encourage R&D within the sector, and more importantly, why agriculture?

What do we mean by agricultural R&D? 

The UK Government spent £365 million (3%) of its total R&D spend on agriculture in 2019. But what exactly do we mean by agricultural R&D?

Farmers in white lab coats, running experiments and developing ground-breaking agricultural products, processes and services?

British farmers are among the most innovative in the world, constantly experimenting with new techniques and tools to improve the performance of their farm business.” – Farmers Weekly

Research and development within the agricultural industry has come a long way: Over 12,000 years ago, we moved away from the traditional hunter-gatherer type lifestyle towards a more reliable food supply. New ways of farming crops and animals were created to meet demand, and the global population skyrocketed as a result.

Research has altered our world in big ways. The standard of living we enjoy today is much higher than it was for previous generations.” – Carlisle

This agricultural revolution, coined the “Neolithic Revolution”, was thanks to research and development within agriculture.

And agricultural research and development is still going strong: Companies, farmers, scientists and researchers are all working together to develop new technologies, equipment and principles to make agricultural processes more efficient, so that livestock and crop yields increase, farmland productivity improves, harmful diseases are reduced, and food quality increases - but with less input.

For example, R&D within agriculture has led to the creation of hybrid seeds. This new, innovative type of seed is resistant to wheat rust, has an intolerance to drought, contains more nutritional value and has improved yield potential.

So that’s what agricultural R&D is, but why is it seen as a key driver for the UK’s economy?

Why is agricultural R&D needed? 

We touched on the “Neolithic Revolution” earlier and how R&D within agriculture has changed (and is still changing) how we live, eat and work. Agriculture is, therefore, a central pillar of the economy: It supplies the population with food, jobs, raw materials and international trade opportunities.

The fast rate of development in the agriculture sector offers progressive outlook as well as increased motivation for development... Therefore, economic development relies on the agricultural growth rate.”  - Agricultural Goods

The development of our economy is one reason why the government is keen to encourage investment in agricultural R&D. But there are other, equally as important, reasons too:

Agricultural R&D is tackling environmental and climate change issues 

The environmental problems we’re facing, such as warmer temperatures, drier soils and the release of chemicals, pesticides and damaging toxins into the atmosphere is making the availability of natural resources scarcer and the production of food and crops harder.  

Therefore, investment in R&D is needed to reduce the pressure on natural resource supplies and develop new production methods and improved ways of increasing yield in the face of such major climate change challenges.

Agricultural R&D is helping to solve the famine crisis

Over two million children under the age of five have died from hunger, and one in eight people suffer from chronic hunger. With a growing population and these shocking famine statistics, there is huge pressure on the agricultural industry to increase the amount of food it’s producing so that food becomes cheaper and more available.    

To meet the growing demand for food, the agricultural industry needs to prioritise the research and development of innovative technologies that lead to new types of seeds, ground-breaking animal vaccines and pioneering production and farming methods.

Indeed, over the past several decades, economic studies show that R&D-driven improvements in farm productivity have helped drive down food costs and global poverty rates.”  - Issues in Science & Technology 

Agricultural R&D allows the industry to be more competitive

Since WW2 there has been pressure on the agricultural industry to increase productivity to keep up with the demand for food. This has prompted farmers to treat their farms like proper businesses: Costs are now analysed against yield and these ROI figures are used to dictate the direction and strategy of the farming world. But, with a shortage of natural resources comes an increase in costs, and agricultural businesses are struggling to make ends meet.

Agricultural R&D is, therefore, needed to make processes more efficient, production more effective and agricultural companies more competitive. 

There is a recognition by Government that there is a need to improve the efficiency and productivity of farming to bring it more in line with the performance of other industries and other countries such as the Netherlands and New Zealand.” – Farmers Guardian
 

How is the government encouraging R&D within agriculture?

Long-term investment in agricultural R&D is the best driver for productivity." – Farmers Guardian

To tackle climate change, famine and the economic and competitive issues we’re facing, the government plans to invest £160 million to fund agricultural R&D and innovation within the industry.  

Initiatives to boost R&D within the agricultural industry include:

  • Investment in the development of new agricultural technology
  • Improving collaboration opportunities between researchers, scientists and farmers – both in the UK and abroad
     
  • Making the process of R&D easier and less of a financial risk for agricultural businesses  

To push these initiatives forwards, the government are offering eligible agricultural businesses the opportunity to claim R&D tax relief and apply for R&D grant funding.

Let’s look at these two opportunities in more detail.

R&D tax relief

The government-funded R&D tax credit incentive is designed to support large, medium and small agricultural businesses with their timely, risky and costly R&D work.

It allows these businesses to claim up to 33% of the costs associated with their R&D project. This includes any project that’s designed to either make an advance in science or agricultural technology, improve an existing farming process, product or service, or develop a new area within agriculture. And the R&D work doesn’t even need to be successful to be eligible for this tax relief!

The R&D tax relief scheme has been around since 2000, but less than 400 UK farmers claimed R&D tax credits last year. This is mind-boggling when you consider that the average agricultural claim is around £52,000!

Many don’t realise that simply trying out something new on your farm can make you eligible to claim R&D tax credits that could be worth tens of thousands of pounds.” – Farmers Weekly

As an example, R&D tax credits have helped agricultural businesses create new, innovative animal vaccines, environmentally friendly fertilizers, improved methods of processing and better management techniques for fisheries.

R&D grant funding 

The UK governments grant scheme, that’s open to all UK-based agricultural businesses, is funded by Innovate UK. However, the EU backed Horizon Europe grant scheme is also open to UK businesses and provides opportunities for collaboration between other countries, experts and industries, which is exactly what the agricultural industry needs. If an agricultural business can prove they’re solving a technical uncertainty by undertaking risky or innovative research, and they can demonstrate the commercial, technological and financial benefits of their R&D project, they’re likely to win funding to support their R&D work.

But, applying for and writing a winning grant application takes a lot of time, skill and resources. Some smaller businesses and farms may struggle. This is where working collaboratively with larger corporations or seeking support and guidance from R&D grant specialists will help.

Some of the projects that have been funded by government-funded grants include preventing waste in harvest and storage, improving labour productivity through robotics and machines, creating better resource management solutions and finding smarter soil management and irrigation methods.

Conclusion

The agriculture industry is under immense pressure: Farmers and agricultural businesses need to increase yield to feed a growing population, while fighting against climate change and economic problems. 

This is why investment in agricultural R&D is incredibly important, both for businesses within agriculture and the government.

But, every piece of R&D work includes an element of risk: Time, money, resources and even reputation could be lost if the project fails, for instance. So, agricultural businesses should take advantage of the available R&D incentives to protect their interests and reduce the risks associated with the pioneering work they’re doing.

This article was brought to you by Tax Cloud

Tax Cloud is the UK’s first self-service R&D tax credit portal. With the support of the R&D tax experts at Myriad Associates, you can submit your client's R&D claim and receive the maximum amount of tax relief possible in a fraction of the time and cost it would take to file the claim manually, yourself. 

Find out more by visiting the website, speaking to one of the friendly Tax Cloud team on 020 7360 4437, or dropping them a message.