Lack of finance crippling UK innovation

Financial constraints are crippling new product development among the UK’s SME base, with engineering and technology companies particularly badly affected.

Research commissioned by product development contractor Pera Technology shows that 91 percent of SMEs are failing to innovate via new product development or commercial research, which potentially has severe implications for the UK’s economic recovery and competitiveness.

Only eight percent of SMEs, and only two percent of manufacturing and technology SMEs, are doing any product development or research, with lack of finance (31 percent) being cited as the main reason. Other reasons given include a lack of in-house resources (22 percent) and lack of time (21 percent).

Pera Technology’s Commercial Director, Dr Mark Wareing, says the research paints a very worrying picture of a key sector of the economy failing to innovate because of outside pressures:

“This is bad news if we are hoping that small businesses will lead the recovery and genuinely rebalance the economy. If businesses fail to innovate then the UK will become less competitive in the long term. It is clear that the squeeze on lending is having an effect beyond day-to-day operations and beginning to impact on longer-term strategy.

“The good news is that the barriers to new product development are easy to overcome. All sorts of funding for research can be obtained if only SMEs know where to look. Traditional bank finance is not the only option.”

The survey asked where companies would choose to get advice on new product development, and 40 percent said they would look to internet forums to get ideas, with 37 percent generating ideas internally.

New product development companies would be the first port of call for 20 percent, with management consultants attracting 13 percent. Only 11 percent would contact their local university.

“I wasn’t surprised that there seemed to be a lot of confusion about where to go to get advice on NPD. Given that not many are actually undertaking any research at the moment, the methods of getting advice are obviously failing,” Dr Mark adds.