Early indications for R&D spending in 2021 have proved much more positive than might have been expected — and it all bodes well for Canada’s economy. Richard Hoy, President of Catax Canada, assesses the latest Government data.
R&D is just one piece of the jigsaw puzzle when it comes to the wider Canadian economy but, since it plays a role in generating prosperity and jobs, it is a critical element.
But just as there isn’t a single part of the economy that Covid-19 didn’t impact in some way, it was feared the pandemic could have held back innovation too.
With that in mind, those of us who follow R&D investment with a keen eye held our breaths when the latest R&D figures were released.
This data provides the final tally for 2020 — and it’s good news, with R&D spending up 3.3% on 2019.
But much of the R&D work which took place in 2020 will have been long in the planning, even before the pandemic started. It means 2021’s figures are just as important, if not more so, for signalling whether business confidence has been hampered by the pandemic.
It seems we need not have worried.
Despite all the turbulence, the latest preliminary figures show in-house spending on R&D across industry in 2021 grew by 3.5% to reach $23.4billion. If this proves to be accurate, it would actually be an improvement from 2020.
Even more surprising is that the preliminary figures suggest that outsourced R&D is expected to grow in 2021 following two years of decline. If the early indications prove correct, R&D spending will surpass its previous peak set in 2018.
However, this growth is unlikely to be evenly distributed. Manufacturing is likely to see an overall decline while the fields of software engineering and technology continue to improve every year.
So why is this R&D data release so important?
For a start, it means businesses are still investing in innovation. Robust R&D activity in 2021 suggests companies bounced back quickly from the impact of Covid-19 and continued with much of their planned research and development activity. The Government is expecting to see continued support for R&D in 2022 too, which is another sign that businesses recognize the importance of innovation.
For more information about the tax incentives available to businesses, you can reach Richard Hoy at Richard.Hoy@catax.com.Statistics Canada – Industrial research and development, 2020 (actual), 2021 (preliminary) and 2022 (intentions)