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Europe losing out in race for tech R&D cash
Business must get spending or risk hurting the economy

By Jo Best

Published: Wednesday 20 July 2005

The growth rate for technology and science R&D in Europe has stalled and is fast approaching zero, according to the European Commission - and it's shaping up to be a threat to the continent's economy.

The Commission found that the growth rate for Europe's spend on research and development, as a percentage of GDP, has been dropping since the start of the decade and will soon reach zero.

The continent is already the poor R&D relation to the US and Japan, which in 2003 spent 2.59 per cent and 3.15 per cent of GDP on research, respectively. Europe spent just 1.93 per cent of its GDP on R&D in the same year.

Europe could well lose out to developing nation China if trends continue. While China has recently invested less of its GDP on science and tech R&D than Europe, its spend has been growing at a much faster pace. In 2003, China spent 1.31 per cent of its GDP on research but between 1997 and 2002, that percentage grew by 10 per cent.

If R&D investments for China and Europe continue to grow at the same rates, by 2010 both will be spending the same - 2.2 per cent of GDP - on R&D.

According to the EC, the reason for the continent's poor performance is European businesses' reluctance to put their hands in their pockets for R&D. In 2002, the private sector paid for around 55 per cent of all R&D. That share has since dropped and pales in comparison to the US' 63 per cent and Japan's 74 per cent.

A drop in foreign investment in the European Union is also contributing to the paucity of R&D cash, the EC said, as countries like the US are increasingly looking to invest in R&D in countries outside of Europe, such as China.

Europe is now also spending more in the US than the US is spending in the European Union, leading to a €2bn R&D imbalance in the States' favour.

European Commissioner for Science and Research Janez Potoènik warned that the R&D stagnation could have serious consequences for Europe's economy.

"We must heed this wake-up call. If the current trends continue, Europe will lose the opportunity to become a leading global knowledge-based economy," he said in a statement.