Yorkshire Manufacturing: Global firm invests thanks to R&D tax credits
A PUMP manufacturer has developed two high-tech testing facilities utilising the government’s research and development tax credit regime as it continues “vital” investment in the business.
Leeds-headquartered Sulzer Pumps UK is part of the Sulzer Group, a global company which operates in over 40 countries. The £180m turnover business develops complex custom engineered high-energy pumps for applications in industry sectors such as oil and gas, power generation and the water industry.
Sulzer has developed a gas turbine drive test bed that can fully string test pump packages of up to 30 MW, and has recently added a new electrical sub-station, giving it access to 45 MW of electrical power. The company has also invested in a subsea pump test-bed, which makes it possible to examine subsea pump/motor packages with weights approaching 100 tons in water depths of up to 10 meters. It is now in the final qualification phases of a 3.2 MW subsea multiphase pump to be located on the seafloor at depths of up to 2,000 meters, for which it won the Spotlight on New Technology Award at the 2013 Offshore Technology Conference in Houston, in the US.
Sulzer, which has recovered more than £3m in cash benefit in R&D tax credits, says continued investment in skilled engineering jobs, high-tech software modelling packages and its facility – from design and machining through to assembly and testing – is vital to ensure it maintains its market leading position.
Dr Ernst Lutz, vice-president, head of the Technology, Innovation Engineering department at Sulzer Pumps headquarters, Switzerland, said: “The UK government’s R&D tax credit regime and the assistance of Deloitte was essential for Sulzer Pumps to enable the huge investment required in our high-end testing facilities to keep our leading edge position in the design and the production of the world largest injection and boiler feed pumps.”
Kate Powell, director and Yorkshire manufacturing lead at Deloitte, said she believes that the high performers in the manufacturing sector are getting serious about innovation.
“Innovation requires investment and the government has reinforced its commitment to helping companies working in the sector with its recent changes to the R&D Tax regime, introducing the Research and Development Expenditure Credit (‘RDEC’) and the Patent Box regime,” she said.
The RDEC replaces the tax superdeduction obtained under the existing R&D tax regime and provides a cash injection, like a grant, directly reducing the net costs of investing in R&D for a business claiming under the large company regime.
Steve Blacker, a director in the tax team at Deloitte, said it is a “great boost” to large companies and especially those who have been traditionally loss making and hit by the pressures of the recent downturn.
He added: “People think R&D and they think of people in white coats but the R&D tax regime can actually relate to innovation in your production and manufacturing environment – it is not just for product innovation.”
Teresa Hitchcock, partner and head of safety, health and environment at DLA Piper, said some businesses may be restricted in what they can achieve with innovation of existing equipment and production processes.
She said: “The difficulty is that a lot of businesses operate in old plants with legacy issues so they can’t always do something about it – to do so would have a high capital cost. They may be thinking about it but to what extent can they take action?”
But there are certain things that manufacturers of all sizes can look to do that do not require capital investment, and could result in significant savings.
“There is a focus on reducing the amount of non-renewable materials and of course experimenting with new materials also comes under R&D, so there could be tax credits for that. Plus, if businesses can reduce the amount that goes to landfill, that reduces the carbon footprint and reduces costs,” said Blacker.
