NEW YORK (GenomeWeb News) – Investment bank Jefferies today issued a report saying the budgets of the largest Western European Union funding sources for government-backed research could increase by 5 percent in 2012 despite weakness in the larger macroeconomic environment there.
The report from analyst Jon Wood looks at the budget proposals for the EU Commission, France, Germany, Spain, and the UK and says that for 2012 government-backed, life science-related research funding would increase "essentially in line with rates typical of normal macroeconomic periods, but up from an estimated +3 percent trajectory in 2011."
EU government/academic end markets make up about 8 percent of the life science research supply space's composite revenue stream, he added.
Wood cautioned that his estimates are preliminary and the analysis "remains a work in progress," due to the decentralized nature of the funding mechanisms in the region, "disclosure inadequacies, and obvious language barriers. … However, at a minimum, our work should shed light on the current budgetary outlooks for investors to monitor over the coming months and allow for a more accurate and swift view into [fiscal year 2012] EU government research budget levels as such details are finalized over the coming periods," he said.
His analysis is most optimistic about the EU Commission, for which Wood estimates the aggregate scientific research budget to increase 13 percent, or €900 million ($1.24 billion), to €7.64 billion ($10.53 billion) in 2012. The increase "emphasizes the Commission's continued support of research activities under the [Seventh] Research Framework program," the EU's main scientific research funding instrument, Wood said.
For Germany, he estimated government-sponsored scientific research would get a 10 percent boost in 2012 to €13.07 billion from €11.88 billion in 2011, under the current draft budget. Germany is of particular interest because that country is the largest source of government-backed research funding in Western Europe, making up about 30 percent of total funding in the region, Wood said.
In particular, two programs that account for three-fourths of aggregate research funding in Germany — the Competitiveness in Science & Innovation program and the Research for Innovation & High Tech Strategy program — could see funding levels increase 17 percent in 2012.
Meanwhile, Wood said that funding in the UK is anticipated to be flat for 2012. He said the outlook is "predicated on its four-year spending outlook provided in October 2010 and consistent with recommendations outlined by" UK Chancellor of the Exchequer George Osborne in recent public forums.
A year ago, Prime Minister David Cameron froze scientific research funding for four years, while Osborne has signaled his support for the life sciences during the past year, including unveiling earlier this year a planned $161 million investment in life science facilities for 2011.
The latest UK budget outlook calls for research funding to remain at about £4.6 billion ($7.27 billion) through fiscal 2014, Wood said, adding that an updated FY 2012 budget is expected in the coming weeks.
His expectations for Spain and France are the gloomiest. Details about Spain's 2012 budget have yet to be made public, but based on aggregate budget proposals outlined by the country's Finance Minister in June, Wood anticipates the budget for the Ministry of Science and Innovation to decline 3.5 percent to €5.57 billion.
"However, such an estimate could prove conservative, in our view, considering total research funding fell only 3.5 percent in 2011, despite a 7 percent decline in Spain's total budget," he said.
Research funding in France is also expected to retreat, by .7 percent to €10.12 billion in 2012. Total funding for education and research is expected to rise 1.5 percent, but funding for university research is anticipated to decrease by 2 percent under France's current draft budget. Multidisciplinary scientific and technological research is expected to stay flat year over year, Wood said.
In the US, National Institutes of Health funding for 2012 may not become clear until mid-December "at the earliest." The House Appropriations Committee called for a 3.3 percent increase to NIH's budget in its recently submitted FY 2012 budget, while a Senate sub-committee passed a plan to trim the NIH budget by .6 percent.
Wood called the developments "encouraging" and an improvement over an expected cut of between 2 percent and 3 percent to NIH's 2012 budget, but he added that US academic/government end markets "will remain challenging until lawmakers solidify the fate of NIH-related agency monies" for 2012 and 2013.