Private sector and government decrease spending on R&D, only higher education increases it

Dow Jones +16.21 24,196.85 S&P 500 -2.75 2,627.57 Malta featured among the EU laggards in a Eurostat feature on R&D intensity this week, with Malta coming in with the fourth lowest intensity in the EU.

In 2016, the highest R&D intensities were recorded in Sweden (3.25%) and Austria (3.09%), both with R&D expenditure above 3% of GDP. They were closely followed by Germany (2.94%), Denmark (2.87%) and Finland (2.75%).

Belgium (2.49%), France (2.22% in 2015), the Netherlands (2.03%) and Slovenia (2.00%) registered R&D expenditure between 2.0% and 2.5% of GDP.

At the opposite end of the scale, ten Member States recorded a R&D intensity below 1%: Latvia (0.44%), Romania (0.48%), Cyprus (0.50%), Malta (0.61%), Lithuania (0.74%), Bulgaria (0.78%), Slovakia (0.79%), Croatia (0.84%), Poland (0.97%) and Greece (0.99%).

Over the last ten years, R&D intensity rose in twenty-two Member States, with the highest increases in Austria (from 2.36% in 2006 to 3.09% in 2016, or +0.73 percentage points - pp) and Belgium (+0.68 pp).

Conversely, R&D intensity decreased in six Member States and most strongly in Finland (from 3.34% in 2006 to 2.75% in 2016, or -0.59 pp) and Luxembourg (-0.43 pp).

R&D intensity in Malta, that is, R&D expenditure as a percentage of GDP, rose from 0.58 in 2006 to 0.61 in 2016.

In money terms this means that Malta spent €31 million in 2006 compared to €61 million in 2016.

The main sector in which R&D was performed in 2016 was the business enterprise sector in all Member States, except Cyprus, Latvia and Nasdaq +1.27 6,763.48 CAC 40 -20.79 5,353.00 Lithuania (where the higher education sector was the dominant performing sector).

The highest shares of R&D expenditure performed in the business sector were observed in Slovenia (76%), Hungary (74%), Bulgaria (73%), Ireland and Austria (both 71%), Belgium and Sweden (both 70%) as well as Germany (68%).

Over the last ten years, the share of R&D conducted in the business enterprise sector increased in twenty Member States, while it decreased in eight.

For the government sector, the highest shares were registered in Romania (33%), Latvia (32%) and Luxembourg (30%).

The highest shares of R&D conducted within the higher education sector were recorded in Lithuania and Portugal (both 45%), Latvia (44%) and Cyprus (42%). IBEX 35 -71.50 10,139.80 (R&D expenditure as % of GDP)

In the case of Malta, spending by the business enterprise decreased from 66% in 2006 to 63% in 2016.

Spending by government, never high in any case, decreased from 4% in 2006 to 1% in 2016.

It was only spending by higher education that rose, from 29% in 2006 to 35% in 2016.

In 2016, the Member States of the European Union spent all together over €300 billion on Research & Development.

The R&D intensity, i.e. R&D expenditure as a percentage of GDP, remained stable at 2.03% in 2016. Ten years ago (2006), R&D intensity was 1.76%.

With respect to other major economies, R&D intensity in the EU was much lower than in South Korea (4.23% in 2015), Japan (3.29% in 2015) and the United States (2.79% in 2015), while it was about the same level as in China (2.07% in 2015) and much higher than in Russia (1.10% in 2015) and Turkey (0.88% in 2015).

In order to provide a stimulus to the EU’s competitiveness, an increase by 2020 of the R&D intensity to 3% in the EU is one of the five headline targets of the Europe 2020 strategy.

The business enterprise sector continues to be the main sector in which R&D expenditure was spent, accounting for 65% of total R&D conducted in 2016, followed by the higher education sector (23%), the government sector (112%) and the private non-profit sector (1%).

R&D is a major driver of innovation, and R&D expenditure and intensity are two of the key indicators used to monitor resources devoted to science and technology worldwide.