Slumping business R&D pulls down Canada's spending for third consecutive year

Mark Henderson
September 24, 2015

Not-for-profit funding remains strong

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.

Ontario and Quebec continue dominance

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.

R$

R&D Spending by Region

Jurisdiction2012   2013   
Canada 32,707   31,972   
Newfoundland379   309   
Prince Edward Island 82   74   
Nova Scotia 536   531   
New Brunswick 288   282   
Quebec 8,285   8,391   
Ontario 14,677   14,081   
Manitoba 690   746   
Saskatchewan 702   715   
Alberta 3,773   3,609   
British Columbia 3,133   3,065   
Territories12   11   
National Capital Region, Quebec 54   67   
National Capital Region, Ontario 1,138   1,132   

R&D Spending Intentions

($ millions)
 Federal    Provincial    Business   Higher   Private   
YearGovt   Govt    Enterprise    Education    Non-Profit    Foreign   Total   
PERFORMING SECTOR   
20052,414   303   15,638   9,518   149   ...   28,022   
20062,496   332   16,474   9,625   152   ...   29,079   
20072,532   392   16,756   10,187   171   ...   30,038   
20082,599   402   16,664   10,927   179   ...   30,751   
20092,762   385   16,038   10,818   125   ...   30,129   
20103,007   360   15,803   11,249   135   ...   30,555   
20112,649   332   16,894   11,832   127   ...   31,834   
20122,555   348   16,700   12,953   151   ...   32,707   
20132,736   331   16,032   12,715   158   ...   31,972   
20142,602   326   15,877   12,860   160   ...   31,825   
20152,679   317   15,462   12,988   158   ...   31,604   
FUNDING SECTOR   
20055,242   1,359   13,836   4,341   784   2,460   28,022   
20065,214   1,468   14,884   4,435   827   2,252   29,079   
20075,482   1,472   14,778   4,574   953   2,780   30,038   
20085,709   1,552   15,210   5,055   1,015   2,211   30,751   
20095,951   1,657   14,618   4,824   944   2,131   30,129   
20106,467   1,697   14,347   4,970   1,068   2,001   30,355   
20116,220   1,788   15,586   5,193   1,153   1,891   31,834   
20126,054   2,053   15,403   6,146   1,191   1,854   32,707   
20136,186   1,877   14,600   6,240   1,167   1,897   31,972   
20146,087   1,883   14,445   6,311   1,180   1,914   31,825   
20156,199   1,885   14,042   6,374   1,191   1,907   31,604   

R&D Spending Intentions by Discipline

($ millions)
Science type 2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   
NSE *25,968   26,967   27,756   28,2 81   27,690   27,925   29,176   29,494   28,693   28,516   28,283   
SSH *2,054   2,113   2,282   2,470   2,439   2,630   2,659   3,213   3,279   3,309   3,322   
Total 28,022   29,079   30,038   30,751   30,129   30,555   31,834   32,707   31,972   31,825   31,604   
Source: Statistics Canada
* NSE - natural sciences and engineering; SSH - social sciences and humanities



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