Presentation to the TFI Network event on 19.04.2021 by ERC Research Fellow Temitope Akinremi.

1. Innovation Readiness in Foundation
Industries
TFI+Network 19th April 2021
By
Temi Akinremi, Hopley Susan & Ian Drummond

2. Overview
• About UK foundation industries
• Innovation activity in foundation industry
sectors
• Collaboration in the Industry Sector
• Energy/Resource Efficiency
• Impact of Covid-19
• Way Forward
Full Report: https://www.enterpriseresearch.ac.uk/wp-content/uploads/2021/02/ERC-
Report-Innovation-Readiness-in-UK-Foundation-Industries.pdf

3. Data & Methods
12
16
0
5
10
15
20
Trade Associations FI Businesses
In-depth Interviews Conducted
Literature
Review
Analysis of
Available
Data (LSBS,
Eurostat &
OECD)
1st Phase
Interviews
(Trade
Associations)
Foundation
Industry
Survey
2nd Phase
Interviews
(Foundation
Industry
Businesses)

4. Profile of foundation industry businesses
Number of businesses
All
businesses
Micro
(1
to
9
employees)
Small
(10
to
49
employees)
Medium
(50
to
249
employees)
Large
(=>
250
employees)
Employment
Turnover
£m
Cement 1165 770 275 100 20 37450 8583
Paper 1370 790 370 175 35 58050 12188
Ceramics 545 430 70 35 10 17550 2513
Metals 2030 1315 500 180 35 69175 18642
Chemicals 1240 785 280 145 30 47830 22075
Glass 735 475 185 65 10 23770 3583
All Foundations
industries
7085 4565 1680 700 140 253825 67584
All Manufacturing 137365 108300 21575 6205 1285 2521519 570095
All Economy 2718435 2431995 233960 42000 10480 31574358 4005865*
Source: Office for National Statistics * Non-financial economy

5. How foundation industry
businesses are run
• Four in ten businesses reported increased turnover prior to the
pandemic (In the year to March 2020)
• Despite long investment cycles, planning horizons are short, with
most businesses planning capex, R&D and training on an annual
basis.
• Just over half have a business plan, reviewed at least annually. This
proportion increases with size.
• Nearly nine in ten business compete on product quality and
customer service with six in ten competing on price and less than
half reporting environmental credentials as a competitive
advantage.
• Competition, Brexit and skills are the most cited obstacles to
running foundation industry businesses.
• As energy intensive sectors, profound pressures to reduce carbon
emissions

6. R&D intensity – international comparison
Total Manufacturing Paper Chemicals
Non-metallic
minerals* Basic metals
US 2.1 12.0 1.5 4.6 2.0 0.9
UK 1.3 5.2 0.3 4.1 0.9 2.0
Spain 0.7 2.7 0.4 2.9 0.8 1.0
Netherlands 1.3 6.0 2.8 5.2 1.0 4.0
Japan 2.5 10.6 1.5 7.1 5.3 2.4
Italy 0.9 3.9 1.2 4.0 1.5 1.4
France 1.6 7.0 0.7 5.2 2.8 2.6
Finland 2.1 7.4 2.7 5.4 2.4 1.7
Canada 1.0 - 2.3 2.6 0.7 3.0
Belgium 2.1 8.4 1.3 3.9 2.3 5.2
Germany 2.4 8.8 0.9 8.2 1.8 2.8
Source: OECD

7. Innovation activity in the last three
years
55.8
52.6
43.3
46.2
0
10
20
30
40
50
60
New or improved
goods/services
New or improved
processes
Percentage
of
businesses
Innovations introduced in the last three
years
Yes No
32.1
40.6
25.7
0
5
10
15
20
25
30
35
40
45
Product OR
Process
Both Product
AND Process
Neither
Percentage
of
businesses
Has your business introduced new
products or processes in the last 3 years?

8. Innovation by sector
0
10
20
30
40
50
60
70
80
Chemicals Cement Ceramics Glass Metals Paper
percentage
of
businesses
Product and process innovation
Product innovation Process innovation

9. New to the firm or new to the
market?
51.8
30.5
47.5
68.7
0
10
20
30
40
50
60
70
80
Product/Service Process
Percentage
of
businesses
Were any of these new products or processes....?
At least some new to the market All just new to the business

10. Most important factors in the
decision to innovate
4.6
5.2
6.3
6.3
8
8
10.3
13.1
13.1
15.4
17.1
19.4
28.6
0 5 10 15 20 25 30 35
Reduce energy use
Customer requirement
Improving health and safety
Survival
Reduce environmental impacts
Regulatory requirements
Replacing outdated products or processes
Entering new markets
Improving capacity for production
Reduce unit costs /increasing margin
Maintain/increase competitive advantage
Improving quality
Increasing sales/market share
Percentage of businesses
What was most important in your decision to innovate?

11. Innovation and ambition
31.8
42.9
24
40.9
18.2
36.4
0
5
10
15
20
25
30
35
40
45
50
Product OR process Both product AND process Neither
Percentage
of
businesses
Innovation and growth ambition
Aiming to grow Not aiming to grow

12. Other Investment in Resource Efficiency
• 49 percent of businesses invested in new technologies to improve energy/resource efficiency.
• Across the sector, large businesses (businesses with turnover of over £5m) invested most in new
technologies for energy efficiency. Over two-fifth of businesses in the £5 to £15m (61 percent) and
the >£15m size categories invested for this purpose
• The paper sector had the highest percentage of businesses (more than two-fifths) investing in new
technologies in the last three years to improve energy/resource efficiency. The cement sector was
the sector with the lowest percentage of businesses (31 percent) investing in energy/resource
efficiency .
34
46
61
68
66
54
39
32
0
10
20
30
40
50
60
70
80
Up to £1m £1-5m £5-15m Over £15m
Percentage
of
Businesses
Turnover
Other Investment in Energy/Resource Efficiency
Yes No

13. Energy/Resource efficiency improvements
0 20 40 60 80 100 120
We have done all we can with existing technology
We have made the investments we can with the cash available
We know there is techn that would allow us to do more, but it
is not proven in the UK
Agree or disagree with statements about the improvement of energy and/or resource
efficiency within your business
Disagree Agree Don’t know

14. What’s involved (Collaboration/Engagement)
Collaboration. Over the past three years, half of FI businesses (51 percent) had
collaborated on innovation with other businesses in their supply chain. Far fewer had
collaborated with organisations outside the supply chain. Product design was the
main reason for collaboration.
External advice. Less than half of FI businesses (49 percent) had sought external
advice over the previous year. Of these, 58 percent sought advice on innovation.
Most users reported positive outcomes.
Trade organisations and rep bodies. Almost three-fifths of FI businesses are
members of a trade organisation or representative body. More than a quarter of
these members reported that this organisation did not encourage innovation.
Innovation support. Less than half of FI businesses had applied for or received R&D
tax credits, innovation loans or other innovation support during the last three years.
Access to finance. During the last year, 43 percent of FI businesses had sought
external finance. 84 percent of these received some or all of the finance they sought.
In just over a third of cases (36 percent) the finance was sought to fund innovation.

15. Neither product nor process
innovation in the last three years
22
25.7
35.5
28.6
32.7
13
36
29.7
21.6
13.2
0
5
10
15
20
25
30
35
40
Percentage
of
businesses
No product or process innovation in the last three years
Sector Turnover

16. Innovation constraints - summary
• High entry barriers and associated very low levels of
churn.
• Under-developed management and leadership skills.
• Dispositions and mindsets resistant to innovation.
• Widespread reluctance to collaborate.
• Regulatory and other pressures to achieve profound
reductions in carbon emissions.

17. “Innovation is constrained by poorly
developed management and leadership
skills”
59.5
52
62.9
58.1
51.5
63.4
67.4
56 53.9
62.8
71.1
0
10
20
30
40
50
60
70
80
Percentage
of
businesses
Frequently/sometimes
Sector Turnover
This suggests that poorly developed management and leadership skills are more widely
associated with suboptimal levels of innovation than a range of other factors including
macro economic uncertainty, costs of innovation, issues with A2F and skills shortages.

18. Impact of Covid-19
• Reduction in Turnover and Employment.
• Adjusted future growth forecasts across businesses.
• Lower R&D budgets expected even as gradual return to
“normal” training resumes.

19. Way to go…………….
• Funding and partnerships: focus on collaborative ventures and consortia,
which include smaller businesses. Develop a more strategic engagement
framework for collaboration between the foundation industries and the
research base.
• Firm-level capabilities: Tailoring existing management support
programmes to foundation industries, with more encouragement for
networking and peer-to-peer learnings.
• Industry representative bodies: An increased role for trade associations in
promoting innovation and identifying businesses that would benefit from
additional support.
• Foster competition: Encourage and support new entrants to sectors where
entry costs can be prohibitive.
• A convening role for government agencies to facilitate engagement and
collaborations with and across businesses, sectors, end-users and the
science base to inform innovation and technology priorities, identify
barriers and tailor funding solutions accordingly.