Public R&D Spending in Germany Continues to Rise

Between 2005 and 2015, public spending on research and development (R&D) in Germany has seen a nominal increase of around 50 per cent. In 2015, federal and state R&D expenditure in the research and business sector amounted to 25.08 billion euros. This increase, however, is not sufficient to meet the target set by the German government, which hoped to see the share of public R&D spending reach 1.15 per cent of the GDP by 2025. These are the findings of a recent study carried out by the Centre for European Economic Research (ZEW) in Mannheim on behalf of the Commission of Experts for Research and Innovation (EFI).

Since 2005, the additional costs associated with R&D expenditure have been largely covered by the government. The 43.9 per cent increase in costs for the federal government has been much higher than the additional costs for the individual federal states (12.2 per cent). In 2015, the federal government contributed 59.4 per cent (14.90 billion euros) of the total funding volume of 25.08 billion euros, while the state governments accounted for approximately 40.6 per cent (10.18 billion euros).

In order to boost the country's R&D activity, the German government had committed itself to spending one per cent of the country’s GDP on research and development by 2010, and a total of 1.15 per cent by 2025. For 2016, policy-makers have announced a 15.8 billion euro increase in federal R&D spending. If the state governments do not contribute a larger share of R&D spending than the level recorded in 2015, the annual growth rate of R&D expenditure is likely to fall to 0.84 per cent of Germany’s GDP.

"This development is mainly driven by the target set by the German government with the aim of increasing R&D investment to 3 per cent of the GPD by 2010, and to 3.5 per cent by 2025. In this context, the private sector will have to account for approximately two thirds of total R&D investment," explains Christian Rammer, a project head in ZEW's Research Department "Economics of Innovation and Industrial Dynamics". "In order to meet the target percentage in 2025, public spending on R&D will have to increase significantly."

Public R&D funding is mainly used for research at universities

When it comes to the distribution of public funding, the concentration of R&D expenditure in Germany has changed little over the past 25 years. The largest share of public investments in R&D is injected into university research (39 per cent in 2015). Defence-related research was the only sector which recorded a decrease in public funding. Since 1991, the share of public spending allocated to the defence sector has decreased considerably (-11.1 per cent), falling to 3.1 per cent in 2015. With an average annual growth rate of 8.4 per cent, energy research as well as agricultural and nutritional research have recorded the strongest increase in public funds between 2005 and 2015.

In Germany there are a great number of measures aimed at promoting R&D and innovation operating on both a federal (mid-2016: 88 measures) and state level (mid-2016: 199 measures). These assistance measures are currently being implemented by a total of 101 different organisations. Due to this vast number of funding options, the funding system is often perceived as a "funding maze." Despite efforts to simplify the system, neither the number of assistance measures nor the number of organisations coordinating them has decreased in the past 15 years.