Research & Development incentives in manufacturing and engineering: Turning innovation into real growth Dr Phil Chambers PhD, Associate Partner at Sumer NI - part of the wider Sumer Group explains how R&D incentives can help turn technical development into tangible financial benefit.
M anufacturing and engineering companies across the UK are innovating every day, often without realising that much of this work can qualify for valuable research and development (R&D) incentives. From improving production processes and developing advanced equipment for solving complex engineering challenges, innovation in this sector rarely looks like stereotypical laboratory research, conducted by those wearing white coats. Instead, it happens on the shopfloor, in design offices, and through continuous improvement projects aimed at improving quality, productivity and competitiveness. Yet many manufacturers still assume R&D tax relief and the related incentives are only for technology companies or scientific research organisations. When in reality, manufacturing is one of the most frequent users of R&D incentives in the UK, precisely because so much genuine innovation takes place within engineering environments.
A Real Company Story: Innovation Driving Operational Performance
Together, these incentives help reduce the financial risk of innovation while supporting reinvestment into new products, improved processes and manufacturing capability. Importantly, R&D does not need to succeed to qualify. Projects involving trial and error, uncertainty and iterative development are often the strongest from an incentive perspective. What types of manufacturing activity can qualify? Common qualifying activities in manufacturing and engineering include:
An advanced manufacturing company undertook an innovation project to improve the accuracy and efficiency of a critical production process. The existing approach relied heavily on manual intervention, leading to variable quality, extended production times and high levels of rework and scrap. No available automated solution could deliver the required consistency. The company developed a new automated process, overcoming genuine engineering uncertainties around achieving consistent precision and integrating automated adjustments within production equipment. Following extensive testing and refinement, the new process was deployed into live operations, delivering:
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Developing new or improved production processes Designing advanced machinery or modifying existing equipment for new applications Improving tolerances, speed, materials or output quality Automating previously manual or inefficient operations
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Reducing waste, defects, energy consumption or downtime
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Over 70% reduction in rework Over 80% reduction in scrap Around 75% reduction in process time
How R&D incentives support manufacturers
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Scaling prototypes into reliable commercial production
At a high level, companies undertaking qualifying innovation can benefit from:
If your team is solving technical problems where the outcome is not immediately obvious and requires testing and refinement, there is a strong chance the work qualifies.
The work qualified for R&D tax relief as it involved resolving technical uncertainties through experimentation and innovation rather than routine production changes. The resulting process materially improved productivity, quality and operational resilience, while freeing capacity for higher-value manufacturing work.
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R&D Tax Relief , which provides either cash repayments or reductions in corporation tax based on eligible development expenditure Innovation and R&D grants , available through bodies such as UKRI and regional growth organisations, which support early- stage technical projects Patent Box , which reduces the corporation tax rate applied to profits generated from patented technologies
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