The EU’s innovation performance has improved

The latest figures from Eurostat, assessing the EU’s progress towards the EU2020 objective of spending 3% of gross domestic product (GDP) on R&D, show an improvement, despite the long years of austerity.

Following a relative stagnation of gross domestic expenditure on R&D at around 1.77% of GDP for the period 2004 to 2007, at the onset of the economic crisis, R&D intensity increased to 1.94% in 2009.

It has continued to grow marginally since 2011, reaching 2.02% in 2013. The reasons for the increase between 2007 and 2009 include GDP falling more rapidly than overall R&D expenditure and the actions taken by individual EU Member States to increase public R&D investment. In 2009 many Member States sustained nominal growth in public R&D expenditure to counter the impacts of the crisis on private investment.

As ever, there was a rather varied picture across the EU. In 2013 R&D expenditure ranged from 0.48% to 3.32%, with Northern European countries such as Finland and Sweden not only sharing a pattern of high expenditure, but also having the most ambitious national targets. In 2013, Denmark achieved its national target of 3% and Germany came very close to meeting its target.

Countries with lower R&D expenditure levels, below 1%, were mostly in Eastern and Southern Europe, for instance Romania, Bulgaria, Cyprus, Malta and Greece. Of these countries, Cyprus came closest to its national target. The financial crisis and its adverse impact on GDP growth in the following years, along with an increase in nominal government spending on R&D, led to an increase in R&D intensity in most Member States, with the exception of countries including Croatia, Luxembourg, Portugal, the UK and Sweden.

Germany has experienced the fastest growth, exceeding the EU average since 2011.

The analysis shows that the European Commission and individual Member States put R&D investment high on the agenda for combatting the economic crisis.

Private R&D investment remains the largest source of expenditure

Expenditure on R&D is split into four institutional sectors: government, corporate, higher education and the private non-profit sector. The two sectors with the highest expenditure on R&D in Europe have been the business enterprise sector, which made up 63.8% or €174.4 billion, and the higher education sector, which made up 23.2% or €63.4 billion of total R&D expenditure in 2013.

At a more modest 12.2% or €33.4 billion, the government still plays an important role, especially in terms of the long-term stability of R&D expenditure. Meanwhile, the impact of the private non-profit sector is negligible, accounting for less than 1% of the total, or €2.3 billion.