German R&D investment levels right on target

Germany invested more than three percent of its gross domestic product (GDP) in research and development (R&D) in 2017. According to a report by the Stifterverband, German companies and the government together spent nearly EUR 100 billion on R&D in 2017, or 3.03 percent of GDP.

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This puts Germany among the world's top-ranked countries in terms of investment in innovation. An organization established on the initiative of business and foundations, the Stifterverband is dedicated to consulting, networking, and promoting improvements in the fields of education, science and innovation. It reports that research spending alone in Germany grew by ten percent in 2017, or EUR 68.8 billion. This puts the growth rate for R&D investment higher than that of the economy over all.

Along with other industrial sectors, German healthcare – pharmaceuticals, medical technology, medical biotechnology, and digital health – made a significant contribution to this achievement. Germany's Federal Ministry for Economic Affairs and Energy (BMWi) stated in a brochure that the healthcare industry is a main driver of economic growth. It calculates that healthcare spending accounted for just over 12 percent of GDP in 2018.

In terms of healthcare R&D, according to the BMWi, pharmaceutical research, including basic research at universities and scientific institutes, is a major player. The figures show more than 40 percent of R&D value creation, or about EUR 8.7 billion, is accounted for by the development of medicines for humans.

Meanwhile, the German Pharmaceutical Association (BPI) has reported that no other German industrial sector invests a greater share of its turnovers in R&D than pharmaceuticals. The country's Commission of Experts for Research and Innovation (EFI) estimates that the industry is devoting 14 percent of its turnovers on domestic R&D.

The government is well aware of innovation's contribution to keeping Germany's economy competitive and successful. In 2017, reports the Stifterverband, it spent EUR 30.5 billion on research, or nearly one percent of GDP. The country has furthermore announced plans to intensify its promotion of research by introducing tax breaks for companies' R&D outlays.

In May, the government agreed to introduce a program of tax relief for which all companies will be eligible, regardless of their size. What is more, the program is dedicated specifically to stimulate small and medium-sized enterprises (SME) to invest in R&D. The tax relief, says the government, will be disbursed as an allowance, even in the case of losses. This is particularly significant for start-ups that are not yet making profits. In addition, the allowance payments themselves will not be taxed.

Germany's Federal Minister of Education and Research Anja Karliczek said of the decision, " is an important signal in Germany and abroad that investing in research and development in Germany pays off. Tax relief to promote research has been agreed in the coalition accord. Now we will implement it to strengthen Germany as a location for research."