The EU is facing a serious backlog when it comes to investments in research and development. This is the opinion of the Danish Association of Engineers, IDA, which points out in a new analysis that the EU only spends two percent of GDP in the area, while both China and the US invested close to three percent in 2023. Investments in the EU have also been flat over the past decade, while global competitors have been ramping up.
Chief economist at IDA, Anders Overvad, warns that Europe's productivity and competitiveness are at risk if strong efforts are not made.
- Investments in research and development are the entire foundation for future competitiveness and growth. If the EU does not succeed in increasing investments, it risks being left behind, while other economies continue to run with the accelerator at full throttle. The hottest topics of conversation among European heads of state about European security, strategic autonomy and digital sovereignty will therefore quickly appear as empty talk if there is no action behind the words, he says in a press release.
IDA proposes that the EU raise the target for research and innovation to four percent of GDP in 2035 and implement a capital markets union to create better access to risk capital. The association believes that the EU's financial system today is characterized by caution and low-risk savings, and that countries with large pension assets in particular should invest more in innovation projects.
- The USA is currently far ahead of the EU when it comes to creating large risk capital bases, and this is hitting development in Europe doubly hard, says Anders Overvad.
The lack of access to capital is forcing many European companies to attract investors outside the EU in the scale-up phase. This often means that the head office moves out of Europe – and thus the value creation follows.
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