Working Our Way into a New Age with Canada’s Manufacturing Industry

Intensive research and development pioneered a new age in manufacturing, Industry 4.0, which introduced automation through robotics and other smart technology. In 2016, $6.6 billion was invested into research and development by the manufacturing sector alone in Canada. However, reports by the OECD found that while Canada’s business capital investment into manufacturing increased by 6% over the last 10 years, other OEDC countries averaged 25%. Importantly, these values correlate with labour productivity with Canada only increasing 15% over 15 years whereas their global competitors grew by 50%. Canadian Manufacturers & Exporters (CME) highlights the lack of investment into the sector has deterred Canada’s global competitiveness, lowered productivity, and is linked to decreased innovation capacity.

The state of manufacturing directly impacts many other industries who act as suppliers or clients looking to increase their own productivity. Thus, consolidating Canada’s manufacturing sector can lead to a positive multiplier effect in other industries and collectively drive important economic growth. A factor in growing the manufacturing scene requires investment into research and innovation that can lower costs of production and production time while increasing product quality and customer satisfaction. Financing research ventures is a costly self-investment especially for smaller businesses and the current economic state has made it hard to acquire external grants. In the following article, we outline how the SR&ED tax incentive can be suitable for manufacturing businesses looking to invest their efforts into research and innovation. 

SR&ED for the Manufacturing Sector

Research and development related to manufacturing and processing is recognized by SR&ED whether this is an embedded process in a larger company or a stand-alone manufacturing business. As long as the projects submitted for claims work towards resolving an uncertainty in the field using a systematic and well-documented approach, they are qualified for SR&ED funding.

While SR&ED covers salaries for permanent workers or subcontractors that are a part of the project, it also extends to materials used to carry out the work too. Specifically, when materials are consumed or transformed while conducting SR&ED experimentation can be claimed but this does not include purchases around data, software license, and new equipment. 

Examples of SR&ED projects in manufacturing include but are not limited to:

  • Improving the production process
  • Altering production methods to comply to new regulations
  • Changing product finishing protocols (e.g. heating, dyeing, plating)
  • Transforming current materials or developing new materials to address production issues or to update the process 
  • Re-working current materials or components that were formally incompatible with one another

While the above are common examples of manufacturing projects that qualify for SR&ED, not all applications will receive funding. Successful claims are often tightly linked to the quality of the application submitted by the claimant as well.


Find your own business carrying out the above services? Or not sure whether you are carrying out a SR&ED qualified project? Reach out to our team (This email address is being protected from spambots. You need JavaScript enabled to view it.) today! We can help you identify SR&ED related projects and our team of experienced technical writers can help you secure the funding you need to take your business to the next level. We will accompany every step of the way during the application procedure to ensure the most optimal outcome.