"The strong R&D skills base in the UK has long been recognized as a major factor for the country's appeal among U.S. companies. World-class technology companies establish their research centers in the UK because of the excellence of scientists and specialists in British universities who consistently produce groundbreaking research. In fact, one of the major themes of 2001 was the strong partnership forged between academia and business.

What's more, the Chancellor of the Exchequer (UK Treasury), Gordon Brown, recently announced the 2002 Budget (on April 17th) which included a generous R&D tax credit for large companies operating in the UK, including foreign companies that have expanded there. The credit represents a 25% increase in tax credit previously available for R&D for large companies (raising from a 100% credit to a 125% credit). This incentive has broad implications for US companies looking to expand overseas.

To encourage R&D and innovation in the UK by large companies and their subsidiaries, a new tax credit was introduced–given by means of an extra tax deduction in addition to the normal 100% deduction on current R&D expenditure. Large companies are not required to hold any intellectual property rights attached to the R&D. The relief will therefore encourage overseas companies to subcontract R&D work to group companies resident in the UK."