Risk adversity dominates UK as R&D spend falls across Europe

According to the survey of UK finance leaders, conducted by Accountancy magazine in conjunction with RBS Corporate & Institutional Banking, some 45% of firms surveyed admitted they will prioritise risk management over growth next year. Just over one-third of the companies polled said this was the case for their businesses three years ago. The growing sense of corporate caution in recent years was also reflected in the finding that 47% of businesses plan to reduce their debt levels next year, compared to 40% in 2008, according to the survey. More than half the companies surveyed intend to cut costs by more than 10% in 2011, compared with 35% that targeted such cost cutting measures in 2008.hideThe survey asked respondents to compare their business strategies for 2011 with the plans they had implemented in 2008. More than 620 finance directors and accountants working in a range of commercial and not-for-profit organisations were polled. Ken Barclay, managing director, RBS Corporate Coverage UK, said: “The results of the survey reflect the shifting priorities for businesses over the last couple of years and highlight something of a Catch-22 scenario for the UK economy. The recovery will in part be driven by business confidence and investment, but until the outlook becomes more certain a significant number of firms remain more focused on cash generation than on growth, which makes a swift recovery more difficult to achieve. “However, most customers I speak to remain cautiously optimistic about the future. That said, where increased volatility exists, it is to be expected that businesses will do everything possible to mitigate risk. For many, in the short-term at least, that will take priority over longer term growth ambitions.” Meanwhile, The European Commission also revealed this week that it's 2010 "EU Industrial R&D Investment Scoreboard" showed that Research and Development investment by top EU companies fell by 2.6% in 2009, even though sales and profits fell much more, by 10.1% and 21.0% respectively. The fall in R&D investment by leading companies in the US, at 5.1%, was twice as sharp as in the EU, but the worldwide reduction was lower, at 1.9%, reported the EC. Japanese firms maintained their level of investment. Companies based elsewhere in Asia - China, India, Hong Kong, South Korea and Taiwan - continued the high R&D growth seen in previous years. Japanese car maker Toyota is the world's biggest R&D investor (€6.8bn) for the second consecutive year. Three EU companies feature in the top ten: Volkswagen, the biggest investor based in Europe with €5.8bn, Nokia and Sanofi-Aventis. The Scoreboard covers the top 1,400 companies worldwide. Máire Geoghegan-Quinn, Commissioner for Research, Innovation and Science said: "The fact that major EU firms have largely maintained their R&D investment shows that they recognise R&D as key to emerging stronger from the crisis. But the wide gap with the top US companies in areas like software and biotechnology and the continuing rapid rise of Asian-based companies highlight the innovation emergency Europe is facing. We urgently need heads of state and government at the December European Council to back the Innovation Union proposals that Antonio Tajani and I announced on 6 October." The EC reported that, within the EU, R&D growth rates differ between Member States because of their varied sector composition. Some of the biggest R&D decreases in 2009 were by companies based in countries such as Germany (down 3.2%) and France (4.5%) with a large automotive industry. Countries like Finland (down 6%) and Sweden (6.6%) where IT hardware is a major industry for home-based companies were also hit hard. However, Spain's top R&D investors increased investment by 15.4%, despite a drop in sales of 6.4%. This was because of large increases by top Spanish companies such as Telefónica (16%) and Acciona (29%) and the inclusion of top players such as Banco Santander (18%).

Risk adversity dominates UK as R&D spend falls across Europe

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