Manufacturers’ verdict on UK innovation support: ‘improved, but could do better’

EEF, the manufacturers’ organisation

‘Improved, but could do better’ – this is the verdict from British manufacturers on Government support for innovation, according to a new report out today from EEF, the manufacturers’ organisation, in association with Vodafone UK.

The Innovation Support Report Card, based on a study of the opinions of UK manufacturers, shows room for improvement in most aspects of innovation support, with the UK frequently judged to be trailing behind competitors. It says that the UK risks missing out on opportunities unless there is a step up in support for bringing innovations to market.

One aspect of the innovation support landscape that does get manufacturers’ seal of approval is the Government’s tax treatment of Research and Development (R&D). Over six in ten manufacturers (62%) have taken up the R&D tax credit, making it the most widely used innovation support scheme. It is also the most highly rated of the support on offer, with 38% of manufacturers saying that the UK is as good as its competitors for the R&D tax incentives it offers, while over one in ten (12%) rate the UK as a world leader.

However, other areas of innovation support do not get such a vote of confidence. Six in ten manufacturers (60%) say the UK could do better on business access to scientific research, while 58% say the UK lags behind on support for external innovation partnerships. This is a concern because the most successful innovation nations are not those that excel in one area, but those excelling in many.

When it comes to Government support for commercialising new technology, seven in ten manufacturers (69%) say that the UK could do better. While they highlight a number of recent improvements – such as the introduction of Catapult centres – further progress must be made. Without it, the UK looks set to remain an innovation follower, unable to reap the rewards of successfully bringing research to market.

But while manufacturers say there is room for improvement, the underlying concern appears to be about quantity rather than quality. Over 90% of manufacturers who have used support – from growing a network of contacts to enabling them to innovate more quickly – say that it fully or partially met their needs. Of those who haven’t used support, only one in ten (11%) say that none of the support available addresses the challenges faced by their company.

The breadth of support is right, the issue is that there is not enough of it - and this is reflected in the fact that manufacturers do not have one priority for a boost to expenditure, they have several. While 19% say that an increase in Government support to help bridge the gap between research lab and market would have the biggest impact on their company’s level of innovation, 26% would prioritise additional access to external experts. These are matched by those who say that improvements to the tax treatment of R&D would have the biggest impact on their company’s level of innovation (26%).

What is clear is that the Government still has some way to go if it is to achieve its aim of making the UK the best place in Europe to innovate. EEF is calling for its long-term commitment to continuing to build a robust and successful innovation ‘ecosystem’ in the UK, including a real term increase in funding for science and innovation and increased funding for Innovate UK.

Lee Hopley, Chief Economist at EEF, says: “If this was a school report the overarching message would be ‘improved, but could do better.’ Manufacturers tell us that there is much to be positive about but, while some areas of UK innovation support compete with the best in Europe, our inability to bring new research successfully to market continues to let us down.

“Although Government funding is being squeezed, it’s vital that business success generators - including innovation support - are allowed to continue to drive growth. This is particularly important given that the Government wants the UK to become the best place in Europe to innovate.

“If we are to achieve this then we have to build on existing innovation support to ensure top class performance across the board - the most successful nations do not excel in one area, they excel in many. This is an important lesson for the UK and it is vital that industry and Government work together to get a well-designed support system in place.”

EEF’s key recommendations ahead of the Government’s Spending Review:

• There should be a real term increase in funding for science and innovation by the end of this parliament and certainty about the trajectory of spending
• Government should increase funding for Innovate UK, maintaining the breadth of support schemes
• Government should commit to the principle of funding Catapult centres on a ‘one third, one third, one third’ basis 
• Government should increase the value of the large companies’ R&D tax credit to ensure its competitiveness is not eroded by reductions in corporation tax
• An industrial approach should involve Government maintaining a dialogue with industry and making sustained strategic investments where necessary. 

EEF’s Innovation Support Report Card can be downloaded at:

http://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/innovation-support-report-card