Sir, Lex's article on UK dividends says that "companies with big capital expenditure or research and development projects could elect to trim back, especially if the market is declining to reward them for the future growth from these investments."

Any companies considering this course of action should be aware of the many excellent companies that chose to take precisely the opposite approach at the start of previous downturns and recessions. These companies increased R&D as sales decreased to enhance their range of products and services compared with those of competitors and hence strengthen their position in the upturn that followed.

Examples of companies that increased R&D during 2001 to 2003 include Intel, Nokia, Adobe, Altera, Autonomy and Renishaw. Sales in 2004 and 2005 were in all cases well above the 2001 level and share prices rose.

For example, in 2001-02 Renishaw saw its sales fall by 17 per cent but increased R&D by 15 per cent; its share price tripled from a low in late 2002 to late 2005. A similar effect was seen in a US study of a large sample of companies over 20 years which included the 1990-91 recession. Many of the industry leaders at the end of the period were companies that had increased their R&D during the recession. Intel, for example, more than doubled its R&D in the period 1989-92.

The conclusion is that “taking a hard look at R&D spending in a recession” can mean having the stomach to invest more while others are cutting back. Market rewards will follow – but not immediately.