“March of the makers” being stalled due to lack of funding

Despite finding that 65 per cent of UK manufacturers have developed new products in the last three years – and that a half are using innovation to expand into new export markets – the EEF and Vodafone Innovation Monitor 2015 said four in ten lacked all the resources they needed and were increasingly concerned about losing out to competitors.

The survey found that UK firms were upping innovation activity and investment –particularly larger companies and those in the oil and gas supply chains – to diversify a way out of the investment downturn. It said manufacturers were “highly ambitious” about innovation using specialist resources, but also pulling in employees, equipment and finance in from elsewhere in the business.

According to the survey, 94 per cent of companies are engaged in some form of innovation and are more focused on driving exports and developing new products up from 59 per cent to 64 per cent of companies.

Just over a half of companies are using innovation to develop new markets, whilst a third said that growing exports was a long-term business objective. Of these, 54 per cent thought innovation would have a significant impact on their exports, whilst 40 per cent thought innovation would have some impact.

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Manufacturers are also using innovation to develop new domestic markets, having increased to 38 per cent in 2015 from 27 per cent in 2014. Over two thirds of companies said that satisfying existing clients was a driver of innovation in the last three years, once again the top reason for companies engaging in innovation. This was followed by a desire to enhance margins.

However, despite these investments in innovation there has been a further increase in the proportion of manufacturers who are concerned that the level of expenditure on innovation is not enough to keep pace with competitors.

“Manufacturers are not always achieving the results they need. Innovation is challenging and a lack of resources reduces chances of success,” the report said. “As a result of this, for the second year running manufacturers have reported increased concern about falling behind.”

It said the UK’s expenditure on research and innovation, despite the government’s well flagged “March of the Makers” ambition, was lagging well behind that of the UK’s key competitors at only 1.1 per cent of GDP. The OECD average is 1.6 per cent and Germany is at 2.02 per cent.

“In order to boost growth in productivity, we have already seen strong ambition from government on exports and workforce skills, this should be matched with long-term ambition on innovation,” the report said.

“Manufacturers continue to forge ahead into new markets at home and abroad, with investments in innovation playing a starring role in achieving this,” said Lee Hopley, chief economist at manufacturers’ organisation the EEF. “However, innovation is a resource-hungry process, and manufacturers are finding that the results they achieve do not always match their ambition. Shortages of expertise, equipment and finance are holding manufacturers back.

“This matters for manufacturing, and it matters for the UK, because manufacturers are now more concerned about falling behind competitors. We’ve seen year after year that manufacturers want to do more and every additional pound invested in developing the products and services of tomorrow can help get the UK closer to its goal of having a more productive economy. This ambition should be matched by government to ensure the UK continues to compete on the global stage.”

Tim Hancock, head of manufacturing at Vodafone UK, added: “It’s essential that we create the right environment for continuous innovation in manufacturing which is the backbone of UK industry. The good news is that almost all manufacturers are innovating in one form or another and with a variety of business goals, but they are doing so with decreasing diversity. This seems to be down to an organisation’s size and access to resources which can impact the level of innovation that can be taken on without disrupting day-to-day operations.”

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