Feature


Enterprise & Innovation


Why aren’t more businesses investing in innovation and R&D?


By Henrietta Brealey, Director of Policy & Strategic Relationships, Greater Birmingham Chambers of Commerce


Why invest in innovation and R&D? Investing in innovation and research and development (R&D) is a good idea. In a world where technologies


advance rapidly, consumer loyalty is diminishing, customer behaviour is constantly shifting and the competition is global, innovation is crucial for business survival. Many iconic businesses of my childhood (think Blockbusters, Woolworths, Toys R’Us) fell into the trap of failing to innovate – with very public consequences. While they don’t make the headlines, countless small and midsized businesses have also suffered a similar fate. But it is not just fear of being


consigned to the business graveyard that motivates businesses to innovate – it is generally good for business. Firms that consistently invest in R&D, a key part of innovation, are 13 per cent more productive than firms that don’t invest in R&D. Embracing innovation can also be


a great way to attract talented employees; as the latest Deloitte


48 CHAMBERLINK October 2018


Millennials Survey highlights, young professionals attach significant value to organisations that innovate. But if investing in innovation and


R&D is such a great idea, why aren’t more businesses doing it?


Why don’t businesses invest in innovation and R&D? According to the UK


Government’s Innovation Survey, between 2014-16, 50 per cent of UK Enterprises were actively innovating. What about the other 50 per cent? Well first up, plenty of


businesses that are innovating may not realise they are doing it. Innovation isn’t just about labs and white coats or young creatives disrupting industries from coffee shops. Improving processes or machinery, adapting products for key customers or new markets, applying ideas or technologies seen elsewhere to your business are all forms of innovation. Investment in innovation also doesn’t necessarily mean a financial investment: staff time is a vital component.


‘Firms that consistently invest in R&D, a key part of innovation, are 13 per cent more productive than firms that don’t invest in R&D’


This is particularly important


when it comes to R&D, particularly R&D that matches HMRC’s definition for R&D tax credits. There are plenty of employers, particularly SMEs in the region who could be missing out on, well, cash through failing to claim R&D tax credits for applicable activity. Research from PwC released last year suggests that, while over 10 per cent of UK R&D spending is incurred in the West Midlands, only around eight per cent of claims for R&D reliefs come from the region. The missing two per cent may have cost West Midlands’ companies around £60m in one year alone. There are also some core reasons


why businesses don’t invest in innovation. Earlier this year we surveyed GBCC members in partnership with the University of Birmingham’s City-Region Economic Development Institute. We found that the top barriers to


investing in innovation were:


• Cost pressures/high input costs (65 per cent rated it of high to medium importance to their business)


• Too much competition in your market (64 per cent rated it of high to medium importance to their business)


• Lack of skilled employees within your enterprise (59 per cent rated it of high to medium importance to their business)


• Lack of internal finance for innovation (49 per cent rated it of high to medium importance to their business)


These highlight several interesting factors: • The one thing all businesses have in common: finite resources. When cost


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