For the first time in 13 years the amount spent on research and development has dropped, causing some industry observers to worry about the state of UK plc once out of recession and what the implications are for the business insurance industry.

Even during one of the worst years of the recent troubles – 2008 – R&D spending was higher than now. And although the impact won’t be felt within the business insurance sector for some years, it’s a truism that in the commercial world, problems now can be felt years down the line.

And it’s not only the large companies which are affected, the lack of research and development spending will also greatly affect the minnows, meaning further implications for the small business insurance sector.

Those in the sme insurance sector know that the lower research and development spending reveals the true state of British business. Lower budgets effectively means less anticipated growth and less money to spend on ancillary services.

And such is the nature of research and development budgets, that the true effects will only be felt two, or three years in the future. Most companies have to commit funds to either developing products, sourcing new products, or developing new ideas. All these can come within the research and development banner.

Many economic observers focus on the financial situation as it currently stands, whereas others look for trends. And the trend to drop money from such activities is a very worrying sign. It shows a lack of confidence and optimism, and stores up huge problems for the future.

As UK plc starts to emerge from the darkness of the current recession, if it’s in a poor state as regards product development, then it will struggle to not only compete in its own markets, but also international markets.

Other industry experts are not so alarmed though and see no future problems, especially for the business insurance sector. These experts see the lowering of the research and development budgets as a natural element of business during a recession and that it is indeed a sensible course of action, given the harder circumstances. And indeed, these type of budgets can be quickly turned back on during the coming years, without major consequences.

Whichever party is right, the answers will not come to the fore until a few years down the line, when the economy has righted itself and generally companies are feeling more confident about the future. One thing is for sure though, paring back on key business budgets can only go on for so long. As gardeners point out, prune too harshly, and the bush will die. Dead-heading – in gardening parlance – can produce a healthier bush and as long as its carefully done, can work wonders for the future.