Horizon Europe Midterm Evaluation
2021-2023 Perspective of German industry
February 23, 2023
Horizon Europe Evaluation 2021-2023
Europe, its citizens, and companies alike have been massively affected by the Covid-19 pandemic as well as the economic and security-related implications of the Russian invasion of Ukraine. Based on public and private investments in technological innovation; its values, and the investment of huge amounts of public and private money, Europe has been able to demonstrate a huge degree of resilience and robustness. Nonetheless, the challenges we face today will augment in the months and years to come – not least due to climate change, geopolitical tensions and the green and digital transformation of society (“twin transition”). To fully reap the benefits of the green and digital transition as well as to tackle the crises ahead, research and innovation are paramount. The main instrument of EU research and innovation policy is the 9th European Framework Programme for Research and Innovation “Horizon Europe”.
Horizon Europe (HEU) is the world's largest publicly funded research and innovation programme with a budget of €95.4 billion for the period 2021-2027. The regulation was finally adopted in 2021, with the programme starting on April 1st, 2021. What makes HEU so unique is that it combines research and innovation instruments in one joint framework programme along the whole research and innovation chain – from basic research to innovation. HEU plays a constantly increasing role for German innovators and companies, be it large corporates, mid-Caps, SMEs, or Start-Ups. Furthermore, a high level of industry participation is essential to achieve Horizon Europe’s ambitious goals and to increase the EUs competitiveness and technological sovereignty.
The Federation of German Industries (BDI) has therefore contributed its expertise to the development and negotiation process of HEU from the very beginning with the experts from BDI’s member associations and from various German companies. Considering the upcoming HEU-midterm review, it is important to take stock of the first one and a half years of the programme and draw lessons for the second half – and finally also for the successor programme of HEU – namely Framework Programme 10 (FP 10).
General aspects
BDI generally welcomes the setup and the innovation instruments of Horizon Europe, be it the regular thematic calls on various topics in one of the six clusters of HEU-Pillar two (“Global challenges and European industrial competitiveness”); the missions, the partnerships, or the European Innovation Council (EIC) We also appreciate that HEU plays a more prominent role as an instrument in the EU’s industrial policy in general. While HEU is the central instrument of EU Research and Innovation Policy, it should be noted that there are other important instruments and policies, e.g. the European Research area (ERA), the Important Projects of Common European Interests (IPCEIs), regulatory sandboxes, and the Innovation Fund, which play an important role in EU research and innovation policy as well The European innovation ecosystem requires a viable interlinkage of HEU with all the above-mentioned instruments. In addition, it is paramount that research and innovation activities under HEU are also intertwined with other policy domains, be it digital initiatives (e.g. AI Act; Digital Market Act) or the Green Deal (e.g. the “Fitfor55package”).
1. Budget
A budget of 95 4 billion EUR for the time period from 2021-2027 seems to be quite substantial, especially in light of (public) funding constraints caused by the above-mentioned multiple crises Europe and the world are facing simultaneously. However, when taking a closer look at the vast range of (key enabling) technologies and topics that are supposed to be financed from this total amount, it paints a different picture. One example: for cluster four of HEU pillar two (Digital, Industry and Space) a total budget of 15 3 billion EUR is foreseen for seven years; meaning only 2 2 billion EUR is available for funding per annum. This is not much given the importance of the (digital) Key Enabling technologies and digital destinations to be supported in this cluster (e.g. AI, “world leading data and computing technologies”, quantum computing, etc.). A further point is exacerbating the problem: Recently, parts of the budget initially earmarked for Horizon Europe are reallocated to finance other EU priorities (e.g. the EU Chips Act). While German industry recognizes the importance of these new areas, we urge the European Commission, the European Parliament and EU Member States to finance investments in key technologies with fresh money.
2. German Industry participation in the programme
First available data regarding the success rate of German companies in HEU projects (e.g. the regular programme calls) from July 2022 are rather positive. Industry (meaning German companies with more than 250 employees) has a success rate of 25 4% and SMEs (meaning companies with less than 250 employees) has a success rate of 23.4%. Success rate here is defined that a project has been approved, contract negotiations have been conducted and project funds have been disbursed.
The success rate of German companies is rather good, also seen in comparison to the EU-27 average, where it is 21 7 %. Despite this overall positive picture, 788 projects proposed by German industry have been approved but could not get funding due to budgetary constraints. This means that four out of ten successfully evaluated German proposals did not get any money from Brussels due to lack of funding and oversubscription.
This is a big challenge as the respective companies have prepared good applications in terms of content and have invested a lot of human resources in the application process; but due to budgetary shortages, they have not received any funding Most likely, this will have negative repercussions on the willingness of companies to apply for HEU projects or other EU funded programmes in future.
Key demands
▪ HEU needs to secure attractive conditions for industry in the future, especially in terms of budget. Seeing forty percent of approved projects not receiving funding is deterring future industry participation.
▪ The HEU budget should not be used as a piggy bank to fund upcoming political initiatives –even if they are beneficial to ensure Europe’s long-term competitiveness, as this routes money away from the core instruments of HEU (joint projects industry and academia, etc.). This has been done in the last two years with several initiatives, e.g. the energy partnership with the Bill Gates Breakthrough Energy initiative, the new Health Emergency Preparedness and Response Authority (HERA), and the European Bauhaus; taking away several hundreds of million EUR from the HEU core programme. New initiatives need to be funded with new additional funding.
▪ Funding rate: we do not support the new move of the Commission to reduce the funding rates for industry in Innovation Actions from 70% to 60% for direct costs.
3. Rules for participation / lump sums / application process
The Model Grant Agreement (MGA) must be designed in such a way that is customary in the industry so that industry participants can benefit from HEU programmes. So far, only the final version of the Model Grant Agreement is available, but not the explanatory rules of the Annotated Model Grant Agreement. This creates uncertainty among industry participants regarding correct project accounting and subsequent legally compliant auditing of HEU projects.
Key demands
▪ When calculating average personnel costs, the customary approach should be accepted; in particular, the recognition of the customary business year also at the end of the accounting periods.
▪ In the planned expansion of lump sum projects, care should be taken to ensure that the simplification in connection with cost accounting practices do not lead to additional requirements and uncertainties in the proposal phase and during the project. Otherwise it may lead to increasing problems for industry in the project administration, and thus, making HEU less attractive for industry.
▪ Avoid short application / submission deadlines for projects; allow for more realistic timeframes which meet industry’s needs.
▪ Collecting all required details (scope, expected outcome or impact) are usually connected with a time intensive iteration process, which ends up in short timelines for project applications. Early publishing of non-detailed information (e.g. title of the call) could be of help to start the preparation of possible project application early.
▪ Mechanisms to increase participation of SMEs and Mid-Caps to research programmes need to be maintained in future programmes as well.
4. Partnerships
Public Private Partnerships (PPPs) in HEU represent a particularly efficient and goal-oriented form of cooperation between science, research and business for the EU's value creation and technological competitiveness. The legal basis (the so-called Single-Basic Act, SBA) of the institutionalised partnerships in HEU was adopted at the end of 2021. The programme start of the partnerships was at the beginning of 2022. BDI played a major role in ensuring that most important themes and partnerships were preserved and that the new structures also consider industry’s specific needs.
Key demands
▪ For the desired closer cooperation (synergies) between the different types of stakeholders in a partnership to succeed, it requires an extremely effective and uncomplicated implementation as well as management of partnerships that compensates for the additional complexity. This should be kept in mind for future generations of partnerships in the second half of HEU’s runtime.
▪ HEU regulation and partnerships should be flexible enough so that they can adapt to new (technology) trends and innovation. However, this should only go so far that it does not undermine the necessary volume and predictability needed to implement large-scale and long-term European projects.
▪ Avoid extensive KPI reporting for PPPs and cut further red tape and administrative burden of PPPs, e.g.:
- Timeline: adapt timeline (e.g. avoid hearings in the middle of the summer break)
- Synergies: set clear and realistic targets for the implementation of synergies across PPPs and with national programmes.
- Do not use the “exit clause” for secured PPPs and keep sectorial priorities for the second wave of partnerships from 2025 to 2027
5. Missions
The missions are one of the new central elements in HEU. In five different thematic fields (including oceans, climate protection and health), essential societal challenges are to be addressed and (technological) solutions are to be developed jointly by industry and research – involving as many stakeholders from society as possible. A high level of industry participation is an essential factor for success of the missions. The missions were launched at the beginning of 2022; they are complex projects that will run for many years. While the concept and intentions of missions are well understood and generally embraced by industry, their implementation and effects and impact seems fuzzier when compared to other formal and well framed actions – e.g. the partnerships. As the missions currently do not have their own dedicated budget, this might create competition and uncertainties for existing actions that have already committed to deliver to clear goals.
Key demands
▪ The mission boards and mission assemblies should communicate transparently and openly and thus involve all relevant stakeholders Above all, the mission boards and assemblies should include sufficient industry participants.
▪ German industry would appreciate if missions were set up on a test basis as regulatory sandboxes at EU level. One of the five HEU-missions should be designed as a "fast-track mission", with a clearly defined duration and concrete KPIs for its evaluation. Thereby, the concept of missions in EU research and innovation programmes can be evaluated and, if necessary, adapted for the future (i.e. the new Framework Programme) before the FP10 negotiations.
▪ The European Commission should define milestones with which one can better assess the success of the missions during the runtime of the programme.
▪ There should be an open process that ensures industry participation in defining future missions. Synergies and connections with funding programmes and partnerships should be made clearer and encouraged.
Imprint
Federation of German Industries e.V. (BDI) Breite Straße 29, 10178 Berlin, Germany
www.bdi.eu
T: +49 30 2028-1572
German Lobbyregister Number R000534
EU Transparency Number 1771817758-48
Editorial
Christian Rudelt
Senior Manager Digitalisation and Innovation
T: +49 30 2028-1572
c.rudelt@bdi.eu
Julius Hügle
Intern Digitalisation and Innovation
T: +49 30 2028-1752
j.huegle@bdi.eu
BDI document number: D1729
