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R&D funding falls in the budget for 2021

In the state budget for 2021, the total appropriations for research and development activities amount to EUR 2,416.8 million. The appropriations decrease by EUR 681.7 million from the previous year, which translates to a 22.0 per cent fall. The proportion of funds allocated to R&D activities of overall government spending exclusive of debt servicing is 3.8 per cent. The GDP share of public R&D funding is an estimated ¹⁾ 0,99 per cent in 2021.

Table 2. Central government R&D funding and its share in government expenditure in 2020 and 2021

	2020 Milj. €	2021 Milj. €	Change 2020–2021 Milj. €	Change 2020–2021 . %
Total R&D funding	3 098,5	2 416,8	-681,7	-22,0
Total government expenditure	68 750,0	64 197,0	-4 553,0	-6,6
Government expenditure excluding debt servicing	67 838,3	63 432,0	-4 406,3	-6,5
R&D funding share of government expenditure excluding debt servicing	4,6	3,8	..	..

1. R&D funding by administrative sector

Research and development activities are clearly financed most in the Ministry of Education and Culture, whose R&D funding in the budget for 2021 amounted to EUR 1,298.9 million. The research funding of the Ministry of Education and Culture corresponds to over one-half of the entire government R&D funding. The R&D appropriations of the administrative sector of the Ministry of Education and Culture decrease by EUR 38.9 million compared with the budget one year before. The R&D funding of the Ministry of Economic Affairs and Employment also falls, by EUR 637.7 million, as the R&D funding of Business Finland decreases from the high level in 2020. The R&D funding of the administrative sector of the Ministry of Economic Affairs and Employment corresponds to around 36 per cent of government R&D funding. The other administrative sectors account for a smaller share of central government R&D funding. Among other administrative sectors, R&D funding of the Ministry of Social Affairs and Health decreases by EUR 15.8 million in the budget for 2021 and that of the Ministry of Agriculture and Forestry grows by EUR 11.1 million.

The ministries that hand out most R&D funding, the Ministry of Education and Culture and the Ministry of Economic Affairs and Employment, are also the most R&D intensive ministries. Around 19 per cent of the Ministry of Education and Culture’s expenditure and about 23 per cent of the Ministry of Economic Affairs and Employment’s expenditure are directed at research and development activities. The Ministry of Finance and the Ministry of the Interior have the lowest R&D intensities.

2. R&D funding by organisation

The appropriations allocated to Business Finland’s R&D activities grew strongly in 2020 as a result of the pandemic caused by COVID-19. In total, the R&D appropriations of Business Finland in the state budget amounted to EUR 1,387.5 million in 2020, of which around EUR 740 million were paid out as subsidies and loans with disruptive circumstances status. In addition, not all outlays intended for disruption funding were translated into payments in 2020. In 2021, Business Finland's R&D funding is estimated to be EUR 740.4 million, which includes EUR 200 million of outlays due to the disruptive circumstances carried forward to 2021.

Figure 2. R&D funding of Business Finland/Tekes in 2014 to 2021 in the state budget

The R&D funding of universities grows in the budget for 2021 by EUR 33.6 million to EUR 724.0 million. The estimate of universities’ research and development funding for the current year is affected by the increased share of realised research expenditure in universities’ basic funding used in the calculations. The R&D funding of universities of applied sciences is EUR 80.7 million in the 2021 budget, which is around EUR eight million more than in last year’s budget. In the state budget for 2021, the R&D funding of the Academy of Finland amounts to EUR 449.0 million in total. The decrease in research funding of the Academy of Finland is EUR 75.8 million compared to 2020. EUR 21 million is directed at university level health research in university hospitals, which is on level with the previous budget. From 2020 onwards, part of the previous research funding of university hospitals is allocated to social work research, which is distributed on behalf of the Ministry of Social Affairs and Health to various actors. The R&D funding of central government research institutes and other government R&D funding remain in the budget for 2021 on level with the budget one year ago.

Among the organisations, universities and Business Finland have the largest shares of central government R&D funding. The share of R&D funding of both organisations of the entire government R&D funding is around 30 per cent. The Academy of Finland’s share is around 19 per cent. Central government research institutes receive a share of around nine per cent of the funding and the share of other funding is about eight per cent of the entire government R&D funding. The EUR 80.7 million R&D funding of universities of applied sciences corresponds to good three per cent of government R&D funding. One per cent of government R&D funding is directed to university hospitals.

3. R&D funding by socioeconomic objective

According to socioeconomic objective, most of government R&D funding is directed to universities’ research and development activities. In the budget for 2021, the next biggest objective category is industrial production and tsocioeconomic objectiveechnology, which includes research on industrial production and production methods, as well as technology development. The majority of the objective category is funding for Business Finland. The funding of general advancement of science decreases by around EUR 70 million, mainly due to a decrease in the Academy of Finland’s research appropriations. Investments in environmental protection research have increased in recent years and R&D funding allocated to environmental protection also increases by around EUR 14 million in the 2021 budget. In the 2021 budget, more R&D funding than in the year before is also allocated to research related to energy production (incl. different energy forms), storage, transmission, distribution and rationalisation of energy use.

4. Funding of international R&D

State budget R&D funding directed at international research organisations or international R&D programmes increases by almost EUR nine million to EUR 96.2 million. Most increases are seen in funding for Europe-wide R&D programmes between countries that are arranged, for example, within the framework of Horizon Europe 2020. In the budget for 2021, a total of EUR 68.3 million is allocated to Europe-wide R&D programmes between countries, which is EUR 18.7 million more than in the budget for the previous year. European international research organisations, such as CERN, the European Organization for Nuclear Research, receive EUR 19.9 million in research funding from the government budget in 2021. Around EUR 3.7 million are directed at bilateral or multilateral R&D programmes between the governments of EU countries. The remaining EUR 4.4 million are directed at other international players for projects that have no ERA (European Research Area) dimension.

5. Budget funding and external financing of central government research institutes

Budget funded R&D activities of central government research institutes

The total amount of R&D funding for central government research institutes ²⁾ from their administrative sectors’ budgets for 2021 is EUR 211.3 million. Central government research institutes’ budget funding remains on level with the previous year, increasing by around EUR one million. Budget funding for VTT, the Technical Research Centre of Finland, grows by EUR 4.9 million to EUR 95.9 million. The funding for the Technical Research Centre of Finland is influenced by the acquisition of a quantum computer, the construction of which started during 2020. The costs to central government of acquiring Finland's first quantum computer amount to EUR 20.7 million in total, which is divided over several years. Among other research institutes, budget funding for the Natural Resources Institute Finland grows by EUR 2.9 million to EUR 54.5 million.

Total research funding and EU funding of research institutes

In addition to budget appropriations, the R&D activities of research institutes are financed by external funding consisting of income from charged services, EU funding and funding from elsewhere than the institute's own budget classes. External funding mainly comes on a competitive basis from several sources and from both domestic public and private sectors and international sources.

Total R&D funding for research institutes (budget funding and external funding) is EUR 479.1 million in 2021. External funding for research institutes decreases by EUR 2.2 million from the previous year and amounts to EUR 267.8 million in total in 2021. The share of external funding of research institutes’ total funding is around 56 per cent. VTT, the Technical Research Centre of Finland, has the highest external funding of the research institutes, and in 2021 it amounts to EUR 147.4 million in total, which is around EUR 16 million less than one year earlier. The drop is due to a decrease in charged services. Research institutes estimate that they will receive EUR 63.2 million from the EU, which is EUR 0.8 million less than in 2020.

1) GDP 2021 forecast by the Ministry of Finance.
2) Incl. VTT Oy, a non-profit state enterprise with special tasks.

Source: Government R&D funding in the state budget, Statistics Finland

Inquiries: Heidi Pirkola 029 551 3246, tiede.teknologia@stat.fi

Head of Department in charge: Katri Kaaja

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Updated 25.2.2021