European investment

Britain’s current competitive advantage in many sectors is at risk of being wiped out by our global competitors who have increased spending in science to boost their economies. With business reliefs like the R&D tax credits and the education system under serious threat in Britain, it is hard to envisage how we are going to ‘innovate out of the recession’ as our government suggests we should. Leila Sattary investigates how Germany is investing in its research and education infrastructure and finds out whether we have good reason to worry about our global position.

Germany’s economy has been a relatively unbreakable rock while its European neighbours struggle with unimaginable debt and the risk of bankruptcy. A preference for saving above spending, a lower dependence on the housing market and a stable, old-fashioned banking system has allowed Germany to be a calming force through the crisis in the Eurozone. After much resistance in May 2010, Germany’s parliament approved a €148 billion rescue package to bail out struggling economies in Europe to strengthen the Euro. Germany has remained in a powerful position in world, and with a high level of investment in R&D; the country is now leading the way in green technologies.

Since industrialisation, Germany has grown into a true world power and driven global innovation. Germany is the world’s largest exporter, just ahead of China, and Europe’s largest economy – famously prospering in the car industry and globally recognised as the leading producer of renewable energy technologies.

The British Isles are ideal for wind and wave power solutions, yet German companies, with their superior technologies, are developing these sites on British coasts. Leading German power company, RWE, have been awarded a €2 billion contract ‘Gwynt y Môr’ (Welsh for Sea wind) to develop wind power in Wales. Where was the UK while Germany has been leading a second industrial revolution in renewable technologies?

Germany has also heavily invested in the computer chip industry. ‘Silicon Saxony’ in the Eastern German state of Saxony is an innovation hub of microelectronics companies surrounded by top universities and technical colleges. Despite Silicon Saxony’s success, most companies have a reliance on export and have seen a significant drop in demand during the recession. Some companies have even been refusing an almost sacred responsibility in Germany to take on apprentices in recent months. It seems that not even the world-leaders in their sectors have escaped the economic downturn.

However, the German government’s reaction is very different to what we are experiencing in the UK. Germany has truly put science and education at the centre of their plans for economic recovery. The German government has recently announced plans to increase their budget for education and research by €12 billion by 2013 including €800 million to support growing student numbers and excellence in research and innovation.

Meanwhile, with the little money left for science in the UK, our government has been investigating the German ‘Fraunhofer Institute’ model to emulate German success in innovation. Fraunhofer Institutes are well established in Germany to undertake applied research to directly benefit the economy and society. Cambridge venture capitalist, Dr Hermann Hauser, has recommended that the UK set up a network of elite national technology and innovation centres based on this model .These so-called ‘Maxwell Centres’, named after eminent physicist James Clerk Maxwell, have been approved and will be developed by the Technology Strategy Board although it remains to be seen whether they survive the Comprehensive Spending Review.

So should we be worried about our global position? Probably, but all is not lost – Germany has not got everything right. Unemployment has been an issue in Germany for many years and the threat of losing one’s job forces talented people abroad. For example, in German Universities, only a very small minority of academic staff gain permanent contracts. Even very senior lecturers are usually on short term contracts. This lack of job security is a significant factor in Germany’s world leading academics moving to the UK or USA.

Until we are sure of how budget cuts will affect our R&D and universities it is difficult to predict how our global position may change in the coming years. Watch this space...