According to Stats NZ’s latest Business Operations survey, 40 percent of businesses cite cost as the main barrier to innovation in New Zealand. Lack of management resources and not having appropriate staff followed closely behind at 38 percent and 31 percent respectively.

While cost is the key impediment, the encouraging news is that businesses’ expenditure on R&D is continuing to grow with the private sector spending $1.8 billion on R&D in the year to August 2017, up from $1.6 billion in 2016.

Not so encouraging is the fact that NZ still lags significantly behind the OECD average. R&D is critical to NZ’s sustained economic growth – research indicatesg that a one percent increase in business R&D can lead to a 0.04 percent increase in GDP.

For businesses looking to invest in R&D, the government offers a number of grants and funds, together with a supportive tax regime introduced by the former government for companies that make losses during their growth and innovation journey.

Additionally, the Labour Government has recently announced plans to introduce a non-refundable R&D tax credit from April 1, 2019 (see http://www.mbie.govt.nz/info-services/science-innovation/rd-tax-incentive).

After taking power in the 2008 election, the National Government repealed Labour’s previous R&D tax credit regime, believing that businesses would merely recharacterise existing R&D expenditure to obtain the credit. It seems the Labour Government is intent on reintroducing a tax credit regime under a new guise. Whether it addresses the concerns the National Government had with the old regime remains to be seen.

View the rest of Grant's article on BOP Business News here.

Grant Neagle