Although spending on research and development (R&D) in the chemical and pharmaceutical industry is increasing, Germany is losing importance as a centre of innovation. According to the German Chemical Industry Association (VCI), the country suffers from structural problems such as excessive bureaucracy, excessively long approval procedures and a complicated system of project funding. At a press conference, the VCI called for a clear innovation strategy, the removal of bureaucratic hurdles, the promotion of real-world laboratories, the establishment of additional pilot and demonstration plants and increased support for STEM education.
Thomas Wessel, Chairman of the VCI Research Committee, says: ‘In other countries, costs are lower, public funding programmes are better and there is less bureaucracy. Although ‘Made in Germany’ is top for ideas, these ideas are ‘moneymakers’ abroad.’
German chemical industry invests heavily in research and development
According to VCI estimates, R&D expenditure in the chemical and pharmaceutical industry rose by 4% to around 15.5 billion euros in 2023. This growth was primarily driven by pharmaceutical research. In the chemical industry, however, R&D budgets came under scrutiny. ‘High costs at the location, a poor earnings situation and deteriorating innovation conditions are making it increasingly difficult to conduct research in Germany,’ explains Wessel. Nevertheless, the chemical-pharmaceutical industry is highly orientated towards innovation, as almost all companies conduct research. He also describes the increase in the number of R&D employees as a positive development: almost 46,000 employees work in the industry's research laboratories, which corresponds to almost 10% of the workforce.
However, the VCI research spokesman is concerned that the momentum of research budgets has slowed recently and that a reversal of this trend is not in sight. For the current year, the chemical industry association is therefore forecasting hardly any growth in domestic research budgets, but increasing investment abroad. According to a recent VCI survey, every third company that conducts research outside Germany intends to increase its R&D investments there. For 2024, the VCI expects an industry-wide R&D budget of 15.8 billion euros. That is an increase of 2%.
Germany remains at the forefront of international innovation
According to the VCI, the increasing interest of companies in research abroad clearly demonstrates the loss of importance of Germany as a centre of innovation. Germany is still the fourth-largest centre for chemical research, but its competitors are catching up. Excellent chemical research in basic, applied and industrial research is therefore of outstanding importance for the business location, for transformation and for overcoming current challenges: chemical and pharmaceutical patents, for example, contribute significantly to the UN's sustainability goals. In Germany, 71% of sustainability technology patents for clean water originate from chemical research. The figure is 63% for health and over 50% for climate protection.
Wessel: ‘Researchers at our universities, scientific institutes and in industry are making an effective contribution to solutions for the challenges of the future.’ He adds that cross-sector innovations in chemical research and industrial application are becoming increasingly important. This requires close proximity between the innovator and its customers in order to develop future products together with them, for example through new, modern materials, and to remain fit for the future.
Germany suffers as a centre of innovation
This makes it all the more important to strengthen the importance of Germany as a centre of innovation. It is true that Germany can certainly score points. These include, for example, an outstanding scientific landscape, top researchers and strong basic research. Wessel appeals to the traffic light coalition, saying that the characteristics of an attractive centre of innovation also include a comprehensive innovation strategy from a single source - from basic to applied and industrial research.
The industry is particularly disturbed by the diverse patchwork: ‘A new funding programme here, a new institute there - it's a patchwork quilt. This development is exacerbated by uncoordinated measures by the federal government and its departments.’ The federal government is also gambling away trust by once again massively cutting funding for battery research in the 2025 budget, for example, and is thus jeopardising Germany's competitiveness in this future technology. Technology development and research funding must go hand in hand. ‘Acting according to the budget situation and party political needs is counterproductive,’ emphasises Wessel.
VCI calls for a reduction in bureaucracy and more focus on STEM education
The VCI research spokesman also calls for the reduction of excessive bureaucracy. The German application system forces companies into a corset and restricts their flexibility. ‘The red tape strangles companies and also deters foreign investors.’ According to Wessel, bureaucracy is not only a nuisance, but also a massive cost factor. This is shown by the VCI survey: companies have to spend an estimated 5% of their turnover on filling out forms. ‘Some of this money would certainly be better invested in innovation,’ says Wessel.
In view of the global competition between innovation centres, the Chairman of the VCI Research Committee also argues that the funding landscape should be financed by a combination of state subsidies, tax measures, institutional and private venture capital. Pilot and demonstration plants as well as real laboratories should also be funded in order to close the transfer gap between basic and applied research. The shortage of skilled labour is also a concern. In order to train, attract and retain top talent, schools need better technical equipment in chemistry lessons, comparable educational standards, continuous STEM lessons and well-trained teachers who undergo continuous professional development.
Further information is available at www.vci.de.
