NZ businesses investing more in R&D and expansion but numbers still low

Tuesday 20th March 2018

New Zealand businesses are investing more in their growth and research and development but while the number of businesses carrying out R&D is at a 10-year high only 11 percent of firms are doing it.

According to Statistics New Zealand's Business Operations Survey, one in nine businesses with six or more employees undertook research and development in the year to August 2017 versus 7 percent in the year to August 2016 and 9 percent in the year to August 2015. Total R&D expenditure by businesses was $1.8 billion versus $1.6 billion in the prior comparable period.

Under Labour's coalition agreement with New Zealand First, the government is targeting an increase in total spending on R&D to reach 2 percent of GDP in 10 years and work is currently underway to overhaul New Zealand's R&D regime. Total R&D spending - including both the private and public sector - is currently around 1.3 percent of GDP, according to 2016 data from Statistics New Zealand. Of that, 0.6 percent is carried out by business, 0.3 percent by the government and 0.4 percent by higher education.

In terms of barriers to innovation, 18 percent of those surveyed in today's data said the cost to develop or introduce impacted innovation to a high degree and 17 percent cited a lack of management resources.

Regarding expansion, 33 percent of businesses invested in expansion in the year to August versus 30 percent in the prior year and 29 percent in the year to August 2015.

Investment in expansion can include purchasing assets (such as land and machinery). It can also include entering into new markets or investing in innovation.

Over the past decade, the industries with the greatest growth in expansion rates over the past decade were the construction, and information media and telecommunications industries.

According to Stats NZ, in the construction industry, 43 percent of businesses reported investing in their expansion in 2017, compared with 20 percent in 2009 and 24 percent in 2007.

“The construction industry saw a significant decline in expansion rates in 2009 after the global financial crisis,” business performance manager Laura O'Leary said. “The increased demand for construction work in recent years means businesses need to grow to keep up with the workload.”

(BusinessDesk)

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