Investment in research fails to support EU 'economic pillar'

The food and drink industry remains Europe's largest manufacturing sector, ahead of the automobile and chemical industries, with a turnover of euro 836bn in 2005, up 2.6% on 2004.

However, spending on research and development (R&D) in the EU was just 0.24% of output in 2004 - below that of its main competitors.

According to the latest report from the European confederation of food and drink industries (CIAA), the sector accounted for 13.6% of EU manufacturing turnover in 2005 and employed 3.8M people - down 1.5% on 2004 - but it was highly fractured, consisting of some 282,600 companies. France, Germany, Italy and the UK were the top producers.

The industry was a net exporter in 2005 with exports up 5.3% to euro 48bn, while imports were up 5.5% to euro 43bn, although its share of total EU exports to global markets was shrinking at 20%, down from 24% 10 years ago. Figures show that the US was by far the biggest food and drink trading partner, followed by Brazil, Switzerland and Russia.

Jean Martin, president of the CIAA, said: "The food and drink industry is one of the major pillars of the European economy. Europe's cultural diversity and its tradition are the foundation of the industry and a key asset to [its] further development."

On the downside, R&D spending as a percentage of output was lower than the US (0.35%), Australia (0.4%) and Japan (1.21%). The most innovative sectors were dairy, water and soft drinks; the least innovative were pasta, rice, alcohol, meat, ice cream and cereals.

Labour productivity and costs were also among the lowest of the EU's manufacturing industries at euro 40,900 and euro 24,800 per employee respectively. Only textile manufacture productivity and costs were lower.

UK and Irish consumers spent the least on food and non-alcoholic drink as a percentage of their household consumption, at less than 10%, while two of Europe's poorest countries, Lithuania and Latvia, spent the most, at around 25% each.