Many UK firms fail on R&D

19 September 2011

LONDON: Almost a third of UK companies do not spend any money on innovation schemes seeking to develop new ideas, products and services, research has revealed.

Portal, the technology consultancy, commissioned a survey of 500 enterprises in the country, and found 31.4% currently invest nothing in R&D programmes.

Another 25% of organisations allocated between 1% and 2% of revenues, and 21% dedicated in the range of 2% and 5%.

The remaining 15% of enterprises diverted 10% to 15% of turnover towards R&D, and Portal suggested these totals showed why the UK is struggling to compete in many areas.

In all, 32% of businesses had reduced R&D spending since the onset of the financial crisis, with 14% making "enormous" cutbacks. A further 61% had simply maintained their budgets.

As such, a modest 7% of the British brand owners featured raised their outlay in the recession, even though a 51.8% majority believed innovation is vital to retaining or increasing market share.

When assessing the time commitment devoted to new product development, 82% of respondents pegged this figure at under ten hours a month, equating to just 0.5% of all business activity.

Looking ahead, Portal also revealed the "startling" statistic that only 16.8% of enterprises plan to boost the funding provided for this discipline in the coming five years.

Obstacles to making a more concerted effort included creating time outside of "day" jobs on 38%, ensuring teams stay focused on 35%, a lack of knowledge about in-house skills on 15%, and difficulties relating to successful collaboration on 12%.

"We all know that in a downturn we must try and find easy ways to cut costs," said Tony Egerton, Portal's sales and marketing director. "But cutting R&D is a corporate version of cutting your nose to spite your face and is only going to be bad news for companies that think it's a rational business strategy."

Overall, the report argued British firms spend 1.88% of GDP on innovation, behind countries like Belgium, France, South Korea and the US, and less than half the total of Israel, the global leader on 4.9%.

Data sourced from Portal; additional content by Warc staff