Substantial UK increase in new product innovation

Published:  02 September, 2013

Britain’s manufacturers are substantially increasing their innovation in new products, technology and research with plans to use this to grow significantly their presence in emerging markets in the next three years according to a new survey from EEF, the manufacturers’ organisation and NatWest Bank.

The EEF/NatWest Innovation Monitor points to increasingly ambitious innovation strategies following a difficult recovery where most businesses were focused on improving processes to cut costs and meet the needs of existing customers.

But companies are now looking to develop new opportunities, with more than 70% of manufacturers planning to move into new markets on the strength of innovation in products and services – a jump from 54% in the past three years.

However, innovation is a difficult process, which requires significant resources and expertise. Selling into new markets has heightened some of the challenges manufacturers face, particularly the need to deliver innovations quickly.

Commenting, Steve Radley, EEF director of policy, said: “After a long and slow recovery manufacturers are looking to drive growth through innovation, developing new products and services for new markets. However, the demands of selling into new markets have increased the ‘need for speed’ when it comes to innovation, something that remains a key challenge for manufacturers. Encouragingly, government schemes are well-targeted to help manufacturers, but in order to deliver the stability companies need, there must be a longer-term commitment to innovation funding.”

Mark Eastwood, head of manufacturing for Business and Commercial Banking at NatWest, said: "Manufacturing plays a vital role in the UK economy and is the backbone of real growth, so it is fantastic to see that confidence is growing across the sector. Investment in innovation and research is key to keeping on top of this global market and manufacturers need stability and certainty as they look to invest in new products and markets. I am hugely excited at the outlook for innovation over the coming years. What is evident is how much knowledge and capability not to mention success, already exists within the UK.”

The EEF/NatWest Innovation Monitor found that government support is generally well-targeted to meeting companies’ needs, but EEF is urging government to build on existing work by raising awareness, ensuring stability and keeping access simple. In particular, government should:

  • Ensure stability by announcing a long-term commitment to the Technology Strategy Board; maintain the breadth of support mechanisms such as the R&D tax credit
  • Simplify and streamline application processes and consider an ‘innovation active’ qualification to fast-track access to support.
  • Improve access to the new network of Catapult centres by streamlining membership models and, longer term, develop metrics to ensure SME engagement

The report shows taking advantage of new opportunities presents challenges, while concerns about the speed of innovation have been heightened by the growth of low cost competitors and ever shorter product life cycles. Furthermore, accessing facilities and expertise are technical hurdles.

To help overcome these barriers companies are increasingly collaborating with customers, suppliers and research institutions on innovation activity. In particular, the proportion of companies working with research institutions has risen significantly, up from 44% in 2010 to 62% now.

Such collaboration is not limited to within the UK as 51% of companies were working with organisations overseas, and it is not just limited to larger companies, with one third of companies with fewer than 100 employees engaged in such collaboration.

Companies also use government support to help with their innovation. This is well targeted, with schemes such as the Knowledge Transfer Partnership and the new network of Catapult centres helping companies to access expertise and facilities. European funding has also proved an important source of support.

Despite the increasing attention being given towards innovation however, the survey also highlights that at 1.1% of GDP Business Expenditure on R&D (BERD) in the UK remains low by international standards. Even after adjustments for structural differences between countries, the UK is 0.4% below the OECD average and further behind the leading countries such as the US, Sweden and Korea.

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