Businesses to boost spending on innovation in post-Brexit Britain

Seven in 10 businesses plan on increasing spending on innovation, according to a survey by the CBI.

Carolyn Fairbairn, director-general of the CBI, said: “The UK will need to work hard to become the front-runner in global innovation, creating a pioneering economic role for itself in the world that drives prosperity in every corner of the UK.

“Innovation is the nucleus of future economic and social development, so it’s encouraging that seven out of 10 firms will keep up or even raise their spending on new technologies and work practices to grow their business.”

The survey, supported by Deloitte and Hays, of over 800 businesses found that 70 per cent of respondents plan to increase or maintain their innovation spending following the vote to leave the EU. Only seven per cent plan to reduce their investment.

Last year businesses invested nearly £21bn on innovation. However, the challenge for businesses is that while the UK innovation system has world-class attributes, it does not currently match firms’ ambitions. Businesses rate the UK 10th in the world for innovation.

While some companies view the UK as a world-beater in areas such as access to scientific research, 35 per cent, and tax incentives to support investment, 30 per cent – the UK lags behind in other critical areas. Businesses rate the UK as a follower in areas such as partnering with external companies, 21 per cent, and grant funding, 14 per cent.

In order to support businesses’ ambition to make the UK an innovation powerhouse, the CBI is calling on the Government to commit to a long-term target of three per cent public and private spend on R&D.

Looking ahead to the upcoming EU negotiations, firms have a number of priorities that will enable them to innovate in the future – access to skills, 66 per cent, tariff-free access for goods, 41 per cent, and keeping common regulatory standards, 38 per cent.

As the UK prepares to leave the EU, Ms Fairbairn said that the result of the survey shows “that firms are rolling up their sleeves and looking to make the best of Brexit”.

She added: “Spending on innovation generates jobs and economic growth across the country, offering solutions to the challenges we face today and in the years ahead from improving healthcare and mobile technology to a new generation of autonomous vehicles.

“While the UK has many innovation strengths to build on, businesses are worried that the country is too much of a follower in the global economy, with the lack of access to technical skills a grave concern for ambitious firms.

“This Autumn Statement comes at a real crunch point to support our inventors, makers and designers, so the Chancellor must make the most of the tools at his disposal.

“The CBI wants to see a long-term commitment to target three per cent of GDP in R&D spending by 2025 and a doubling of Innovate UK’s budget.”

The survey also found that customer service and product development are seen as two key areas that would benefit from greater innovation. For more effective innovation, the priorities are to increase collaboration and partnership, greater access to technical skills and increased Government support.

David Sproul, chief executive of Deloitte UK, said it was “promising” to see businesses recognise the need to prioritise investing in new technologies.

Fears over ‘cliff edge scenario’

Business needs to know what will happen on the day after Brexit as they consider a “cliff edge scenario” of a sudden transformation in trade, the Government is being told.

Paul Drechsler, president of the CBI, is to highlight areas of uncertainty such as access to Europe’s markets and workers.

He will tell the business group’s annual conference in London today that companies wanted a “smooth” Brexit to avoid any “cliff edge” problems.

He will tell 1,000 businessmen and women: “Businesses are inevitably considering the cliff edge scenario – a sudden and overnight transformation in trading conditions. If this happens, firms could find themselves stranded in a regulatory no man’s land and, even if our legal obligations are clear and in place, there would also be real, practical implications. Our ports, airports and logistics firms, if faced with new trading rules, could suddenly need new and potentially complex paperwork, which would take more time and money to process.”

Mr Drechsler will also warn that many people see business as run by a “ privileged few”, playing by a different set of rules.