21 Nov 2018   |   Viewpoint

Viewpoint: EU needs more funding for global challenges and industrial competitiveness

We need to increase our ambitions for the Horizon Europe research programme, or risk falling behind the US and Asia, says Markus J. Beyrer, director-general of industry association BusinessEurope

Photo: BusinessEurope

EU leadership in the digital economy is not a given.

In the years to come, European companies will see fundamental changes in their businesses, and increased competition with China, the US, Japan, Korea and other large economies. Factories around the globe will become more digitally connected, guiding industrial processes, from ordering the metal raw materials to steering the intelligent robots that will assemble them. Entire value-chains will be connected, and become more resource and cost efficient. Highly digitised logistics will be automated – from shipping through to the final recycling processes within the circular economy.

To be ready to make the most of all these opportunities, we need to allocate more money for research and innovation. In short, we need to increase the ambition of the EU’s 2021-2027 Horizon Europe programme.

In the European Commission’s proposal, 56 per cent of the total budget is allocated to Pillar II, “Global Challenges and Industrial Competitiveness”.

While we very much appreciate the clear emphasis on the role of industry throughout the programme, as well as the efforts to target entrepreneurs, we consider these provisions are not enough. We note also that the Parliament, on Wednesday, voted for a proposal that slightly reduces the budget allocated to this pillar.

Key players spend more than we do. Japan spends above 3 per cent of its GDP on research and innovation, the US about 2.7 per cent and China has recently overtaken the EU in R&I spend, with overall EU investment now just 2 per cent of GDP.

Industry is committed to playing a leading role in tackling global challenges and contributing to EU growth. But this global reality means much tougher competition for us.

As such, we say €120 billion – at least – for Horizon Europe is the minimum amount necessary to deliver on the EU’s research and innovation priorities. This would be a step forward to reach the agreed target of investing 3 per cent in R&I.

Given the right framework conditions, millions of companies are committed to increase investments in research and innovation in the EU. They already contribute with more than 55 per cent of the total expenditure within the EU-28.

However, if we want to see innovation-led growth that builds a prosperous Europe, we need to further leverage private sector investments as much as possible. This is why we call for at least 60 per cent of the Horizon Europe budget to go to Pillar II, the true collaborative pillar in the programme.

In our view, industry collaboration with research and technology organisations, higher education institutions and public authorities, is key, as it has the potential to create positive spill-over effects.

Key enabling technologies, EIC

Furthermore, raising the budget for Pillar II addresses another priority of ours: ensuring an adequate budget for so-called key enabling technologies (KETs), the essential technology building blocks that underpin Europe’s global leadership in various industries.

Their importance for our economy is only going to increase. In 2013, KETs-based products represented about 19 per cent of the EU’s total production, at €950 billion, compared with 16 per cent in 2003.

We call on the EU institutions to strengthen support for KETs across the whole of Pillar II.

We suggest, meanwhile, that the new European Innovation Council (EIC) promises further and very much-needed support for breakthrough and incremental innovation.

The new funder can be instrumental for both innovative start-ups as well as traditional innovative SMEs – so long as the EIC’s “pathfinder” instrument provides clear support from the early technology state to the early commercial stage.

For businesses, the main benefit is the leverage effect: EU-funded R&I activities encourage the private sector to invest more in innovation. Involving key businesses ensures that research results and solutions are applicable across Europe and beyond.

Involving these businesses also helps to develop EU and worldwide standards and interoperable solutions, and it offers the potential of high exploitation. Let’s remember that the Commission estimated that each euro of EU investment in R&I would bring a GDP increase of €10 - 11 over 2021-2027. 

So, while we like the current proposal, our bottom line is that it can still be improved. In addition, third country participation in the programme should be more explicitly encouraged, as it was under Horizon 2020. As things stand, we fear the Commission’s proposal, and some of the ongoing discussions among the co-legislators, may hamper the current level of international cooperation.

Markus J. Beyrer has been director-general of BusinessEurope, Europe’s largest business organisation, representing 39 national employer and industry federations in Europe, since 2012

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