Innovation in construction falls to lowest level since credit crunch

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Innovation in construction,
© Pavel Losevsky

Innovation in construction has fallen by 14% in two years as R&D by UK industries drops to the lowest levels since the credit crunch, analysis by R&D tax relief specialist Catax has revealed

The number of companies in the construction sector who say they are actively innovating has fallen from 44% to 30% in the last two years, according to Catax’s analysis of the latest ONS data.

The fall is indicative of the whole of UK industry.

Some 38% of UK businesses reported they were ‘innovation active’ in the latest survey, down from 49% between 2014 and 2016. This is the lowest level since 2008-2010 when 37% reported being ‘innovation active’ as they struggled to recover from the financial meltdown of the credit crunch.

The UK Innovation Survey is carried out on behalf of the Department for Business, Energy and Industrial Strategy (BEIS).

Larger businesses are faring better than small firms, with almost half (49%) of large companies engaged in research and development, compared to a third (38%) of SMEs.

The highest proportion was found among manufacturers of electrical and optical equipment, with almost two-thirds (63%) actively investing in innovation, while the lowest was in accommodation and food services, where only a quarter (23%) were.

The South East demonstrated the most innovation, with 42% of firms engaged in R&D. The area which saw the largest fall was Middlesbrough, where activity fell 14%.

Companies cited cost factors as being the biggest barrier to innovation, while a lack of qualified personnel was flagged by 15% in the latest figures, up from 10% in 2014-16. The EU referendum was blamed by 16% of companies, up from 9% in 2014-16.

R&D is ‘secret ingredient’ to business boost

Mark Tighe, chief executive of R&D tax relief specialists Catax, said: “It’s a concern that companies are investing less in innovation at a time when Britain needs to be making the most of its new-found freedom post-Brexit.

“Research and development is the secret ingredient that will give our businesses a boost now that we’ve left the European Union.

“Lack of personnel, high cost and Brexit uncertainty will all be, in part, to blame but the number of businesses blaming their lack of research and development on its expense should investigate whether they are eligible for R&D tax credits.

“Most companies find that innovation pays for itself many times over once they start exploiting the government help available to them.”

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