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Of Dom Stevens – August 19, 2021

Nine out of ten companies in the East Midlands have innovated in some form due to the pandemic, according to a new report.

In addition to responding to the impact of the coronavirus on the economy, half of businesses in the region did something else to survive or grow as a result of Brexit, a joint investigation by the East Midlands Chamber and the accounting, tax and accounting department found Consulting firm RSM.

The organizations have published the results in a new report entitled “Helping you Understanding Innovation in the East Midlands: Business Innovation in the last 12-24 months”.

It found that many companies expect more innovation over the next two years, with 57% planning new products and services, but others still facing obstacles ranging from skills to resources to achieve them.

To address these challenges, the report includes policy recommendations for the government, including a call for more financial support to foster innovation and collaboration, align R&D incentives with government goals, and additional investment in leadership and management resources.

Chris Hobson, Director of Politics and Foreign Affairs for the East Midlands Chamber, said: “In the past two years, corporate operating environments have changed significantly, with Brexit quickly followed by the pandemic.

“While these times have been challenging, new opportunities have emerged that have encouraged companies to adapt the way they work, develop new products and services, or in some cases even change their business models.

“However, barriers remain, with the perceived lack of adequate funding being most significant. This is an area where funders need to continue to work to understand where current products are inadequate and the extent to which companies are aware of the funding opportunities available.

“A more general feeling of being too busy is also a significant hurdle. To overcome this, increased support for companies in building capacity in executives and managers is required.

“As it becomes increasingly clear which changes to the external operating environment are temporary and which are more permanent, organizations will need ongoing support to drive further innovation in these areas.”

Key findings from the East Midlands Chamber and RSM innovation study

The study was conducted by the East Midlands Chamber during their most recent quarterly economic survey for the second quarter of 2021, to which 432 companies responded between May 17 and June 8.

The report found that 45% of companies responded to the pandemic as “significantly” and 46% “somewhat innovated”, with only 9% not innovating at all.

While only half did so in response to Brexit, the proportion rose to 75% among manufacturers who were more exposed to changes in international trade.

Meanwhile, four out of five companies in the East Midlands (81%) innovated in response to wider challenges or opportunities, and 70% in response to competition.

For innovating companies, changes to improve employee efficiency (65%) were the most popular method, followed by new product and service development (61%), improved IT and technology (55%), and back office or support upgrades Services (45%). A significant result was that one in five had changed or reorganized their business model in the last 12 to 24 months.

Innovation on the way to recovery – and obstacles in the way

When you look at plans for more innovation over the next 24 months, new product and service development was high on the wish list – 57% of companies aim to make it happen.

Almost half (49%) plan to introduce new technologies or business models, 46% recognize the importance of developing an internal culture to support innovation, and a third (33%) plan to “recruit innovative people”.

It shows the importance companies attach to having an appropriate mindset and operating environment in which to innovate. Only 4% did not indicate any plans for innovations for the coming period.

A lack of adequate funding was cited as the main obstacle to innovation (46%), while four in ten respondents said they were too busy. A quarter said they lacked the necessary skills in their business, a fifth thought it was too risky or unnecessary.

How politics can support future innovations

Innovation can be supported by R&D tax credits, an important incentive and tool for companies who can apply for a cash refund or corporate tax reduction for money spent developing new products, processes or services and improving existing ones.

While the East Midlands Chamber and RSM research found that 36% of respondents had previously successfully accessed R&D tax credits, 38% found them not relevant.

Sheetal Sanghvi, Partner and Head of Innovation Reliefs in the East Midlands at RSM, said, “The survey responses show the level of innovation, whether or not you would call it such innovation, that East Midlands companies have in the last two years, with the pandemic understandably being a major driver.

“Many companies have developed new products and services, changed the way they manage their people, often with significant efficiency gains, and introduced new technologies to support their customer loyalty.

“Going forward, there is a high general awareness of the need to evolve and innovate to be successful, but there are still a number of companies that need further assistance – both practical and guidance – in order to to maximize innovation activity in the region.

“Research and development tax credits play a key role in the government’s strategy to encourage investment in innovation in the UK. However, a significant proportion of companies – especially non-manufacturing companies – do not see them as relevant to their organization, which suggests that more work is needed in the region to raise awareness of these generous tax breaks and to help companies to cope with the complex regulations. ”

The report ends with five recommendations for policy makers. These are:

• Increased funding and focus on communicating existing policies in support of innovation
• Additional investments in leadership and management resources in SME companies, based on the current “Help to Grow Management” program
• Further financial support for companies participating in cooperation activities
• Incentives for companies to encourage investment in the creation of specific innovation-oriented roles, including a greater focus on working with educational institutions
• Alignment of R&D incentives with the overarching goals and objectives of the government

Of the 432 companies that participated in the survey, 34% were manufacturers and 59% were service companies, with 46% operating in international markets for the quarter.

One fifth (21%) employed more than 250 people, 32% employed between 50 and 249 people and 42% employed fewer than 10 people.

To read the full East Midlands Chamber Report and RSM Report, click here.