Corporate investment in innovative start-ups slips

Investment in UK small firms and start-ups by large organisations has fallen sharply after a period of strong growth.

Data released by law firm Bond Dickinson shows that deals between large organisations and UK SMEs dropped 28% in 2016/7, after a three-year upward trend in collaborative investment.

Despite the recent fall, large organisations invested £21bn in deals with UK SMEs in the last tax year - 31% more than the £16bn large organisations invested in UK R&D in 2016.

It shows "a healthy appetite remains for partnering with SMEs" according to Bond Dickinson. Large organisations invested a total of £102bn in UK small firms and start-ups between 2013/14 and 2016/17.

In the same timeframe, corporates spent a total of £61bn on UK research and development. These findings suggest that corporates are buying into smaller businesses via mergers and acquisitions in order to access innovation.

Jonathan Blair, managing partner at Bond Dickinson, said: "Business leaders know that neither corporates nor SMEs are perfectly built to deliver innovation alone, but the reach and power of one, combined with the agility of the other can be a potent combination."

However, the number of deals has fallen to 1,111 in the past year from a peak of 1,536 in 2015/16.

Blair describes the dip in investment as "understandable" given current economic uncertainty in the UK and Europe. He adds: "Innovation continues to be a key priority for businesses facing disruption from all corners. On the brink of a major shift in its international trade relationships the UK has much to gain from these dynamic partnerships between PLCs and start-ups."

The latest data comes after a disappointing run of business investment results since the EU referendum. Business investment shrank by 1.5% in 2016 according to the ONS - the first contraction since 2009 - and in 2017 has continued to lag behind the recovery of GDP. Economic consultancy Cebr is forecasting a 3.4% fall in business investment for 2017.

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