We believe that now is an important time to take a look at the issue of innovation within UK manufacturing.Our report Where Now for Manufacturing? revealed that two-thirds of companies were responding to growing competition from low-cost countries by increasing their focus on innovation and that almost half were developing niche markets or customising their products.
Similarly, our Catching up with the Continent report on productivity differences showed that UK firms were more active than their counterparts in France and Germany in developing new or improved products, processes and services. However, innovation seemed to be contributing less to the bottom line for manufacturers in the UK than in the other two countries.
In recent years, the government has put increased effort into improving the environment for UK firms to innovate. This has included a substantial increase in science spending, the introduction of the Research and Development (R&D) tax credit and a refocusing of the government’s support for innovation, following reviews in 2003 of links between business and scientificinstitutions.
All these strands have been drawn together in the government’s Ten Year Science and Innovation Framework, with progress reviewed each Budget. With the government’s Spending Review to set out its spending plans for the next three years, now is a good time to look at what is effective and what could be done better. Based on our findings, we set out some recommendations on how to address this.