Mid-sized businesses will drive UK R&D investment in 2015

Grant Thornton’s Agents of Growth report makes recommendations for businesses and government to maintain global presence

UK mid-sized businesses will be the largest investors in new technologies in 2015 and will drive the country’s Research and Development (R&D) agenda, according to a report from business and financial adviser Grant Thornton.

Figures show that over the past year expenditure on R&D among the UK’s 34,100 mid-sized businesses has increased by 2.7%, over the 2.4% shown by larger and smaller businesses.

Nearly a quarter of UK’s mid-sized businesses – those employing 50 to 499 and which contributed an estimated £305bn to the nation’s GDP in 2013 – are expected to increase their investment in R&D over the coming year.

Although clearly improving, the UK is still significantly behind other developed economies in the same field.

Additionally the UK’s mid-sized business population is anticipating faster growth in turnover (6.7%), exports (4.5%), capital investment (2.8%), and employment (2.7%) than the UK business population as a whole.

In light of its findings the Agents of Growth report has recommendations for government to ensure Britain’s future as a contender among global business hubs.

It highlights the need for more and better targeted support on exports by increasing the volume of trade delegations to higher growth emerging markets, whilst ensuring representation for mid-sized businesses on these trips, and doubling the number of specialist export finance advisers.

Following this recommendation and with the department of Business, Innovation and Skills (BIS) and UKTI promoting schemes more vigorously should help boost exports for mid-sized businesses.

The report also suggests that significant growth could be achieved by doubling the Enterprise Investment Scheme to companies of 500 employees and gross assets of £30m. It also recommends crowdfunding and a reintroduction of the Corporate Venturing scheme to unlock capital for mid-sized businesses.

In light of research finding productivity in mid-sized businesses can be raised by an average of £214 per week through apprenticeships, the report recommends incentivising training and development for the under 25s with tax reliefs.

Mid-sized businesses could be supported more effectively if BIS and Downing Street appointed CEOs to represent that group on relevant business advisory groups, as well as assigning companies a Customer Relationship Manager to deal with administration, minimising potentially problematic inadvertent tax and reporting errors.

However, the relationship has to work both ways the report said and mid-sized businesses would be served by taking a collegiate approach to issues within the sector. By forming an umbrella organisation and developing a more clearly defined collective identity, mid-sized businesses will gain a stronger voice.

Partnerships could be formed with local University Technical Colleges allowing businesses to help design the curriculums of their future staff and actively consider what future skills may be required. Exploring partnerships with local business schools with MBA type development could better support personnel.

With increased support from UK Export Finance, UKTI and the “GREAT Britain” advertising campaign, mid-sized businesses should find it easier than ever to explore exports to the higher-growth markets beyond Western Europe.

The report cites research showing that at a time when the costs of additional debt are low, mid-sized businesses are capable of taking on more debt to fund acquisitions and fuel faster growth. The possibilities of alternative methods of finance – including equity finance – should also be considered.

Head of innovation at Grant Thornton UK LLP, Dominic Preston commented: “Innovation lies at the heart of leadership and the UK has for generations been looked at as a leader in developing new technologies, processes and ways of thinking.

“It now risks losing this significantly invaluable trait to other economies which are proactively offering their business communities more support and encouragement to invest in R&D.

“In order for the UK to remain a relevant contender amongst global business hubs, more needs to be done to support its critical mass of mid-sized businesses in developing the processes and technologies which strengthen the competitiveness of British businesses.

“No other segment of the business community is as well placed as the UK’s MSBs to deliver cutting edge technologies, innovative ideas and transformative operational processes – all they need is just a bit of extra support and encouragement from the government to do so.”

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