Europe pledges catch-up on IT spending

Latest report shows EU lags behind competitors

Europe's ICT sector accounts for just 4.8 per cent of GDP, but consumes the single largest proportion of private R&D in the EU

The European Commission is determined to catch up with its global competitors in terms of investment in ICT R&D, despite the publication of a report yesterday showing that Europe still lags behind other areas in terms of private and public investment in the sector.

The report was carried out by experts in the European Commission's Joint Research Centre for the period 2002-07. The statistics show that the EU is lagging behind its main competitors (the US, Canada, Japan and South Korea) in terms of corporate R&D investments in the ICT sector.

R&D business investment is 2.5 times greater in the US (€83.8bn [£71.8bn] in purchasing power parity) than in the EU (€34.1bn).

This investment gap is identified as one problem that will be tackled by the forthcoming European Digital Agenda, one of seven flagship initiatives of the Europe 2020 strategy for smart, sustainable and inclusive growth.

"To help achieve our goal of investing three per cent of GDP in research and development, Europe needs to double its public spending on ICT R&D by 2020 and create the best conditions for the private sector to do the same," said digital agenda commissioner Neelie Kroes.

The report shows that half of R&D patents submitted by US-based inventors are in ICT technologies compared with 20 per cent by European researchers. However, lower R&D investment in the EU compared with the US does not necessarily mean that individual EU ICT companies invest less in R&D than their international competitors. The disparity is largely the result of the smaller size and slower growth rate of European ICT companies.

Europe's ICT sector accounts for just 4.8 per cent of GDP, but already consumes the single largest proportion of private R&D in the EU, with 25 per cent of total investment.

The UK remains the leader in ICT services, taking up 19 per cent of jobs, and Germany accounts for 27 per cent of employment in the ICT manufacturing sub-sectors.

These two countries, plus France, contributed to more than half of business R &D expenditure in ICT, and generated three out of four of all European patents in ICT technologies, with Germany in the lead, at almost 45 per cent. Finland, Germany, the Netherlands and Sweden are the only four member states whose number of ICT patent applications is similar to or above the US ratio of 110 patents for every million people in 2006. Finland and Sweden invest the largest amount of business R&D expenditure in ICT in relation to their GDP, above the US level.

But when it comes to public funding, EU governments fund a smaller share of ICT R&D in relation to total public funding for R&D compared with the US. In 2007, six per cent of total public funding for R&D in the EU (€5.3bn) went to the ICT sector, while it was close to nine per cent in the US (€10.4bn). Finland, Sweden and Spain were the countries with the highest levels of ICT public funding in relation to their GDP, close to the US level.

In the new EU Member States, largely in Eastern Europe, public R&D expenditure is still low in relation to GDP. However, spectacular increases in ICT manufacturing employment have occurred in Hungary (42 per cent) and the Czech Republic (44 per cent).

In 2009, the Commission committed to increase the annual funding available under the ICT part of its overall research programme from €1.1bn in 2010 to €1.7bn in 2013.