Europe has long way to go in meeting Lisbon agenda R&D targets

Any remaining illusions that Europe might even come close to a key goal of the 2002 Lisbon agenda - to devote 3 per cent of GDP to research and development by 2010 - will disappear today with the publication of the International R&D Scoreboard.

The 1,000-company scoreboard, produced by the UK Department of Trade and Industry, is the most comprehensive global ranking of corporate R&D. It shows that European companies increased R&D spending by just 2 per cent in 2004-05, while their counterparts in the US and Asia achieved 7 per cent rises.

This year's figures continue a trend of European R&D underperformance. European companies invested no more in R&D in 2004-05 than they had on average over the previous four years, while companies in the US and Asia invested 12 per cent and 8 per cent more respectively than their four-year average.

Companies rather than governments are the main source of R&D - and the European Commission is counting on them to do more. According to the Commission, business financed 55.6 per cent of R&D in the EU in 2002, compared with 63.1 per cent in the US and 73.9 per cent in Japan. The target is for the private sector to finance two-thirds of EU R&D in 2010.

Janez Potocnik, European commissioner for science and research, warned: "If current trends continue, Europe will lose the opportunity to become a leading global knowledge-based economy." He said China, where R&D spending is increasing at a double-digit percentage rate, was set to overtake the EU in the percentage of GDP spent on R&D by 2010.

Mike Tubbs, R&D analyst at the DTI Innovation Group in London, said the Commission was beginning to take a more sophisticated approach to increasing research and innovation. "When the Lisbon strategy first came out, they imagined that they could increase R&D just by shouting at companies to spend more," he said.

Mr Tubbs said European policymakers were coming to realise that an important reason for the EU's poor performance lay in its "sector mix". Most European companies are not spending conspicuously less on R&D than competitors elsewhere in the same industry. But, compared with the US and Asia, Europe as a whole is under-represented in fast-growing R&D-intensive sectors such as IT hardware, software and electronics - and over-represented in profitable but less innovative areas such as food manufacturing, oil and utilities.

Even so Mr Potocnik and his colleagues in Brussels have ambitious plans to make a difference through the EU's Seventh Framework Programme, to run from 2007 to 2013. The big question now is how much money will be available for Framework Seven.

- (Financial Times Service)