By Daniel Hunter

Mid-market businesses have always relied on investment in innovation as one way to ensure they remain competitive, but in recent years we have seen innovation move higher up the board agenda as companies compete in ever-more global markets

As part of its Central South Mid Market focus, BDO has identified 20 companies that truly highlight the breadth of innovation taking place in the region. "This was challenging," explains James Tetley, tax director at BDO Southampton. "Not so much because innovation is hard to measure, but because the term 'innovation' can encompass so many different things.

"Although it's often easy to focus on the 'product' aspect of innovation, it is important to also recognise the value of process innovation. Process changes that may appear from the outside to be a relatively simple improvement, development or adaptation can result in a genuinely innovative result. This equally applies to the use of new, environmentally-friendly technologies to enable production processes to be more efficient.

In recent years, the Government has given clear signals that it intends to make the UK an 'Innovation Nation' a global leader in the development and exploitation of intellectual property.

This has been reinforced through Research and Development Tax Credits and more recently the Patent Box tax regime, which rewards companies keeping IP within the UK with a 10% rate of corporation tax. This has made the UK tax landscape extremely attractive to inward investment and continued domestic investment.

BDO's study of companies within the £10 million - £300m turnover bracket indicates that investment in R&D is not just a 'nice to have' but an essential. Regardless of size — from small companies in a pre-revenue phase of R&D, through to large businesses with extensive product portfolios — there is recognition that innovation and strong growth is common to those at the forefront of their industry.

"When companies can potentially recover £33 for every £100 spent on research and development through the tax credit regime, and then halve their future tax rate through exploitation of a patent, in many respects investing in innovation is a highly cost-efficient way to achieve strong sustainable growth," adds Tetley.

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