Concern over economic nationalism causing companies to re-think R&D investments
A quarter of executives surveyed have already experienced some pressure to change how or where they conduct innovation. / A third have felt the effects on their R&D talent acquisition or retention. / Global R&D spend last fiscal year by top 1000 corporate spenders reached a record high of over $700bn, of which the UK accounts for 3%.
Annual worldwide corporate R&D spending exceeded $700bn for the last fiscal year amongst the top 1,000 global public companies, up 3% on the previous year1. However, R&D leaders around the world are increasingly concerned about economic nationalism, and its potential to impact where companies invest in R&D and innovation.


The latest annual Global Innovation 1000 study by PwC’s Strategy& analyses spending at the world’s 1,000 largest publicly listed corporate R&D spenders. This year 562 R&D leaders globally were surveyed alongside this, finding than more than half (52%) believe a general move toward economic nationalism around the world would lead to at least a moderate or significant impact on their company’s R&D efforts.

Major companies have been conducting some R&D outside their headquarters’ countries for decades. But increasing attention on regulations and policies around visas, labour movement, and how to govern the sharing of knowledge and technology are causing some to question how sustainable their integrated global innovation networks are.

  • Nearly 33% of R&D executives surveyed report that they have already felt the effects of economic nationalism on their R&D talent acquisition or retention because of visa or work restrictions — either losing employees, seeing less talent available, or in hiring more local talent;
  • Although nearly 66% of all participants surveyed say they have not experienced pressure to change their approach to innovation in their headquarters country to date, 23% say they have already experienced such pressure in another country;
  • Survey participants believe the US, UK, and China could be most at risk from potential changes in policy that could impact R&D investment; and
  • Canada, Germany, and France are likely to gain if protectionist policies broadly become a reality.

John Potter, partner in PwC’s Strategy&, said:

“To deliver innovation, many of world’s largest companies rely on shifting talent, money, and ideas across borders. If policies in the major global economic powers start to focus more inwardly, however, this would cast uncertainty over companies’ innovation plans and their current models would need to evolve.

Uncertainty only serves to slow innovation. Given that R&D activities ultimately help to create the jobs, growth and wealth of our communities, we need to ensure clarity over policy to keep innovation centres around the world working effectively.”
 

Global Innovation 1000: UK highlights

Thirty-six UK companies were part of the top 1,000 largest publicly listed corporate R&D spenders last fiscal year. They invested a total of $23bn2 in R&D between them, accounting for 3.3% of the global total ($700bn). They spent an average of 3.8% of their revenue on R&D (global average 4.5%), slightly increased from 3.1% the year before.

The healthcare industry continues to lead the way in the UK, investing nearly half (49%) of the total R&D spend. The automotive and aerospace and defense industries complete the top three for R&D spending by UK companies, investing 21% and 7% of the total respectively.

Marco Amitrano, UK consulting leader at PwC, commented:

“Organisations that operate in and around the UK are rightly watching the ongoing Brexit negotiations closely and, as greater clarity emerges, that will drive decisions on investment bets to support medium and long-term plans.

Innovation is essential for the future success of any economy, but here in the UK, the development of policy to maintain companies’ ability to bring talent from abroad will be an area of critical debate and importance for business. We need to make sure that stronger borders don't mean weaker innovation.”

Top 10 UK R&D spenders

Notes to Editors

  1. In the last fiscal year, as of 30th June 2017, worldwide R&D spending among the world’s 1000 largest corporate R&D spenders increased by 3.2% to USD $701.6bn, exceeding $700bn for the first time. To be included, companies had to make their R&D spending numbers public. The Global Innovation 1000 companies collectively account for just over 40% of the entire world’s R&D spending, from all sources, including corporate and government sources.
  2. For the Global Innovation 1000 study all sales and R&D expenditure figures in foreign currencies were converted into U.S. dollars according to an average of the exchange rate over the relevant period.
  3. For more information please visit: https://www.strategyand.pwc.com/innovation1000

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