The U.K. has not yet published figures for 2004, but for the last few years it's been hovering just below the E.U. average of 1.9 percent, less than half of it privately funded.
(This is one area where Malta is setting a poor example, with R&D spending at just 0.29 percent of GDP, and most of that funded by the government.)
The effects of R&D spending by companies and countries are harder to measure. The European Commission has just published the 2005 EU Industrial R&D Investment Scoreboard, which compares the performance of the top 700 R&D investors based in the E.U. with the top 700 investors based elsewhere. A preliminary analysis ranking the 200 or so IT and telecommunications companies included in the survey by the ratio of R&D spending to net sales, and by the ratio of net profit to net sales, shows no obvious link between the two: none of the top ten companies for profitability are among the top ten for R&D spending, nor are the poorest spenders among the companies with the worst profitability. Of course, there can be a significant lag between when a company begins spending on R&D, and when it reaps the fruits: this kind of simplistic ranking can only work in an industry where companies have been investing at the same rates for a decade or more so in the technologies they are now selling.
If today's profits are no guide to the effectiveness of today's R&D programs, how else can we measure innovation? One way is to look at the number of patents awarded for new processes and technologies, the more immediate fruits of researchers' labors.
When it comes to judging Europe's IT industry, though, there are some flaws with this measure, as much of the innovation is in software. The patentability of software is still something of a gray area in Europe, following the European Parliament's rejection in July of a proposed directive on Computer-Implemented Inventions.
Nevertheless, researchers are finding plenty of scope for patenting inventions in the fields of computing and electronic communications techniques, though. Between 2000 and 2004, the number of European patents awarded in those fields by the European Patent Office (EPO) almost doubled, from 2,819 to 5,615. Of all the European countries, Germany won the most, with 741 IT patents. Second was France, with 466. Finland received 288, the U.K. 238 and Sweden 221.
However, European countries are but small players in the European patent game. In 2004, the European Patent Office granted 1,749 IT patents to U.S. applicants, and 1,192 to Japan. Those two countries together accounted for almost two-thirds of the European IT patents awarded in 2000, although by 2004 this proportion had slipped -- to just over half.
The German Federal Ministry of Education and Research notes in a report on Germany's Technology Performance in 2005 that patent awards for information and communication technologies are slowing in Sweden, the U.K., the U.S. and Japan, although Finland seems not to have been touched by this slump. Germany's patent applications have not, traditionally, been in such cutting-edge fields, although the country is increasingly moving in this direction, as this is where there is the greatest opportunity for global growth, the Ministry notes.
For this growth potential to be fulfilled there must be more investment in broadband communications infrastructure, the Ministry notes.
There's plenty of work to do: while Denmark had broadband penetration of around 18 percent at the end of 2004, and Finland, Sweden and Norway hovered around 15 percent, according to IDC report published in June, the figure was nearer 10 percent for France and the U.K., and less still for Germany.
Admittedly, France has deployed a lot of broadband connections in 2005, and the rankings could change -- but that just goes to show that trying to measure the most IT-savvy country in Europe is like trying to hit a moving target.
Nancy Gohring, in Dublin, and Jeremy Kirk, in London, contributed to this report.