Craig Wilson
Craig Wilson
Associate Director: In House

Articles From the Team

R&D spending and investment in innovation - how might this impact legal?

Various articles on the CBI website have focused on the need for companies to invest in R&D and spending on innovation to ensure that Brexit is a success.

You may be asking why a legal recruiter is interested in this topic and these articles, and I concede it is a fair question. The reason however is very simple; as an in-house recruiter I am interested in business, the economy and the job market, specifically with regard to the creation and development of in-house legal roles.

The impact of Brexit and the commitment to increase R&D spending and innovation potentially translates into additional opportunities for in-house Intellectual Property (IP) Solicitors, Trademark Attorneys, Patents Attorneys and other associated legal professionals. It is also likely to lead to a similar increase in said lawyers at private practice law firms.

Companies developing new products and services will be looking to exploit and protect their IP and this is certain to require the aforementioned lawyers as well as commercial lawyers to help market and sell the newly developed products. Gaining an understanding of the sectors that spend the most on R&D, and understanding the current level of R&D spending in the UK, particularly compared to our main competitor countries is both an interesting exercise and a useful tool for my business / client development and planning.

What does R&D spending look like now:

https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/researchanddevelopmentexpenditure/bulletins/businessenterpriseresearchanddevelopment/2015

Office of National Statistics data from November 2016, showed that in 2015 total expenditure on R&D performed in UK businesses increased by 5% to £20.9 billion compared with 2014. The previous years report showed that total R&D spending in 2014 increased by 6% to £19.9 billion compared with 2013.

In 2015, expenditure on R&D performed in UK foreign-owned businesses increased by 5% and accounted for 51% of total UK business expenditure on R&D, and the largest increase in R&D expenditure was in the Motor Vehicles and Parts product group, which increased by £339 million or 14%. This took total automotive spending to £2.7 billion in 2015, or 13% of the total R&D expenditure performed in UK businesses in 2015. The only sector larger than automotive was Pharmaceuticals, a product group that accounted for £4.2 billion or 20% of total expenditure on R&D. Close behind automotive was the Computer Programming and Information Services Activities Group at £2.4 billion (or 11% of total expenditure) and Aerospace at £1.7 billion (or 8%).

Unfortunately however, despite the year on year increase in R&D spending, Britain’s spending as a percentage of GDP has remained relatively constant at 1.1pc of GDP, which is considerably lower than many other nations. By comparison, according to OECD data, in 2014 South Korea spent the equivalent of 4.1pc on GDP developing new technology and products, Japan 3.4pc, Germany 2.9pc, the US 2.7pc and France 2.2pc. The EU average was 1.9pc.

The future for R&D and innovation in the UK:

In light of the above, which tends to indicate that UK companies are poor at investing in R&D and innovating compared to other countries, and that the majority (51%) of UK based R&D is in UK foreign-owned businesses, the premise of the CBI articles below appear pertinent to the UK’s success post-Brexit. In short, we need to invest more: Getting Behind Innovation Will Be Central To The UKs Success

Tom Thackray, CBI Director for Innovation, said in the aforementioned article:

“The growth of business R&D spending is encouraging and reflects the efforts of companies around the UK. This is a critical juncture for the economy and getting behind innovation will be central to the UK’s success in the years ahead, with overall R&D spending still too low.

“Growing R&D spend relies on a partnership between business and the Government, so we are calling for a joint target of 3% of GDP expenditure to be introduced. Together, the Government and business community still have plenty to do on this front. 7 in 10 Firms Plan To Increase Or Maintain Innovation Spending In Light Of Brexit

And in the aforementioned article, focused on a CBI survey of over 800 businesses - supported by Deloitte and Hays (the recruitment company), it is detailed that 70% of respondents plan to increase or maintain their innovation spending following the vote to leave the EU. Yet despite investing almost £21bn on innovation, businesses rate the UK as 10th in the world for innovation.

Looking at this from a recruitment perspective, Alistair Cox, Chief Executive at Hays plc said:

“Innovation brings us better ways of doing things, new solutions to old problems and whole new industries from which to grow. But in order for businesses to innovate they need the people with the skills to take their strategy forward and it is a great concern that many businesses today feel that they don't have access to the skills they need.”

“Government and business must work together to realign our education system in order to produce the graduates with the skills that are needed by today's and tomorrow's industries. In the meantime we must not restrict access into the UK for highly-skilled workers from abroad. Only by ensuring that UK businesses can access world-class talent, whether home-grown or from overseas, can we ensure that British business remains competitive and gains a position at the leading edge of innovation globally."

Summary:

Based on the above articles and the stated ambition to increase spending in R&D and innovation, it is perhaps realistic to expect that this will eventually translate into a greater need for commercial and IP lawyers, principally to ensure that the new innovations are properly protected and marketed. Alongside this, the impact of Brexit will undoubtedly require companies to review, renegotiate and develop new contracts, policies and procedures. All in all it should be a very busy time for the legal profession, and with many companies looking to save money on legal fees, I would expect an uptick in the numbers of legal vacancies we see at BCL Legal. This is particularly likely in the innovative pharma, aerospace and technology sectors, although in the case of the UK it will also need to take place in the dominant and sizeable professional services and financial services sectors.

For more information contact Craig Wilson at BCL Legal.

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