International Coatings Scene
EUROPE
BY SEAN MILMO
EUROPEAN CORRESPONDENT
MILMOCW@RODPUB.COM
Economic downturn doesn’t
deter R&D investment
Continued
investment in
R&D is vital
to stay one-step ahead of
the competition when the
economy
recovers.
Balance-sheet tactics adopted by compa- nies within the coatings supply chain in Europe to deal with the economic downturn have triggered cutbacks in investment in
production plants but not so much in R&D.
Throughout the chain extending from raw
material suppliers through coatings producers to
their customers, companies have been focusing
on generating cash flow to restrict falls in profits
or even increase them, as well as to reduce debt.
The strategy has led to big decreases in capital investment by many companies but to a
much lesser extent in R&D expenditure. For the
larger players at least maintaining research
capacity has become almost sacrosanct.
With production plants, companies are making much deeper cuts in spending, even reducing or postponing major maintenance work.
With R&D they are delaying development of
new applications, products and technologies.
Some of the larger coatings companies and
leading raw material supplies having been saving research money by making their R&D
operations more efficient and more productive
by cutting staff. Stand-alone incremental product improvements have been set aside in order
to concentrate resources on advancing major
innovations.
However they have been trying to keep any
reduction in R&D spending to a minimum
because economic downturns tend to present
opportunities for innovation work so that
companies can take full advantage of rising
demand after a full recovery.
The exception is with SMEs which often
have little choice but to make cuts in
research expenditure because for them R&D
can be highly expensive.
“Companies should not take the risk of call-
ing a halt to innovation projects,” said Paul
Hodges, a consultant at the London-based con-
sultancy International eChem. “Once you stop
development work on something it can be diffi-
cult to get it started again.”
“Innovation is always important but it’s cru-
cial at the moment because when there is a
full recovery, the world will be different for
coatings and other companies than it was
before the crisis,” he continued. “The primary
concerns will be things like carbon footprints
and pressure on natural resources rather than
conspicuous consumption.”
Multinational coatings companies are par-
ticularly anxious to protect their R&D opera-
tions. They are conscious of the fact that
innovation is vital at present because of the
need to adjust their portfolios to the expected
new market conditions when demand returns
to more normal levels.
