UK recovery at risk unless R&D investment is protected

Posted on 22 Jun 2020 by Jonny Williamson

Research and development in UK companies is at immediate risk as we come out of lockdown and requires urgent government intervention to adapt to the economic conditions after the Covid-19 pandemic.

During April 2020 – a month in which the UK economy shrank by 20.4% – the Royal Academy of Engineering asked 25 organisations of different sizes from different sectors what impact the Covid-19 crisis was having on their R&D activities and business-university partnerships.

The findings of this research have been summarised in a new report that outlines some immediate actions and interventions to enable businesses of all sizes to support a better and faster recovery from the crisis.

Those surveyed see R&D as the solution not only to the healthcare emergency itself but also as a central part of adapting to changing circumstances and innovating a way out of the pandemic-induced recession.

CROP - Business growth ideas innovation competitive advantage market share - image courtesy of Depositphotos.

The Academy found that the pandemic has rapidly altered the business environment in which innovative start-ups and R&D-intensive businesses operate.

With R&D often funded through revenue, many companies experiencing cash flow difficulties are liable to halt or significantly reduce their R&D activity, including partnerships with universities and support for studentships.

Projects said to be at highest risk are those in the middle of the innovation process, from proof of concept through to prototype and demonstration stages. These steps are costly and often face technical challenges with the need for extra time to be resolved.

Cancelled projects are likely to reduce the benefits of previous R&D investments, cut competitiveness and reduce innovative outputs in the coming years as planned projects fail to reach maturity.

As a result of these findings, the Academy is calling for targeted interventions to support business R&D and innovation, including:

  • Expand the Made Smarter pilot to support SMEs to adapt and thrive in the ‘new normal’;
  • Protect the innovation pipeline, future-proof and build resilience by:
    • front-loading public funding in multi-year research and innovation programmes
    • introducing agile and rapid Collaborative R&D programmes to promote industry-university collaborations and knowledge exchange
    • boosting support for late-stage R&D and demonstration
    • maintaining and improving the UK’s competitive package of tax incentives for companies to innovate
    • developing globally leading capabilities
  • Use the Industrial Strategy Challenge Fund to stimulate pre-competitive collaboration to address future innovation needs and opportunities;
  • Make innovation a key component of the public procurement process to bring best value for money to the public purse;
  • Support regulators to adapt rapidly to innovation and new practices.

To ensure that the benefits are felt right across the UK, these interventions need to be delivered by a variety of organisations, including UKRI, Innovate UK, Local Enterprise Partnerships, and devolved and local government.

President of the Royal Academy of Engineering, Professor Sir Jim McDonald commented: “A knowledge and innovation-led economy remains our best strategy for future prosperity and we know from previous economic downturns that companies that have continued their R&D activity have been much better placed to recover afterwards.

“Now is the time for government to set out a powerful vision that both demonstrates its commitment to R&D and provides certainty to the businesses that will shape our economic destiny. Investing in R&D is investing in the future.”

*All images courtesy of Depositphotos