Germany widens R&D lead over US and UK

After more than a decade of federal spending increases, the country also looks set to overtake Japan on the proportion of GDP spent on innovation

May 17, 2020
Source: iStock

Germany is on track to devote 3.5 per cent of its gross domestic product (GDP) to research and development, pulling further ahead of the UK and US, and looks set to overtake Japan in the next five years on current trends, according to a new report.

In the global race to build a high-tech economy, Germany spent a record €105 billion (£93 billion) on R&D in 2018 − in part the fruits of a decade of rapid funding increases by the federal government.

In the mid-2000s, the country was spending about 2.5 per cent of its GDP on R&D, lagging slightly behind the US. 

But by 2017, it managed to hit a European Union-wide target of three per cent, three years ahead of schedule, according to a recently released biennial analysis of the country’s research position from the federal Ministry of Education and Research.

And for 2018, preliminary estimates put Germany’s R&D percentage even higher, at 3.13 per cent, although it still spends less than the US, China and Japan in absolute terms. 

Meanwhile, US R&D intensity has edged up only slightly since the mid-2000s, and stands at 2.8 per cent, according to the most recent figures. The UK trails far behind both, at 1.7 per cent, with barely any change since the start of the century.

“Germany is well on the way to achieving its goal of investing around 3.5 percent of gross domestic research and innovation in 2025,” said federal education and research minister Anja Karliczek, welcoming the report.

The analysis, Bundesbericht Forschung und Innovation 2020, released on 13 May, shows that R&D spending by the German federal government has more than doubled since 2000. It has introduced, for example, the country’s “Excellence Strategy”, designed to elevate the profile of an elite handful of universities and research clusters.

At the same time, since 2008, state-level expenditure has also swelled and German companies have increased their spending on internal R&D by more than half. Germany boasts six of the world’s top 30 companies by R&D spending – Volkswagen, Daimler, Robert Bosch, BMW, Siemens and Bayer – more than the rest of Europe combined, and second only to the US, which hosts 15.

The R&D percentage figure is closely watched by governments as a broad gauge of investment in future innovation and competitiveness.

The UK has a target to increase its R&D intensity to 2.4 per cent by 2027, for example. China has a target of 2.5 per cent by 2020; in 2017, it managed to hit 2.1 per cent, following big increases since 2000.

Nevertheless, high R&D intensity does not automatically mean big budgets for universities. In East Asia, a much greater proportion of R&D is done by companies than in Europe. In South Korea, for example, which leads the pack of major economies when it comes to R&D intensity, almost four-fifths of expenditure is corporate. The picture is similar in Japan and China.

Commenting on the report, Ms Karliczek said that a key future priority was to make Germany once again “the pharmacy of the world”, with a renewed focus on drug development.

And echoing the rhetoric of European Commission president Ursula von der Leyen, Ms Karliczek also stressed the need for European digital “technological sovereignty”.

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