Growth in R&D spending by over 200 of the world’s largest electrical, machinery and medical equipment companies is on the rise.

Growth in R&D spending by over 200 of the world’s largest electrical, machinery and medical equipment companies has been on the rise since mid-2020, according to new research conducted by Capital Economics and Accenture. As a whole, industrial company spend on R&D grew by 17.5% in the third quarter of 2021 compared with the same period a year earlier. The rebound is particularly evident in the electrical sector, where spending grew by over 25% in Q3.

The findings confirm a trend of growing R&D investment. The report “R&D and Innovation across Industry”, also looks at the spending of a larger sample of industrial companies across 12 countries. This shows that R&D spend increased by over 35% in real terms between 2012-2019. On average global R&D investment has been growing at an annual pace of 3.6% in the 5 years to 2019, outpacing growth in the wider economy of 2.1%. Across a sample of the largest industrial firms, 1.6-11% of revenue was invested in R&D.

Austria claimed the number one spot in the ranking, thanks to its high absolute R&D spend as a share of industry output. France, Sweden and the US trailed closely behind. At the end of the ranking table was the UK and Norway, whose R&D efforts are weaker in both absolute spending terms and research intensity.

Digitisation was identified as the key focus of 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.

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.”

“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.”

Research Methodology

Capital Economics (commissioned by Accenture) conducted a series of analysis to assess the R&D spending activities of the industrial sectors of twelve countries. The research defined “Industry” as any business activity involving the manufacturing of products that generate, distribute and use electrical power; the manufacturing of machinery and equipment; and the manufacturing of irradiation, electromedical and electrotherapeutic equipment.

The twelve countries analysed were: China, Japan, Austria, Finland, France, Germany, Italy, Norway, Sweden, Switzerland, the United Kingdom, and the United States. R&D spend data was quantified as capital to cover gross assets (fixed and current) dedicated to R&D, paired with the expenditure on “R&D personnel” or labour employed for these purposes. The investment rankings for each country were calculated by three weighted indicators – Absolute R&D spend, R&D share of industry gross value added, Growth in R&D spend over the last 5 years.

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