Surprising Confidence in R&D

Spending on research and development in the UK has increased since last year, according to a the Puntios Innovation Finance Snapshot, with over 70% of companies starting new R&D projects in the past 12 months.  The Snapshot indicates a surprising degree of confidence throughout the UK technology base, given the wider economic conditions.  But a high level of postponed or cancelled R&D projects also suggests that although companies are still investing in R&D, they are focusing on projects that are close to market and are quick to cut riskier, longer term R&D.

71% of respondents to the Snapshot reported starting a new R&D project in the past twelve months. However, the majority of the same respondents also reported cancelling and shelving existing projects, or postponing the start of planned projects.  16% also reported making R&D staff redundant. Puntios Director Lynne McGregor noted: “The results show surprising and encouraging confidence among the R&D base, but it’s not an entirely positive picture.  The indication is that although companies have moved on from the freeze on spending and are now investing again, projects which are non-core or are more speculative are being shelved as the company focuses on core activities.”

For those projects that were shelved or cancelled, 50% reported that the reason was availability of finance – rather than technical, market, customer or skills issues.  Data showed a trend to abandon projects in Technology Readiness Levels 4 and 5, despite having achieved significant customer specification milestones in realistic environments, emphasising the problem of funding through the ‘Valley of Death’.   Puntios Director David Gahan: “It is a concern that projects in which a great deal has been invested and for which a market exists cannot be sustained for the long-haul.  It is very important that companies maximise hit-rate by making a rigorous assessment of where they are in Technology Readiness and what it takes to get through the later stages.”

The majority of companies reported that their overall R&D spend had remained the same or increased since last year, including 18% who reported that their R&D budget has increased by over 50%.  There remain issues, though, with 30% of companies reporting an overall decrease in R&D budget since last year.

The Puntios Snapshot was conducted in February 2013, with UK respondents predominantly from SMEs in manufacturing, processing, software and electronics sectors.