UK government figures have shown that every commercial pound invested in research and design provides, on average, a return of £1.74 in additional revenue.
According to Scottish Enterprise, innovative companies grow nearly twice as fast in terms of sales than non-innovators – they create more jobs and are more attractive to investors.
Bank of Scotland research amongst SME and mid-market companies has shown that firms across Scotland recognise innovation as a crucial factor for future growth. One in four firms told us that they expect to increase their investment in new products and services over the next five years, with nearly three-quarters (74 per cent) recognising that innovation is vital to their growth strategy.
In a further sign of growing business confidence, bosses at half of Scotland’s small and mid-market firms expect annual sales to increase between 16 and 35 per cent over the next two years, driven by new innovation, against UK GDP growth predictions of 2.4 per cent.
Yet despite the positive outlook, our research shows that executives believe their businesses are being held back, with 56 per cent of Scottish firms saying their R&D plans were being postponed. The most common reason given were access to new talent, lack of investment, the right internal staff skills and a lack of space.
Last month, the CBI called on the government to prioritise innovation and science funding in the Comprehensive Spending Review, highlighting that the UK’s research and development spending is now the lowest amongst the G8. In September, the World Economic Forum’s global competitiveness index showed Britain had slipped to tenth place in the rankings, being overtaken by Sweden.
In total, more than half of SME and mid-market firms in Scotland (56 per cent) plan to raise external funding to support their innovation rather than use working capital. Funding however is only one part of the puzzle. If Scottish firms are to reap the reward of innovation the challenge is clear: unless we provide access to the talent necessary to deliver that innovation, we run the risk of missing an enormous economic opportunity.
2016 is Scotland’s year of innovation, creativity, architecture and design. Going into the new year, businesses have the opportunity to champion the business benefits of innovation. Whether it continues to be in engineering, healthcare, science or, as we have seen more recently, in the technology sector.
Scottish companies have always shown creativity and an aptitude as problem solvers. We need all parts of Scotland’s innovation ecosystem to join in a collaborative effort to realise the potential within many businesses, with skills and funding being the killer elements.
• Jane Clark-Hutchison is area director, mid markets, for Edinburgh and east Scotland at Bank of Scotland