Ontario's manufacturing sector hit hard as industrial R&D shows modest 2009 increase

Marginal overall gain

The manufacturing sector's share of overall industrial R&D spending continues its precipitous slide in 2009, dropping from a 68% share in 2000 to just 52% according to the latest data from Statistics Canada. The finding was captured through a survey revealing that Canadian industrial R&D outlays have yet to recover from the technology meltdown early in the decade and will likely fall even further as companies ratchet back during the current recession.

In 2009, total R&D spending is projected to inch up to $16.146 billion from $15.98 billion in 2008 (The 2008 total has been substantially revised downward from the previous annual survey when it was projected to reach $16.32 billion).

When measured in constant dollars, industrial R&D appears to be in slow decline, even though the previous survey showed a dramatic increase in the number of firms performing R&D (R$, April 16/09).

The slump in manufacturing R&D has hit Ontario hard, with expenditures declining 8.9% between 2003 and 2007 (the last year for which a provincial breakdown is available). Between 2006 and 2007, industrial R&D spending in the province dropped $320 million to $7.5 billion (manufacturing R&D declined from $4.9 billion in 2008 to $4.7 billion in 2009). When measured in constant 2002 dollars, Ontario's 2007 industrial R&D output was down a whopping $876 million from a high of $7.45 billion in 2005, a decline of 11.8%

In contrast, companies in Quebec increased their spending by $144 million to $4.7 billion. Spending dropped marginally in Alberta, Saskatchewan and Newfoundland, with modest gains in the remaining provinces including British Columbia which increased 7.9% to $1.74 billion.

The latest StatsCan survey of industrial R&D was in the field between August/08 (prior to the onset of the recession) and March/09.

For the fifth year in a row, the information and cultural industries sector was the highest spending industrial sector with outlays of $1.73 billion, relegating the once mighty communications equipment sector to second-place status (see chart). The 2009 performance of the latter is unknown because for the first time, StatsCan suppressed its R&D expenditures. With the demise of Nortel Networks Corp, it's almost certain to be below estimated 2008 levels of $1.6 billion.

StatsCan's strict enforcement of the confidentiality requirements of the Statistics Act has laid waste to industrial R&D data. Of the 45 sub-sectors tracked, data from 10 have been suppressed for 2009.

While the manufacturing R&D has been heavily hit, industries engaged in information and communications technology R&D have weathered the tech downturn well, recovering from a 2007 dip to register a 2.5% annual increase this year for a total of $6.2 billion.

Services R&D is also showing staying power, managing a 3.2% increase in 2009 to $6.8 billion.

In the resources sector, a 2.2% increase in oil and gas R&D to $459 million indicates that falling oil prices have not yet had a negative impact.

R&D spending on utilities, electric power and construction are all unknown as the data have been suppressed.

While it's too early to determine the impact of the recession on personnel working in industrial R&D, the data up to 2007 show small but steady increases. R&D personnel between 2005 and 2007 increased 3.9% to 147,600. Professionals accounted for 86,368 while technicians totalled 61,231. Employees with master's and doctorates experienced small declines.

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