BHP, together with the other UK member firms of Kreston International, is pleased to publish the results of the second Technology Business Barometer, a quarterly snap shot of business confidence across the UK technology market with encouraging results.
Each quarter, the barometer looks to assess confidence in some of the topical areas affecting the sector.
R&D tax credits
Perhaps surprisingly, over three quarters of businesses that responded have not advanced R&D expenditure as a result of the tax credits available. Many responders felt that they did not undertake any R&D activity that would qualify. Our experience shows, however, that far more expenditure can now be classified as R&D and qualify for the tax credit than previously thought. Consequently, this is very much an area that businesses should be taking advice on to ensure they are getting the most out of this generous tax regime, especially given the recent boost to R&D following on from the Budget which means that SMEs will be able to recover 32.6p in every £ of qualifying expenditure as opposed to the 24.5p currently available.
Patent Box
Although billed as the tax regime that technology businesses and manufacturers alike have eagerly awaited, the commencement of the Patent Box regime, which started in April 2013 and offers a reduction in the Corporation Tax rate on profits generated from patents (ultimately to reduce to 10%), seems to have had little effect on the patent strategies for our responding businesses, with only one fifth of them having actively refined strategies to take advantage. Those in group structures seem to be doing more work in this area but there is still little enthusiasm for smaller businesses to start looking to patent existing products to qualify for this tax break. This may well be influenced by the potential costs of engaging in the patent process, but for such businesses it is important to balance the cost-benefit ratio.
Funding
A third of respondents back up recent positive media which suggests that funding is becoming easier to unlock – whether debt (through banks) or through equity. However, the majority of our respondents have seen no change and nearly a quarter are finding obtaining funds more difficult now than ever. There’s “still work to be done” seems to be the message coming out loud and clear.
Value of businesses in the sector
Good news in the fact that over half the responders are feeling that the value of the businesses in their sector are now improving since they took a tumble of the past 5 years. This improvement in value is breeding confidence in the sector which is borne out by the increase in M&A activity we have seen over the past 12 months and the increase in multiples being paid.
In summary, mixed results from this quarter’s barometer. Business values are increasing which can only be good for the sector but it is apparent that businesses are still not taking full advantage of the tax breaks which are available to the sector. On the whole, availability of funding is perceived to be improving slightly, but probably not at the rate which businesses would like.
