VCI calls to modernise the innovation location Germany
Research budget of 11 billion euros in the German chemical industry in 2018
R&D spending of the industry reaches a new record high ++ Almost two thirds of chemical and pharma companies are engaged in innovation ++ R&D employment is stable at a high level (41,100 staff) ++ Digitalisation makes chemical/pharma research faster and more efficient ++ Buoyant tax revenues open up scope for fiscal R&D incentives.
In the present year 2018, the R&D spending of the German chemical-pharma-ceutical industry will reach for the first time the 11 billion euro mark, according to the forecast by Thomas Wessel (chairman of the VCI committee for research, science and education) at today’s press conference in Frankfurt. Back in 2017, the R&D budget went up to the then record total of 10.8 billion euros. That was an increase by 3 percent over the previous year 2016. Thus, there was the seventh consecutive rise in the industry’s funds for research and development.
Wessel: “We are relying not only on euros but also on bits and bytes. Digitalisation enables new ways to strengthen our innovation capability, for example, by systematically collecting large amounts of data.” Exponentially rising computing power means enormously faster research for new chemicals. For example, the currently available hardware can calculate a much greater variety of chemical reactions and product formulations than just five years ago. Wessel underlines the importance of digital development for research: “Also, artificial intelligence is much faster than humans in literature and patent searches for relevant sources. This helps efforts to focus on suitable approaches for solutions.”
In a comparison of industries, the chemical-pharmaceutical industry has the strongest innovation orientation. 63 percent of all chemical and pharmaceutical companies are engaged in research. This puts the sector clearly above the average of German industry as a whole (28 percent).
With around 41,100 staff (2016) the employment situation in the chemical industry’s research laboratories is stable at a high level.
The companies dedicate annually over 5 percent of sales to research. The R&D intensity is only higher in vehicle construction and in the electrical industry.
Rising pressure on researchers and developers
Even though there are many strengthes in R&D, Wessel is particularly concerned about the international innovation pressure: “The competitive edge of the chemical research location Germany is getting smaller. Countries like the USA, China and other Asian nations make huge investments in research and shape favourable framework conditions for innovation. Thus, they are gaining competitive advan-tages.” Wessel calls upon the German grand coalition government “to take a courageous route for modernisation, as this is the only option for Germany to hold its own in the global race for innovation – competing with research super powers such as the USA, China or South Korea.”
Wessel sees fiscal incentives for R&D as a central instrument for improving the quality of Germany as an innovation location. According to the chairman, such incentives are crucial for research investments by the overall economy to rise to 3.5 percent. In this respect, Germany currently holds only rank 7 internationally. It emerges that almost all OECD countries use the mentioned incentives to drive forward research. Wessel points to the successful example of Austria where the share of R&D spending in GDP has gone up significantly. Foreign business groups contribute well over half of the industrial R&D expenditure in Austria. Wessel: “Germany could do with that kind of investments, too.” Fiscal incentives for research and development also have positive effects on the budget of the neighbouring country. The income tax payments from additionally hired researchers alone are sufficient to roughly cover half of Austria’s research promotion costs. In view of the buoyant tax revenues in Germany, Wessel emphasizes: “Our country can afford fiscal incentives for research.”
Furthermore, Wessel speaks for more support for private venture capital providers for start-ups. For example, tax loss carryforwards should be maintained without limitation in time or amount. Their lean organisational structures allow a high speed for start-ups in the innovation race.
From Wessel’s perspective, also an innovation check is needed to examine the impacts of existing and future legislation on the innovation strength. Above all, this holds true for the regulation of new technologies such as gene editing. In this connection, Wessel deplores the judgment of the European Court of Justice: “The ruling is not based on existing scientific facts but blocks the potential of Crispr/Cas and comparable methods.” Wessel wants more openness for new technologies so that innovations can really thrive in Germany. With this in mind, more consideration than before should be given to fact-based findings.
The VCI represents the politico-economic interests of around 1,700 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media.The VCI stands for over 90 percent of the chemical industry in Germany. In 2017 the German chemical industry realised sales of more than 195 billion euros and employed around 453,000 staff.