During the recession of the late 2000’s an odd thing happened: R&D spend increased.
This increase was not as much as before the recession, but rather than cutting this cost center, companies invested more in their innovation programs. This seems counterintuitive when you consider that during this same time the unemployment rate skyrocketed to the second highest rate since the 1940’s, but it evidences a well-established rule that people innovate best when it’s necessary.
Charlie Brooker, one of the UK’s most famous journalists and writers, said about creating the best writing ‘To everyone who has ever emailed to ask me for advice on writing, my answer is: get a deadline.’ His idea is that the more pressure you are under, the better ideas you create, the better writing you can do. It is the exact same concept as innovating in a crisis.
Despite the assertions of politicians and right-leaning media outlets in the UK, the truth is that Brexit will do at least temporary damage to the UK economy. The single largest industry in the UK is finance and banking with 40,000 businesses directly in the industry and a further 37,000 providing accountancy services, but the chances of British-based banks getting essential passporting access to the EU is slim. This means that several banks will move to countries where they can operate more freely, with companies including HSBC, Barclays, Lloyds Banking Group, JP Morgan, Goldman Sachs, Citigroup, and even the London Stock Exchange all planning to move thousands of jobs out of the UK as a result of Brexit.
This is going to have a huge knock-on effect on the wider economy and some believe could throw the UK into another recession similar to what was seen in the late 2000’s. Regardless of the eventual outcome, few would argue that in the years following the official exit from the EU, the UK economy will shrink. It will be a struggle, but within this struggle, there will be a greater chance for innovation, because many companies will be forced to rethink models that have worked for decades.
Joseph Schumpeter, the famous economist and political scientist claimed that the process of ‘creative destruction’ forces companies to discard what was already there and think of something better. If we were to look at Brexit as a ‘creative destruction’ event it could lead to several important innovations. Firstly, with wages likely to fall as the economy shrinks whilst the value of the pound falls, food costs are going to significantly increase, meaning that people will be forced to think of new ideas to produce enough food for the UK population whilst at the same time essentially banning the 70,000 European workers who pick British produce. They pick 90% of all British fruit and vegetables, so somebody is going to need to find a way of fixing this or prices will increase even further than they already will.
There is also the issue surrounding the funding for charitable work, infrastructure, and various industry subsidies that are going to impact people’s employment, their ability to produce good and society as a whole. It means that these organizations are going to be forced to find new ways of operating, either with a more limited budget or increasing profits in ways that haven’t been done before. For instance, the average farmer in the UK earned more through EU subsidies than the produce they create and sell. When the UK leaves the EU these subsidies will disappear and at present the UK government have not provided any concrete plans about how they are going to be replaced, let alone funded. Most farmers are therefore going to need to turn to non-traditional techniques to make up this deficit, through adopting new ideas, creating vastly superior products to improve export potential, or simply being able to produce more than they have in the current system.
As the UK prepares to exit the EU there will be countless issues that need to be overcome, but just like in the most recent recession, companies and individuals are going to need to find creative ways of staying afloat.