The coronavirus pandemic has spurred widespread business innovation, but government intervention is needed to maintain the momentum, according to new research.
The Institute of Directors (IoD) surveyed 769 of its members during the first half of last month, finding that 87% had made changes to their business in response to the pandemic – with only 19% stating they hadn’t made any permanent changes.
The research revealed that 42% of directors felt the changes they had made improved their organisation’s productivity, compared with 27% who said they did not.
Two thirds had made all the adjustments they intended to make, but a further fifth wanted to make more changes in response to the virus.
The directors surveyed expect to ramp up investment in areas such as research, development, training and software in the year ahead – although some significant minorities in each area said they would have to rein in spending.
Overall, business leaders anticipated lower investment in buildings and machinery, compared with their plans before the pandemic.
The IoD urged government to help small businesses by pushing ahead with infrastructure and skills spending, as well as improved tax relief to support firms’ investment plans.
It also warned that business debt and uncertain demand could hold back productivity growth after the pandemic if these actions aren’t taken.
Tej Parikh, the IoD’s chief economist, said that necessity is the mother of invention, with firms facing unprecedented restrictions having to come up with workarounds, fast.
“Many of these solutions – whether remote working, adapted supply chains, or moving services online – have turned out to work better than business-as-usual, so as a result, some organisations may be more prone to embrace innovation going forward.
“Sadly, this doesn’t mean our long-standing productivity puzzle is suddenly solved, and entrenched challenges around skills and infrastructure still need to be addressed.
“The government has been taking strides on these key issues for business, but there’s distance left to run.
Parikh pointed out that in the aftermath of the virus, many companies will be saddled with significant levels of debt.
“The Treasury will need to be accommodating to encourage business investment with tax reliefs – one thing it certainly shouldn’t be doing yet is hiking up taxes, which could snuff out the recovery.”