Against this backdrop, investment in research and development (R&D) can be seen as a critical lever to sustain productivity, enhance competitiveness and underpin long-term economic growth for businesses. As traditional macroeconomic tools face constraints, innovation incentives can take on greater strategic importance. Rather than serving solely as a fiscal benefit, R&D tax reliefs and broader innovation incentives could become embedded within industrial and economic policy. This policy could help shape how countries respond to labour market pressures, technological change and supply chain reconfiguration.
As highlighted in our Global trade insights tracker, international growth remains slightly below trend, but the divergence between regions is becoming more pronounced. The U.S. continues to demonstrate relative resilience, supported by manufacturing recovery and strong levels of capital expenditure, while Europe and the UK are experiencing persistently muted growth and softer labour market conditions. This divergence presents a challenge for policymakers seeking to stimulate domestic economic activity without reigniting inflation or placing additional strain on public finances.
In this environment, R&D tax incentives could offer governments a targeted mechanism to support private sector investment and productivity improvements. By encouraging businesses to invest in innovation, governments can help foster higher value economic activity and support job creation without relying solely on demand side stimulus. This approach is particularly relevant as labour markets adjust to structural change and technological adoption.
The anticipated productivity improvements through 2026, driven in part by the increasing deployment of artificial intelligence and advanced technologies, further reinforce the need for innovation incentives to align with evolving digital and industrial priorities. Jurisdictions that design R&D regimes which support these developments will be better positioned to stimulate sustainable growth and maintain competitiveness in a rapidly changing global economy.
“In the current economic climate, R&D tax relief is increasingly about protecting investment momentum. The relief allow businesses to continue to invest in priority areas such as technology, increasing manufacturing capabilities or product enhancement. That creates headroom not just to sustain current activity levels but also to pursue expansion and help position a company for future growth when conditions improve.”
Trade fragmentation is reshaping global supply chains. The move towards more targeted, product specific tariffs and the ongoing uncertainty surrounding trade agreements are prompting businesses to reassess sourcing strategies, production footprints, financing options and investment decisions. As a result, domestic R&D investment is increasingly becoming a strategic necessity rather than a discretionary activity.
In the U.S., higher tariffs have already contributed to a manufacturing uptick as demand shifts towards local producers. In Europe, where growth remains fragile, innovation incentives could help address structural weaknesses by encouraging businesses to develop differentiated products, advanced manufacturing processes and export resilient technologies. This can place significant demands on finances. R&D tax reliefs and credits therefore play an important role in supporting competitiveness and economic resilience in a more fragmented trading environment.
Inflation adds another layer of complexity. Inflationary pressures remain uneven across regions, with persistence in the U.S. and more subdued, but volatile, conditions in Europe and the UK. Higher energy prices, tariff passthrough and fiscal pressures all influence corporate decisions. In this context, well-designed R&D tax incentives can improve the return on investment position of long-term innovation projects, supporting continued investment even as financing conditions remain uncertain.
For capital-intensive businesses in particular, innovation reliefs can materially affect project viability and the timing of investment, making them an important consideration for finance leaders navigating competing cost and growth priorities.
“In the U.S., R&D tax credits are increasingly being viewed as a source of strategic funding rather than a retrospective benefit. At a time when tariffs, supply chain realignment and capital costs are influencing investment decisions, credits can free up cash to support domestic expansion, advanced manufacturing and longer-term growth initiatives. For many businesses, that flexibility is becoming a key differentiator.”
Adam Quattlebaum Partner, Forvis Mazars US
As innovation incentives become more complex and increasingly central to economic and tax strategy, access to specialist advice is critical. Identifying eligible R&D activity, preparing compliant and robust claims and navigating evolving rules across multiple territories requires technical expertise across various jurisdictions. For international businesses, this complexity is amplified by differences in legislative frameworks, documentation requirements and administrative practices.
The ability to approach R&D incentives in a structured and informed way can help organisations integrate innovation investment more effectively into broader commercial and operational planning. It also supports consistency across jurisdictions, which is increasingly important as tax authorities place greater scrutiny on claims and governance.
Forvis Mazars supports organisations globally with end-to-end advice through Global tax credits and incentives, helping businesses identify relevant opportunities and prepare compliant claims. Our Global innovation incentives hub for international businesses, brings together cross-border expertise to support organisations operating in an increasingly fragmented and competitive global economy, providing clarity and confidence in a complex and evolving landscape.
Economic uncertainty, uneven growth and rising operational pressures mean businesses must protect innovation investment. R&D incentives help fund priority projects and support long term competitiveness when financing conditions remain challenging.
Shifting supply chains and tariff pressures are pushing companies to refocus on local capability. Inflation and higher input costs increase financial strain, making R&D incentives valuable for sustaining viable innovation and capital investment strategies.
Complex and varied rules across jurisdictions require informed guidance. Specialist support helps identify eligible activity, strengthen documentation, maintain compliance and ensure consistent claims as authorities apply increased scrutiny in a changing global landscape.
A global approach that maximises tax benefits
Your international guide to intellectual property tax reliefs. Countries around the world have introduced legislation into their tax policies, designed to support businesses who invest in developing intellectual property. These incentives encourage companies to allocate resources towards innovation and enable the flexibility to pioneer unique solutions in today’s competitive and fast-evolving market.
Stay informed on global trade, tariffs and economic developments with the Forvis Mazars global trade insights tracker (GTI tracker). Designed for senior business leaders, it delivers strategic insight into trade policy and market risks.
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