• H2020
• Policy & Research

The economic downturn has had a prolonged and detrimental impact on research and innovation investment in the EU. Ahead of the next framework programme, the UK Parliament’s House of Lords spoke to businesses and academics about their concerns and expectations for Horizon 2020. Baroness O’Cathain is chair of the Sub-Committee on Internal Market, Infrastructure and Employment and began by outlining the impact of the global financial crisis.

To what extent has the economic crisis had a detrimental impact on RDI investment in the EU?

The EU’s Innovation Union Scoreboard 2013, published in March, confirmed the evidence we received in our inquiry that the economic crisis has had a detrimental impact on RDI investment. The scoreboard noted that the convergence in 2011 between weaker EU member states, in terms of RDI, and stronger member states has now come to a halt. Since the launch of the Innovation Union in 2010, the innovation index has worsened in nine countries: a slight decline in United Kingdom (-0.2%) as well as Poland, Czech Republic, Hungary, Portugal, Romania, Greece and the most dramatic deterioration in Bulgaria (-18.7%) and Malta (-16.0%).

With a lower-than-expected budget for Horizon 2020, what impact will this have on long-term investment in RDI and the EU’s international competitiveness?

Our report urged the European Council and the European Parliament to increase the budget for the Horizon 2020 programme within the Multiannual Financial Framework (MFF) in order for the EU to remain internationally competitive in R&I. Although there are encouraging noises coming from the Irish Presidency of the Council of the European Union and the Parliament, we are still waiting for the MFF to be agreed. We argued in our report that if the Horizon 2020 budget cannot be increased, it should at least be maintained at the level agreed at the February 2013 Council meeting.

What are the committee’s key concerns regarding Horizon 2020, particularly the future participation of the private sector?

Private sector participation in EU-funded (RDI) programmes was a key issue in our report. We looked at the various stages of private sector involvement: from first hearing about or being consulted about the EU opportunities; going through the application process; complying with the monitoring and evaluation requirements; and applying for follow-on funding.

One of our biggest concerns was the bureaucracy and complexity involved in EU RDI programmes, which makes it difficult for SMEs to engage with them. We heard from a variety of different actors including those representing SMEs, large businesses, academia, etc., and the overwhelming feeling was that the time and resources necessary for involvement in these projects meant that for many SMEs, it simply wasn’t plausible to engage. Given that over 98% of businesses in Europe are SMEs, we were particularly troubled by this feedback and made various recommendations as to how this could be addressed.

We found that the European Commission broadly does a good job in consulting the private sector in the development of RDI programmes and we welcome their recent efforts to improve it. We did recommend, however, that the Commission should strengthen its efforts to consult representative organisations as a means of getting in touch with the private sector, especially in the health field. From a UK perspective, it will be important that the government, mainly the Department for Business, Innovation and Skills, the Technology Strategy Board, UK Trade and Investment and the network of Horizon 2020 National Contact Points, reiterate to UK businesses that EU-funded RDI programmes represent an excellent opportunity for collaboration and funding.

We emphasised that in order for the EU to compete with emerging economies, which have a significantly higher spend on R&I as a proportion of GDP, it should make ‘excellence’ the principle criterion when deciding where to allocate funding. RDI policy and project proposals must be based on scientific evidence, rather than political considerations.

To what extent can these concerns be remedied?

The concerns over bureaucracy and complexity creating barriers to private sector participation are not new. The Commission has taken note of these concerns and we supported the changes they have made towards simplification and urged them to make the simplicity of procedures and language a criterion for every new undertaking. We suggested that the Commission should take a closer look at introducing greater flexibility over the rules of participation for different proposals, to take account of the varying needs of the wide spectrum of EU RDI stakeholders. For example, the flexible funding options for the Clean Sky initiative have enabled a large number of SMEs to take part.

We were concerned about the current length of the time-to-grant of 331 days (as at June 2012). The RDI sector is a dynamic and fast-paced one and we heard evidence of UK SMEs experiencing financial planning and staffing difficulties because of delays in receiving funds. We commended the Commission’s undertaking to reduce this by 100 days, but we believe that the experience of the US Defence Advanced Research Projects Agency (DARPA), which has a time-to-grant period of between 150 and 180 days, shows that the time period could be further reduced.

The ‘Dedicated SME Instrument’ has potential in terms of avoiding an overly rigid thematic approach to calls for proposals, which can limit SMEs. However, the Commission should consult with SME representatives when developing the calls.

Investment in RDI is central to European growth in the aftermath of the financial crisis. We hope that in negotiations on the MFF, member states and the European institutions keep this at the front of their mind and ensure that Horizon 2020 is provided with the necessary budget for it to be successful in competing with the EU’s growing competition in the area of RDI.

Baroness Detta O’Cathain

EU Sub-Committee B – Internal Market, Infrastructure and Employment, House of Lords, UK Parliament