Economic hardships should not stifle innovation
Last year was tough for many sectors, including construction. The cocktail of high inflation and its solution, equally worrying interest rates, forced several businesses into the ground, halting development, growth and innovation across the UK.
This shouldn’t be the case; rather, the opposite should happen. Economic hardships should encourage innovation, not stifle it.
I understand balance sheets ultimately dictate a business’ fate, but – when these businesses are struggling to make ends meet, struggling to make a comfortable margin – it frees up the capacity for innovative players to disrupt the market.
And, in times of economic crisis, policymakers – including the UK government – need to ensure innovation doesn’t stagnate. To do this, they need to collaborate with the private sector. Crawling out of the economic doldrums depends on it.
This is not a particularly hot take, either. There is a long history of struggling governments backing projects that, in the end, benefit their nation in the long run.
For example, in 1995, Denmark’s and Sweden’s governments banded together to build the Øresund Bridge, a 16-kilometre link to connect the two countries over the Øresund strait. The project was undertaken by four construction and civil engineering firms.
Of course, the bridge is a fantastic example of international collaboration, but it must be remembered that – at the time, in the 90s – Sweden was suffering its worst economic crisis since the 1930s. Nevertheless, the construction of the bridge went underway, and – to this day – has delivered an economic gain of around £7 billion to the Øresund region (University of Birmingham).
History has proven that it is possible to back innovation in times of economic hardship. And, while, of course, I am biased towards large-scale, government-backed infrastructure projects, the examples are endless.
Let’s take the COVID-19 pandemic, for example, which forced the global economy into a sudden, unprecedented crisis. Yet, even in the economic turbulence, we saw firms throw their hats into industries they hadn’t previously stepped foot into. Crisis had spurred innovation.
Dyson – known mostly for vacuum cleaners – recognised their own expertise in ventilation and the world’s need for air purification and – with £20 million of non-public money – developed a new ventilator in 30 days (Dyson).
Despite the fact they were not supplied to the NHS (The Guardian), the logic still applies. A home appliance manufacturer saw relaxed regulations across medical devices, shook off their vacuum-related reputation, and muscled their way into ventilator manufacturing.
So, as we enter 2024 with the slightest degree of optimism about the economy, the UK government should not put their foot on the brakes. They should not become complacent. They need to incentivise innovation.
But how can they do this?
Conventional wisdom might suggest that the government should encourage businesses to conserve cash, fortify their defences against financial ruin, and prioritise survival. In short, minimise risk and stay in your comfort zone.
But, if the government offers up grants, tax cuts, tax credits and the like, and backs innovative projects across both the public and private sectors, growth-led innovation will seem more appealing.
For example, in the construction sector, government incentives could allow firms in the industry to finally embrace emerging technologies like AI and ML. The innovations that proceed from adopting the tech – enhanced BIM modelling and automated estimation processes, for example – could shorten the building cycle, allowing firms to take on more projects at a time. Besides the fact this could safeguard construction players from insolvency – which, at no fault of its own, loomed over the industry in 2023 – it could cement the UK as the global construction leader.
As we exit the rubble of economic uncertainty, businesses across the UK are met with an open goal. With crisis, there comes new opportunities, an evolving landscape of shifting customer needs, and the ability to lay the brickwork for post-crisis growth. Of course, as the global markets evolve, businesses may have to adopt new business models, become a bit more dynamic and work quickly to identify new competitive advantages.
This may take a leap of faith. Prioritising innovation.
Here’s what I’ll say: when the going gets tough, the tough get going. In times of economic turbulence, the UK government shouldn’t shrink from innovation, deeming it ‘too risky’. Rather, they should look beyond the 6-month scope of recovery and encourage its thriving business ecosystem to drive the next period of rapid growth.
Haman Manak is the Procurement Director at Stanmore, a leading UK-based specialist contractor.
