RISING demand for their current products is diverting many manufacturers from new innovation a regional engineering leader says.

Andy Tuscher, regional director of manufacturers' body EEF, said while most firms wanted to invest in more innovation, they feared for their future competitiveness while being forced to refocus their operations to meet stronger demand.

Mr Tuscher said: "Innovation is a critical part of manufacturers’ growth strategies and most have the ambition to do more. However, while they are now reaping the rewards of previous activity, and stronger demand is boosting growth prospects, the resultant increase in activity is forcing manufacturers to re-focus their innovation activity and leading them to fear for their competitive position.

“If the UK is to continue to compete internationally, both the level and effectiveness of innovation must be increased. Many of the recent changes to policy have been supportive and these should be maintained, together with a longer-term, more strategic approach from government over successive parliaments.”

His comments followed the release of the latest EEF/NatWest Innovation Monitor showing that many firms are concerned that their investment in innovation is not enough to keep pace with competitors.

It shows that:, while 95 per cent of manufacturers have been innovative in the past three years, the number reporting innovation in three activities or more has more than halved in the last year, from 75 per cent to 38 per cent, as companies refocus on satisfying existing customers.

The report reveals that spending on research and development by UK firms is only 1.1 per cent of GDP, against two per cent in Germany and over the last decade the UK’s relative position has declined as many competitor economies have improved.

The latest findings show that manufacturers plan to spend moderately more on innovation, but 26 per cent are concerned about falling behind competitors – up from 19 per cent last year

Activity to develop products and services for new customers and markets has seen manufacturing growth pick up. But, the new monitor shows that the strong demand has put pressure on manufacturers’ internal resources.

EEF has urged the Government to continue boosting support for innovative companies, including through increasing funding for the Technology Strategy Board and other schemes and widening the scope of R&D tax credits.

Mark Eastwood, head of manufacturing at NatWest and RBS, said: “The change we are seeing this year may be that, due to increased demand, manufacturers are refining the innovation projects and focusing on those that are going to achieve the biggest return. However, to remain competitive in a domestic and global market, manufacturers need to continue to invest to ensure they are not falling behind.”