Manufacturers told to improve R&D spend despite export high

UK manufacturers have been told they must raise research and development investment in order to maintain competitiveness abroad after hitting a four and half year export high.

According to HSBC’s latest Trade Forecast, stronger than expected recovery figures in industrialised nations have contributed to the surge in export figures, with 63% of exporters expecting trade volumes to rise over the next six months, up from 61% during the second half of 2013.

In a further boost, UK exports are forecast to increase by 5% per annum over the next two years, driven by the economic recovery in Europe and North America, as well as opportunities in faster-growing markets.

However, it also states the UK needs to encourage businesses to investment in R&D to capture more of the value of their merchandise exports, enabling them to move up the value chain over the long term.

The latest figures show the UK invests 1.77% of GDP in R&D, a consistent figure over the past 20 years, while developing nations in Asia have more than quadrupled their spend to nearly catch up with Europe.

Mark Emmerson, HSBC UK head of global trade and receivables finance, said the example of high-tech presents lessons for other sectors and the future pattern of global trade.

“Companies within developed economies that own the intellectual property of high value goods still enjoy a strong competitive advantage, but under-investment in R&D could threaten the advantage the UK enjoys, presenting an opportunity for emerging markets to gain ground,” he said.

“The world economy is becoming more knowledge-intensive – it is essential for the UK to invest in research and improve links between education and business to retain competitiveness and enhance future growth.”

At the sector level, industrial machinery and transport equipment are expected to be the main drivers of growth, accounting for almost half of the expected increase in the value of UK goods exports in the years to 2030.

The same two sectors are also expected to account for more than one third of the expected increase in goods imports over this period, in part driven by UK firms sourcing intermediate inputs from abroad.