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Research and Development

Innovation, a European asset to be valued

Innovation

Only seven EU Member States demonstrate above-average R&D expenditure in relation to their GDP. The gap between North and South persists

In 2020, only seven of the 27 EU Member States spent an above-average share of their GDP on research and development. With 3.5% of its wealth invested in R&D, Sweden comes first in the ranking. It is followed by Belgium, with 3.48%, Austria (3.2%), Germany (3.14%), Denmark (3.03%), Finland (2.94%) and France (2.35%). In the EU as a whole, this proportion amounts to 2.32%, according to provisional data from Eurostat.

In absolute terms, last year, R&D spending in the 27-member club decreased by 0.38%, from 311.894 billion euros in 2019 to 310.711 billion euros in 2020. The investments mainly benefited business, since more than a sixth of this amount was achieved by companies, compared to approximately 22% in higher education, 12% in public administration and 1% in NGOs. Regarding the origin of R&D spending in the EU, in 2020, 59% came from the private sector, 29% from public administrations and the remaining 12% from higher education and non-profit organisations.

The country having allocated the most resources from its state budget to research last year was Germany, with 2.16%. On the other hand, the 27 Member States spent altogether 694 euros per capita on R&D, with Denmark being the leader in this indicator, with 1,621 euros spent per capita.

Several indicators highlight the rift between the countries of northern and southern Europe.

France ranks among the top

Among the EU Member States whose R&D expenditure in relation to GDP exceeds the European average (2.32%), France is the country with the lowest proportion: 2.35%. However, last year, France increased its R&D investment by 1.5% and spent 1.11% of its state budget on R&D, a level comparable to that of Spain and Italy.

Germany, a driving force for innovation

Germany is one of the countries with the top R&D spending indicators. It is not only the EU country that devotes the largest share of its state budget to R&D, but it is also the fourth Member State in terms of the proportion of GDP invested in R&D (3.14%) and the fifth in terms of per capita expenditure (1,270 euros). However, the amount spent by Germany on R&D in 2020 has decreased by 4.03% compared to 2019, the most prominent decrease in the 27-member club.

In Spain, there is still a lot to accomplish

Although its share of GDP allocated to R&D has increased from 1.25% in 2019 to 1.41% in 2020, Spain just barely takes 16th place among EU countries.

“The increase of this indicator in Spain would be good news, if not for the fact that it is largely due to the decrease in the denominator, the GDP, and not so much due to the increase in the numerator (R&D spending), which, in turn, has increased by only 1.3% compared to 2019, with 15,768 million euros in 2020, compared to 15,572 million euros in 2019,” emphasises Guillermo Dorronsoro, expert economist in innovation management and member of ZABALA’s Executive Committee.

On the other hand, Spain allocates 1.6% of its state budget to R&D, one point less than Germany, and invests 332 euros per capita in R&D, barely 21 euros more than Portugal, 82 euros less than Italy and 473 euros less than France.

Portugal, less than 1% of the state budget

Among Spain’s immediate neighbours, Portugal is the country that has the most increased its spending in R&D, by 7.05%, followed by Cyprus (7.76%), Slovakia (8.03%) and Lithuania (17.69%). Similarly, with 1.6% of its wealth devoted to research and development, Portugal is well behind Germany and France, but slightly before Italy (1.53%) and Spain (1.41%).

Nevertheless, this data is not as satisfactory when considering per capita spending, since for each Portuguese, only 311 euros are dedicated to R&D, behind Spain (332 euros) and Italy (419 euros), and far behind France (805 euros) and Germany (1,270 euros). With 0.75% of its state budget allocated to R&D, Portugal is also one of the eight EU Member States that invests less than 1% of its total budget in R&D.

Italy, third in terms of absolute value

With €25,364 million invested in 2020, Italy ranks third in R&D spending in absolute terms, only surpassed by France (€54,231 million) and Germany (€105,596 million), according to Eurostat’s provisional data. However, last year in 2020, this amount was 3.41% less than in 2019.

In Italy, the share of GDP invested in R&D reaches 1.53%, which places Italy in 14th place among the 27 EU Member States. The share of the state budget that Italy spends on research, 1.1%, is very similar to that of Spain and France. In terms of R&D expenditure per capita, Italy, with 419 euros, is far behind France (805 euros), but close to Spain (332 euros).