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Impact of Covid-19 on R&D expected to vary by country

Image: Kowit Lanchu, via Shutterstock

Public funding should stimulate private investment, reports say

Impacts of Covid-19 on private R&D spending are likely to vary among countries, depending on which industries predominate, according to a new report from the European Commission.

“The medium- to long-term effects of the crisis on private R&D investments may vary globally, according to the sectoral specialisation of economies,” Commission staff Lukas Borunsky, Ana Correia, Roberto Martino, Ruzica Rakic and Julien Ravet said in their report published on 16 July.

For example, the automobile industry, which has “suffered tremendously” from Covid-19 due to the difficulty of remote manufacture and its international supply chains, is one area where the EU dominates private R&D spending, they said.

By contrast, many digital technology companies, including giants based in the United States, have been less affected by the pandemic. Some have even grown their revenues thanks to the increase in remote working.

Meanwhile, a global “surge in research and innovation production in the health area (drug therapies, medical publications) can be observed since the beginning of the crisis”.

But the Commission estimates that total EU R&D spending could fall by about €25 billion in 2020 as a result of the impact of Covid-19 on GDP.

To soften that blow, public R&D investments must aim to trigger private spending, according to another Commission report.

Public investments “need to go hand in hand with policies and reforms that stimulate business” if an economic recovery is to be sustainable, said the report, published on 20 July.

As well as loosening private purse strings, attention should go into supporting R&D for environmentally sustainable technologies, the Commission said.

In general, government R&D for the recovery should pull EU member states closer together, focus on vulnerable demographics and industries, and build on societies’ ability to recover from future shocks.

Policymakers’ tools include lubricating the flow of researchers between industry and academia, making the launch of research-driven companies more appealing, and using knowledge transfer offices, the Commission said.