Manufacturing and technology businesses look to R&D for growth

6 Jan 2012

Businesses in the manufacturing and technology sectors are planning to grow through Research & Development (R&D) over the next 12 months according to the latest Grant Thornton International Business Report (IBR). This provides a bright spot in an otherwise gloomy economic outlook [ see Q4 economic update ].

In the survey of 2,800 businesses in 40 economies globally, net 39% of businesses in both manufacturing and technology indicated that they plan to increase investment in R&D in 2012. This compares to a global average of net 25%. Businesses in healthcare (31%) also indicated that they would increase investment in this area over the next 12 months.

Business leaders in these sectors expect this extra investment to pay off in terms of growth prospects. Net 64% of businesses in the technology sector are expecting to increase revenues over the coming months, ahead of manufacturing (50%) and healthcare (48%), results which compare favourably to the global average (43%). Further, they do not expect this extra investment to damage profitability; expectation for increasing profits in technology (44%) and manufacturing (33%) are also above the global average (31%).

Jim Menzies from Grant Thornton Canada said: “The IBR results come as welcome respite from generally downbeat economic forecasts. They show businesses, at least in technology and manufacturing, planning for long-term growth through R&D.

“Despite the uncertainty surrounding the global economy because of the, as yet unresolved, eurozone sovereign debt crisis, setting aside time and capital to expand products and services should remain high on businesses’ agendas.”

He added: “Technology is a fast-moving sector which naturally goes hand-in-hand with development, but the strength of manufacturing – a sector which still accounts for around a fifth of global output – is particularly encouraging for future economic growth.”

At the global level, there is some evidence that businesses are increasingly looking to R&D as a means of growing their operations. The proportion of businesses looking to increase investment in R&D in 2012 rose from net 21% in Q3 to net 25% in Q4.

The rise was largely driven by businesses in Germany (up 21 percentage points) and Brazil (up 10). It is perhaps no coincidence that businesses in both economies remain overwhelmingly optimistic about the next 12 months; Brazil is the third most optimistic in the survey, and Germany the most optimistic mature economy.

Douglas Oliveira from Grant Thornton Brazil said: “In emerging markets, business growth does not necessarily require high prioritization of investment in R&D. However, Brazilian businesses are facing a very tough competitive environment with many foreign companies starting operations locally and bringing their own production techniques and processes. To remain competitive, businesses need to develop their own products and services.

“By investing in R&D, businesses are investing in their long-term future. In the short-term businesses can survive by squeezing the most existing out of products and services, but this cannot continue without damaging future growth prospects. Those businesses with the foresight to boost activity in this area look set to reap the richest rewards.”

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For further information please contact:
Christine Hobart
International communications manager
T +44 207 391 9548
E christine.hobart@uk.gt.com

Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,500 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com .

Data collection
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.

Data collection is managed by Grant Thornton International's core research partner - Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. From 2011, fieldwork takes place on a quarterly basis every quarter with fieldwork lasting approximately one month and a half.
 
Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 2,800 businesses across the globe conducted in November/December 2011.

The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 40 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (10 per cent) with the remaining 25 per cent spread across all sectors.