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Construction R&D falls 14% in just two years

April 2020

Innovation in the construction sector has fallen 14% in two years as R&D by UK industries fell to the lowest levels since the credit crunch, analysis of the latest ONS data by R&D tax relief specialist Catax has found.

The proportion 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 figures released last week as part of the UK Innovation Survey1.

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). The latest 2019 report shows that larger businesses are faring better than small firms, with almost half (49%) of large companies engaged in R&D, 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 was the English region with the most innovation, with 42% of firms engaged in R&D. The area that 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.

Mark Tighe, Chief Executive of 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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(Image credit: Deloitte)

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