Innovation: state of the nation

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Data released in March showed that whole economy expenditure on R&D had fallen in 2012 as both business and government expenditure declined.

However, the initial findings from the UK Innovation Survey 2013 - looking at all areas of innovation, not just R&D - paint a more encouraging picture.

Higher proportion of companies engaging in innovation

The proportion of firms engaging in innovation appears to be on the up, after taking a bit of a dip in the recession. The 2013 survey – which covered the three-year period from 2010 to 2012 – showed that the proportion of “innovation active”* firms rose to 45%, from 27% in the 2011 survey (which covered 2008 to 2010). For both smaller and larger companies, the proportion defined as innovation active rose, but as with previous surveys, larger companies remained more likely to be engaged in innovative activities.

Companies increase the breadth of innovative activities

It's not just that more firms are engaged in innovation, they're also involved in more types of innovation. This echoes the findings from our Innovation Monitor 2013 which showed that while manufacturers had been cautious about innovation during the recession – focusing on activities such as process innovation that can bring faster and more certain returns – looking ahead to the next three years companies are looking to be more ambitious, increasing their focus on developing new products and services for new markets.

Manufacturers are the most innovative

When it comes to expenditure on R&D, manufacturers are head and shoulders above the rest of the economy, with nearly three-quarters of total business expenditure on R&D coming from the sector. The UK innovation survey shows that when it comes to broader innovation, the sector continues to stand out. In every manufacturing sector more than 50% of companies are “innovation active” and this rises to 62% for companies engaging in the manufacture of electrical and optical equipment.

Many businesses collaborate on innovation

Partnership remains an important way of boosting the effectiveness of innovation. The UK innovation survey shows that 41% of “broader innovating” companies* had cooperation agreements when it came to innovation. This is slightly at odds with our Innovation Monitor 2013 which showed that nearly all innovative manufacturers partnered for innovation in some way. However, what both surveys have in common is that customers are cited as the most frequent collaborative partners.

Quality is the key driver of innovation

Innovation allows companies to differentiate themselves in highly competitive markets. Innovative companies continue to focus on using innovation to improve the quality of their goods and services, something which that can help satisfy existing clients and attract new ones. Other key drivers of innovation included replacing outdated products or processes and increasing market share (especially for larger companies).

EEF will be publishing Innovation Monitor 2014/15 this summer, keep an eye out on the blog for more details.

*It's worth taking a look at the survey if you'd like more information on the definitions used

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