04 Dec 2014   |   News

Corporate R&D spending in Europe slows, Commission says

In 2013, the growth rate of private R&D investment in Europe fell to 2.9 per cent, due to falling corporate profits and a weak pharma and tech sector

When it comes to private R&D investments, Europe is lagging behind its global competitors. A new European Commission report says  that in 2013, industrial R&D investments by European companies grew by only 2.9 per cent, well below the global average of 4.9 per cent and below the 6.8 per cent growth rate registered in 2012.

The report, EU Industrial R&D Investment Scoreboard, says poor performance in pharmaceuticals and biotechnology, and in technology hardware and equipment, weighed down the total, industry-wide spending pattern.

The slow-down in R&D spending tracked a weak corporate performance overall: EU-based companies in 2013 lagged behind their main competitors in the US, reporting a 1.9 per cent decrease in sales and a 6.6 per cent decrease in operating profits.

Also, the overall amount invested in R&D by EU-based companies in high-tech sectors represents only 43.4 per cent of the amount invested by their US counterparts. The gap between the two company samples is increasing with time, the report says.

In a press conference, the EU Commissioner for Research, Science and Innovation, Carlos Moedas said that “despite the harsh economic climate, EU companies continue to invest in R&D”. But “that is not enough,” he added.

Moedas believes that the Commission needs to emphasise more the importance of research and innovation for the economy and how investments in innovation provide the tools for economic growth. “Innovation is a key driver for our future,” he said.

In a press release, Tibor Navracsics, Commissioner for Education, Culture, Youth and Sport, said that the EU has excellent researchers and good knowledge-sharing opportunities but R&D investments need to grow at a faster pace if Europe wants to remain competitive globally. “Building a knowledge economy requires strong foundations and we count on our industry partners to help us in these efforts,” said Navracsics.

Moedas said that the new €315 billion investment plan announced last week by EC President Jean-Claude Juncker is the first sign that the EU is taking important steps to help boost private investment in R&D. This framework “will give companies the appetite to get into riskier, knowledge-based projects that create more growth”, he added.

Moedas said this programme will facilitate the growth of investments in the knowledge economy and it will be “increasing the firepower of Horizon 2020”.

The R&D gap between east and west

The pattern of R&D investment varied widely by country. Some EU member-states reported growth rates well above the world average - but 97 per cent of the EU’s private R&D investments were concentrated in only ten countries.

Helping the not-so-successful member-states to catch up with the R&D-intensive economies in Western Europe is a top priority, said Moedas.  “We can help low-performing countries to climb the ladder of innovation through Structural Funds and Horizon 2020 special mechanisms. We have the tools to bring these countries up to speed,” he added.

The EU Industrial R&D Investment Scoreboard

The study is published annually by the European Commission (DG Research and Innovation and DG Joint Research Centre). The 2014 Scoreboard is based on a sample of 2,500 companies. The research collects companies' key R&D and economic indicators corresponding to the companies' latest published accounts. It measures the total value of their global R&D investment financed with their own funds, irrespective of the location where the relevant R&D takes place.

Read the full report here

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