Global industrial companies ramp up R&D spending following Covid-19 shock
Research and development (R&D) spending from the world’s largest electrical, machinery and medical equipment companies has increased following the emergence of the pandemic, according to new research conducted by Capital Economics and Accenture.
The report, ‘R&D and Innovation across Industry’, showed that spending from 200 of the biggest global industrial companies on R&D grew by 17.5 per cent in the third quarter of 2021, compared with the same period a year earlier.
Digitisation was identified as the key focus of rising R&D efforts, particularly given the Covid-19 pandemic wreaking havoc in working arrangements, supply chains and demand patterns.
Software and data skills remain in high demand, with google searches for “software engineer jobs” rising fourfold since 2005.
For reference, this is a much faster pace than hardware engineers or even solicitors or accountants, where searches have not even doubled over this time period.
The rebound since mid-2020 and the importance of digitisation has led to rocketing spending levels in the electrical sector, where investment grew by over 25 per cent in third quarter.
Across a sample of the largest industrial firms, 1.6-11 per cent of revenue was invested in R&D.
It further revealed average global investment has been increasing at an annual pace of 3.6 per cent in the last five years, outpacing growth in the wider economy of 2.1 per cent.
Commenting on the findings, Thomas Rinn, Accenture’s global lead for industrials said: “Far from derailing investment in R&D, the pandemic has accelerated it. More firms across the industrial sector are recognising its direct correlation with higher production efficiency and elevated business agility. AI, cloud computing, digital twins and automation has skyrocketed across the sector, allowing businesses to respond quickly to disruption and changing demand to generate sustainable returns.”
The report also assessed the spending of a industrial companies across 12 countries over the seven year period between 2012 and 2019, revealing that Austria claimed the number one spot in the ranking, with France, Sweden and the US trailing closely behind, due to its high absolute R&D spend as a share of industry output.
The UK and Norway meanwhile, finished in the bottom two spots, with its whose R&D efforts are weaker in both absolute spending terms and research intensity.
UK industrial businesses spent $1.7bn on R&D in 2019, and around 80 per cent of this went to the machinery subsector, the highest share amongst our twelve countries. However, R&D intensity is comparably low.
The country’s R&D spend by industrial businesses as a share of gross value added from industry was 6.5 per cent in 2019 – aside from China and Italy, the ten remaining countries dedicated bigger shares.
Rinn concluded: “As Covid-19 continues to accelerate new social and economic trends, as well as radically impacting supply chains, it is vital that industrial firms continue to invest in R&D to stay ahead of the curve. Those that fail to do so risk being left behind.”