Report finds Europe lagging behind US in investment

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The UK and other European nations are falling behind US economic growth because they are failing to invest in research & development, education, and information technology.

New research released by The Work Foundation has found that investment by European countries in the “knowledge economy” has actually increased by less than 0.1% as a share of GDP [between 1994 and 2004]; in the US, the investment as a percentage of GDP is considerably higher, at 2.7%.

In a statement released last week, it is claimed that: “Those nations that have invested most in “knowledge” ““ for example in research and development, information and communications technology, and higher education ““ have tended to enjoy relatively better economic dynamism”.

“But the continent has not matched the US in terms of economic growth and productivity largely because it has not invested as much in its knowledge base and may be suffering a slowdown in technological progress as a result”.

The report published last week also found that the Lisbon 2000 EU Strategy Council set a target of 3% of GDP to be spent on investment in “knowledge”. However, this has been blasted as “unrealistic” in light of spending levels that have equated to less than 0.1% over a ten-year period. A new revised figure of 2.5% by the year 2015 is “ambitious yet achievable”.

Ian Brinkley, director of the Knowledge Economy Programme at The Work Foundation, said: “As the Lisbon Agenda recognised, knowledge is critical to the economic destiny of the EU, and the continent is now well on the path to being a knowledge economy both in terms of GDP from its knowledge industries and in terms of employment in knowledge work”.

According to the report, “Europe has particular strength in knowledge-based services. Employment increased by 31 per cent between 1995 and 2005 in knowledge-based services ““ twice as fast as in “non-knowledge services”. Business services and communications jobs grew by 54.5 per cent”.

Further, “employment in knowledge based industries in the US is less than in the Nordic countries, the UK and the Netherlands. The US has about 38 per cent of its workers in knowledge economy jobs”; in the UK, Denmark and Finland, 50% of workers are employed in the “knowledge” industry.

Mr Brinkley continued: “Where it falls down is that it has simply failed to invest enough. The priority must now be for policy makers to encourage organisations ““ especially private sector organisations ““ to invest much more in knowledge in the future”.

“The continent’s technological progress is slowing down: that is precisely the wrong direction to be headed as knowledge rises in importance”.

Vijay Pattni.

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