Coronavirus Crisis Slows Research Spending in German Industry

German companies in the manufacturing sector spent less on research and development in 2020, the year of the coronavirus. This is the result of a recent survey conducted by the ifo Institute, which indicated that research spending fell to 3.2 percent of sales, compared with 3.5 percent on average for the years 2016 to 2019. The automotive sector saw a particularly sharp drop, from 6.9 to 4.8 percent. Even the pharmaceutical industry cut back on research spending, from 7.2 to 7.0 percent of sales. “The decline was exacerbated by the fact that sales declined in many sectors at the same time,” says Klaus Wohlrabe, Head of Surveys at the ifo Institute. “Nevertheless, many companies continued to bank on research and development even during the crisis.”

“There is one bright spot: the percentage of companies that say they are doing research and development has increased overall, from 65.8 to 68.6 percent of all companies,” Wohlrabe adds. However, the proportion of employees working in that area has declined. Across all sectors, this figure fell from an average of 4.9 percent for the years 2016 to 2019 down to 4.2 percent in the past year. The frontrunner here is the pharmaceutical industry with 12.8 percent in 2020, albeit down from an average of 15.1 percent in previous years.

The overall figures conceal major differences among the individual sectors regarding the level and trend of their R&D expenditure. For example, the proportion of sales that the chemical industry devoted to research rose from 4.0 to 4.7 percent; in the textile trade, it rose from 2.1 to 4.8 percent. In mechanical engineering, by contrast, the proportion decreased from 4.2 to 4.1 percent.