Durham University: Almost half of UK firms have made cuts to research and development

Professor Richard Harris and Dr John Moffat also found 40% of firms have invested in ICT, likely needed to facilitate working from home and remote engagement with customers.

The study looked to understand the impact of the pandemic on UK firms’ research and development plans and whether or not companies had refocused their efforts in terms of investments.

The researchers interviewed over 4,500 UK companies during the period between October and November 2020. Questions were centred around the firm size, industry and history of operations, before taking a more specific look at the companies’ previous research and development investment initiatives.

The results suggest that the Covid-19 pandemic will have long-lasting negative effects on productivity and growth for firms, whilst increased ICT investment reflects the necessity for firms to become more digital.

Professor Richard Harris said:

“The Covid-19 pandemic has had profound effects on the world economy, and in the UK specifically, Bank of England figures suggest that it has led to the largest fall in GDP since 1709. While the short-run effects of the early stages of the pandemic are now well understood, less is known about its implications for growth in the medium to long-term.

Our findings clearly show that research and development spending dropped drastically during the pandemic, which likely will have a negative impact on productivity and growth in the medium to longer term.”

The research reveals that the fall in intangibles investment is distributed unevenly across firms, with business/industry playing a major role in predicting the change in investment and internationally oriented firms experiencing smaller declines in the early stages of the pandemic.

These research findings showcase the huge impact that the Covid-19 pandemic has had not only in the short-term, but in the long-term too, with it likely that firms will have challenges related to productivity and growth in years to come due to the lack of R&D over the last year and a half.

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