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Innovation Union Competitiveness Report 2011: Research and Development Countering the Recession

The economic crisis has hit business R&D investments hard. However, as part of a counter-cyclic effort, many European countries are maintaining or increasing their levels of public R&D funding

Despite the economic crisis, there was a positive continuity in public R&D funding trends in 2009 and 2010, with sustained investment rates in many Member States. Seventeen Member States were able to maintain or increase their R&D budgets in nominal terms in 2009 compared to 2008, and only seven Member States decreased their R&D budgets over the same period6. In 2010, sixteen Member States planned to increase their R&D budgets. However, the preliminary data available shows that, relative to GDP, R&D budgets decreased in more countries in 2010 than in 2009 and this trend seems to be maintained in 2011. These are worrying signs, since evidence from previous crises shows that maintaining public R&D funding during an economic downturn is key to ensuring a more rapid return to sustained economic growth.

While the crisis has had a stronger impact on private R&D investment than on public funding, R&D spending by firms headquartered in the EU fell in 2009 half less than that by US firms (-2.6 % and -5.1 % respectively). This impact was greater in the automotive and IT hardware sectors than in the electronic & electrical equipment and the health sector (which actually posted an increase in R&D investment in 2009). However, as a whole it is noticeable that due to intense competition based on investment in knowledge creation and innovation, private R&D investment proved to be relatively resilient in 2009, and even increased in Asia. This demonstrates the determination of the business sector to preserve R&D investments in times of crisis to maintain their competitiveness in the present globalisation context.

The challenge to invest more in knowledge remains a key priority even under the current tight budgetary constraints in Europe. Member States should, therefore, both consolidate public finances and safeguard the resources for future growth and competitiveness by investing in growth-enhancing policies, such as research, innovation and education.

Originally published on Europa