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Business engagement in innovation

The extent and types of innovation activity by North East businesses (data from the UK Innovation Survey)

Productivity and innovation
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Defining innovation

The UK Innovation Survey is a key data source for measuring business engagement in innovation. It is published every two years and provides summaries of responses from companies with ten or more employees who are not mainly in the public sector or the personal services sector. The survey uses internationally agreed definitions of innovation:

  • Innovation active businesses include (i) product or process innovators engaged in the introduction of a new or significantly improved product or process; (ii) businesses engaged in innovation projects not yet complete or abandoned; and (iii) businesses engaged in wider innovation such as new, improved forms of organisation, business structures, practices, marketing concepts or strategies.
  • Broader innovators include innovation active businesses but also those involved in activities such as internal research and development, training, or acquisition of external knowledge, machinery or equipment linked to innovation activities. 

Innovation active businesses
According to the UK Innovation Survey (UKIS), in 2018-2020 almost half (47%) of businesses in the North East LEP area were innovation active. This was a higher percentage than nationally and the fourth highest among the eight core city LEP areas. It was also higher than in 2016-18 but was lower than in both 2012-14 and 2014-16. This was also true at a national level and in most core city LEP areas.

Types of innovation activity in North East businesses
As well as having a higher percentage of innovation active businesses than England, the North East LEP area also had higher proportions of product innovators and process innovators in the latest (2018-20) data.  However, the percentage of wider (strategic and marketing) innovators was lower in the North East. For each of these indicators, the latest North East proportion was higher than in the previous period. However, only the percentage of product innovators was higher than in 2012-14.  The latest percentage of broader innovators in the North East region was lower than nationally. There is no LEP level breakdown of this innovator type.

In 2018-20, the North East LEP area had the third highest percentage of businesses  performing internal research and development among the eight core city LEP areas. It also had the highest percentage collaborating with others in their business group but the third lowest value of new to market goods and services when expressed as a percentage of total turnover.

Innovation factors, barriers, investment and skills
The UK Innovation Survey produces a much wider range of statistics at regional level than at LEP level. The North East region includes the North East and Tees Valley LEP areas.

In the North East region in 2018-20, the two factors most cited as highly important in driving innovation were improving the quality of goods or services and issues relating to COVID-19. The latter was, however, also the most cited barrier to innovation, followed by excessive perceived economic risks.

Innovation expenditure in the region was most likely to be on computer hardware and software and other machinery and equipment. These items made up a higher percentage of the region's innovation expenditure than nationally.

Employees in the region's innovator businesses were more than twice as likely to have a degree in a science or engineering subject than those in non-innovator businesses. They were more than five times a likely to have design, engineering, scientific or software skills.