Spain | R&D in the private sector: Next Generation EU (NGEU) funds are not enough

Research, development and innovation (R+D+I) are undoubtedly pending issues in Spain. Poor performance in this area has severe consequences for our economy. For example, the fact that there has been no growth in labor productivity in recent years and the resulting impact on wages.

Key points

• Key points:
• In 2019, total R&D expenditure in Spain amounted to 1.2% of GDP, which is significantly below the average level in the EU (2.1%). This difference is mainly due to the contribution from the private sector, which has been stalled at around 0.7% of GDP for a decade, which is half the European average.
• Our estimates indicate that if the contribution from companies in Spain was proportional to that of its German counterparts, investment in R&D would be more than double what it is today. Sectoral composition only accounts for 12% of the difference in R&D in comparison to Germany, whereas 33% of the difference results from business size.
• The difficulties that SMEs face when it comes to innovation also limit their ability to grow and make them less productive. To break this vicious cycle, it is essential to reform corporate regulations and public funding for R&D, as the current structure poses many obstacles to business growth.
• While it is good news that the recently approved General Budgets include an 80% increase in R&D items compared to the previous year, there is a risk that these resources will not reach their destination.
• The next few years are crucial for Spain to be able to take advantage of the extraordinary resources the NGEU has to offer in order to progress in the field of innovation, as we face an ongoing automation of work, climate change and the digital transformation.

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