R&D spending is set to decline in Canada for the third year in a row. Statistics Canada estimates that total R&D expenditures in 2015 will decline $221 million or 0.7%, with the largest drop registered by business. Companies estimate their cumulative performance of R&D will decline $415 million or 2.6% to $15.5 billion — well off their recent high-water mark of $16.9 billion in 2011.
Business funding of R&D is set to fare even worse, declining 2.8% in 2015 to $14 billion — the lowest level since 2005.
What's prompting the precipitous drop in business R&D is difficult to ascertain. The plunge in oil prices has almost certainly had a negative impact on R&D spending by the oil and gas sector in Alberta, Saskatchewan and Newfoundland, but a provincial breakdown of the data is not available beyond 2013.
The two (relative) sectoral bright spots for 2015 are the higher education sector and federal government. Their spending and performance R&D is set to increase by modest amounts, helping to keep the overall decline for the year below 1%.
However, when examined in 2007 constant dollars, the picture worsens considerably. Performance and funding of business and government R&D stands at multi-year lows. Business funding of R&D is dropping to $11.9 billion in 2014 (the most recent year for which data are available), while federal funding stands at just $2.3 billion.
Spending by the not-for-profit sector is also set to decline by 2.6% to $158 million, but as the chart to the right shows, its spending tends to vary year-to-year. On the other hand, R&D funding by not-for-profit organizations is holding steady and is at an all-time high of $1.2 billion.
When examined by provinces and territories, Ontario and Quebec remain Canada's dominant players, although that dominance has slipped over the past several years. In 2007, Ontario enjoyed a 46.8% share which has dwindled to 44% as cuts rippled through the manufacturing sector. Quebec's share dropped marginally over the same period from 26.5% to 26.2%.
Resource-rich Alberta and British Columbia increased their shares over the same period. BC inched up from 9.4% to a 9.6% share, while Alberta increased its share of the total from 9.1% to 11.3%.
The data call into question federal (and provincial) policies whereby increasing support for higher education R&D — often targeted and aligned with business needs, particularly in the resource sectors — has yet to have a statistically significant impact on boosting business R&D performance.
For the oil and gas sector, international pricing, demand, ease of delivery and regulation appear to trump current policies and incentives.
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