Government must take steps to drive SME business innovation

The CBI has called on the government to take a strategic, ambitious and expeditious approach to its policy decisions and long-term strategies to support the innovation economy.

In its Building a world-class innovation and digital economy report, the CBI warned that innovation will not realise its full potential without widespread adoption. Research highlighted in the report points to a lack of adoption of tried and tested innovation.

According to the CBI, in 2017, the proportion of UK businesses with basic digital capabilities including websites, internet trading capabilities, customer relationship management and enterprise resource planning systems were lower than the proportion of Danish businesses that had adopted them eight years earlier, in 2009.

The CBI said that this failure to adopt and diffuse innovation throughout the economy has contributed to the UK’s relatively low productivity levels and has made it more challenging for some firms to adapt to changes brought about by the coronavirus.

The CBI reported that compared to other European countries, the UK ranked 16th out of 36 in terms of the adoption of product or process innovation in small and mid-sized enterprises (SMEs).

As the UK leaves Europe, the government has proposed a Shared Prosperity Fund to replace the £2.1bn funding structural funding it receives from the EU, which is used to boost economic development, including support for businesses, employment and agriculture.

The CBI recommended that the department for business energy and industrial strategy (BEIS) and the Ministry of Housing, Communities and Local Government urgently deliver the UK Shared Prosperity Fund over the next year to support SME innovation adoption, fully replacing European funding and simplifying access.

It also recommended that BEIS deliver a bold end-to-end research and innovation strategy, including expanding Innovate UK’s remit to support businesses to adopt innovation. This will help to create a systematic approach to innovation support, ensuring the UK can convert its world-leading research and development (R&D) capabilities into commercial success.

Building on the need for a joined-up R&D policy, the CBI called on the government to set out a bold and systematic approach on key emerging technologies. It suggested that distributed ledger technology (DLT) should top the list as the cutting-edge innovation most set to make an impact in the next five years, along with quantum computing and augmented/virtual reality (AR /VR).

It urged policymakers to draw on the evidence and expertise of UK Research & Innovation, the Office for Science, and departmental chief scientific advisers to scan the horizon and identify the most important emerging technologies to target.

When reforming policies, the CBI suggested that the government learn from international good practice, trial new approaches and be prepared to take risks with innovation funding.

It also said policymakers should also prioritise measures that maximise private sector R&D activity and investment in the UK.

The report’s authors wrote: “Improving the environment for business R&D must be the central focus for government action. There are also real opportunities to redress regional economic inequality through strategic R&D investment. Investment is currently highly concentrated in certain parts of the UK with three regions accounting for 52% of gross spend.”

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