In-house R&D spending by Canadian-based companies decline in tandem with troubles in oil and gas sector

For another indication of the slow, inexorable decline in Canadian industrial R&D, look no further than the latest data from Statistics Canada. In its annual report on industrial R&D characteristics, the collapse of oil and gas prices and resulting downturn in the sector is cited as a major contributor to the decline in in-house industrial R&D spending, which dropped 5.8% between 2014 and 2015 from $18.2 billion to $17.2 billion, with further declines anticipated in 2016 ($16.6 billion) and 2017 ($16.7 billion).

It’s a sharp contrast to 2013, when surging oil and gas R&D outlays helped boost overall in-house business R&D expenditures, capitalizing on high prices and surging demand, offsetting declines in R&D performance in Ontario’s manufacturing heartland.

The latest data also represent a significant deterioration from StatsCan’s previous projections on industrial R&D characteristics from 2017, when 2015 and 2016 totals were estimated to be $17.9 billion and $17.7 billion, respectively.

Capital in-house R&D also fell significantly from $1.3 billion to $1 billion in the same year-over-year period.

Interestingly, the number of personnel engaged in in-house industrial R&D inched up from 154,019 to 156,062 – an upward blip in what has historically been a gradual shrinkage in the industrial R&D workforce.

According to the latest data from Statistics Canada, “in-house industrial R&D by the oil and gas extraction industry fell 32.2%, from $1.3 billion in 2014 to $912 million in 2015, in tandem with lower crude oil prices”.

Also in 2015, manufacturing accounted for $6.2 billion in overall expenditures while services-related R&D continued to top the list with $9.5 billion in R&D outlays.

Foreign controlled firms also account for an increasing share of the total, inching up to $6.6 billion in 2015 from $6.3 billion in 2014.

As expected, the vast majority of in-house industrial R&D was dedicated to experimental development ($14.4 billion/83.9%), followed by applied research ($2.3 billion/14.4%) and basic research ($512 million/1.5%).

Ontario and Quebec continue to dominate the in-house R&D spending of companies in 2015 with 72.9% of the total (Ontario, 44.6%; Quebec, 28.3%).  Ontario’s share is up 0.6%, despite a 7% decrease in spending in the two provinces, reflecting the lower overall total.

Alberta ranked third with $1.8 billion, 16.4% year-over-year decline “in line with the reduced R&D spending observed in the oil and gas extraction, contract drilling and related services industry”.

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