Measuring the Impact of Research and Development (R&D) in Arts, Humanities, and Social Sciences (AHSS) on the Creative Industries' R&D

A new report, titled "Understanding Createch R&D," published by the Policy Exchange Centre (PEC), sheds light on the underutilised potential of Research and Development (R&D) in the UK's creative industries. The report, based on a survey of 361 R&D active businesses in the creative and high-tech sectors, highlights the need for a more inclusive approach to R&D tax credit frameworks.

A Hidden Treasure Trove of R&D

The report estimates that approximately two-thirds of R&D activities in the UK's creative industries are currently being conducted. However, only 14% of creative industries businesses surveyed were eligible for R&D tax relief. This discrepancy is largely due to the lack of recognition of Arts, Humanities, and Social Sciences (AHSS) R&D under existing rules.

The Need for a Broader Definition

The UK's R&D tax credit schemes traditionally emphasise advances in science and technology, which suits sectors like manufacturing and digital industries but less so the creative industries where innovation is often artistic or cultural in nature. Recognising AHSS disciplines explicitly in R&D tax credit frameworks could broaden the definition to include creative work that resolves scientific or technological uncertainties or advances knowledge in AHSS fields.

Clearer Guidance for Creative Firms

Publishing clearer guidance that confirms certain arts-based activities qualify as R&D when they contribute to technological or scientific advancement would make the incentives more accessible and credible to creative firms. This, in turn, could encourage investment by reducing uncertainty around eligibility.

Aligning the Tax Credit Scheme with the Creative Economy

Such recognition would align the tax credit scheme more closely with the diverse innovation ecosystems in the UK, promoting equitable support across science, technology, and the creative economy. This could stimulate more innovation and economic growth in these sectors.

Notable Examples of AHSS R&D

The report highlights several examples of AHSS R&D, such as the Royal Shakespeare Company's new experiences and Netflix's combination of creative skills with state-of-the-art film production techniques. AHSS R&D is also recognised by the tax authorities in the majority (23) of Organisation for Economic Co-operation and Development (OECD) countries, including creative industries heavyweights like Germany, France, and South Korea.

The Way Forward

The low uptake of R&D tax credits in UK creative industries firms underscores the need for a more inclusive approach to R&D tax credit frameworks. Broadening the definition, publishing clearer guidance, and encouraging investment by reducing uncertainty around eligibility could boost investment and innovation in these industries. This would not only support the creative industries but also contribute to the UK's overall economic growth.

The Policy Exchange Centre's report, "Understanding Createch R&D," reveals a scarcely tapped potential in the UK's creative industries' R&D sector.
The report, derived from a study of 361 R&D active businesses, pinpoints the necessity for a more comprehensive approach to the UK's R&D tax credit frameworks.
The report suggests that about two-thirds of R&D activities in the UK's creative industries are present, but only 14% of the surveyed businesses qualify for R&D tax relief.
This disparity primarily stems from the disregard of Arts, Humanities, and Social Sciences (AHSS) R&D under existing regulations.
Expanding the acknowledgement of AHSS disciplines within R&D tax credit frameworks could enlarge the definition to encompass creative work addressing scientific or technological uncertainties or advancing knowledge in AHSS fields.
Offering clearer guidance that validates certain arts-centered activities as R&D when they engender technological or scientific advancement would make the incentives more accessible and trustworthy to creative firms.
This, in turn, may inspire investment by lessening the ambiguity concerning eligibility, ultimately spurring more innovation and progress in both R&D and the creative industries.
The development of a more inclusive approach could extend benefits to sectors beyond science and technology, aligning the tax credit scheme with the multi-layered innovation systems present within the UK – thereby promoting balanced support across science, technology, and the creative economy.
Advocating clearer guidelines, broadening the definition, and promoting investment could stimulate greater investment and innovation within the creative industries – a move that would bolster not only the creative sector, but also contribute to the UK's overall economic growth.