Hospitality Sector R&D Spending Held Firm In Q1 Despite Pandemic Fallout

R&D spending in the hospitality sector held firm in the first quarter of this year despite the disruption caused by the pandemic, analysis of the latest ONS data, released yesterday, by business tax relief consultancy Catax shows1.

The amount invested in R&D by accommodation and food service firms held steady at £20m between January and March this year — no change on the same quarter of 2020.

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 hospitality sector’s performance in the first quarter was better than UK industry as a whole. Total R&D spending by UK businesses dropped 3% annually to £9.7bn in Q1.

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, with 15.9% growth in R&D investment from £69m in 2019 to £80m in 2020. This was still lower, however, than the record high of £84m recorded in 2016.

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:

“The hospitality sector may be starting from a low base compared to most industries, but it has still done well to hang on to the same level of R&D spend that it was recording before anyone knew what Covid-19 was.

“We expect this picture to improve as life returns to normal and greater certainty gives firms in this sector the confidence and leeway to invest for the future.”