As 80% of businesses plan to increase R&D funding over next 3 years, there remains a €2.2 Billion+ gap in R&D funding across the economy.

Strengthening and deepening Research, Development, and Innovation (RD&I) capacity is essential to ensure the continued prosperity of Ireland’s innovation economy.

As the global economy becomes increasingly competitive, marked by rapid technological advancements, talent shortages, and evolving consumer preferences, the pathways to growth have become more challenging than ever before.

IRDG and KPMG carried out a survey on attitudes to Research and Innovation in Ireland, how Ireland compares to other countries, and what improvements can be made to maintain and enhance our performance.

Key Findings

1. Over the last 3 years, 67% of businesses conducting RD&I in Ireland increased their overall research and innovation spend and 80% of businesses expect to increase their RD&I investment over the next 3 years. Only 4% of businesses don’t expect their expenditure to increase over this period.

2. Lack of budget and difficulty recruiting key talent (identified by 48% and 46% of respondents respectively) are the biggest factors impacting companies’ ability to innovate.

3. Admin time related to grant drawdowns (46% of respondents) and the grant application process (39%) were identified as the biggest barriers stopping companies from applying for supports.

4. 58% of companies have between 1 and 10 people directly involved in RD&I in Ireland, 25% have 11-50 and 17% have 51 or more employees
directly involved in RD&I.

5. 64% of respondents indicated that state funding supports allowed them to conduct more R&D and 52% noted that the funding supported
more employment.

6. 69% of respondents feel that Ireland’s R&D grant and tax credit supports compare equally or favourably to other countries. 31% feel that the Irish system compares negatively to other jurisdictions.

7. 58% of multi national corporations (MNCs) responded that less than half of their R&D would take place in Ireland without the R&D Tax Credit.

8. According to survey respondents, the main factors Ireland needs to look at to remain competitive in the evolving international
landscape are; simplifying the claims process/reducing admin work (29%), increasing funding amounts/expanding eligibility criteria (15%), and improving access for Small and Medium Enterprises (SMEs) (9%).

9. In relation to improving supports for SMEs conducting RD&I, 35% of SMEs feel that increasing grants/funding, 21% indicated that
making the application/claims process easier and 13% feel that increasing education/training will significantly improve supports for SMEs.

10. 41% of companies are engaged in incremental innovation (Extension of products/services with existing customers), 34% engage in breakthrough innovation (Breakthrough product/market changing products/services) and 24% engage in disruptive innovation (Technology or new business model that disrupts the existing market).

11. 67% responded that developing new areas of business and new models is one of their key priorities.

12. 78% of respondents stated that they think a R&D Tax Credit of 50% would incentivise increased R&D of Green and Sustainable Technology.

Some Survey Insights

Recommendations

1. Increase Government spend on R&D to .8% of GNI* to match Innovation Leaders and set an explicit target of Business and Government spend (GERD) to reach 3% of GNI* over the next three years.

2. Amending the wording of section 766(1) (a) TCA 1997 to “wholly and exclusively for the purposes of R&D activities”, rather than “wholly and exclusively in the carrying on by it of R&D activities”, in order to align the definition of “expenditure on R&D” with the original policy intention. This amendment would also provide greater clarity and certainty to claimants of the relief with respect to qualifying costs.

3. An increase in the limits on the amount of allowable expenditure on outsourced activities to third parties to the greater of 25% of a company’s non-outsourced R&D expenditure or €250,000.

4. An increase in the rate of the relief to at least 35% for the first €1 million of qualifying R&D expenditure.

5. An increase in the R&D tax credit rate to 50% with respect to R&D carried out on green technologies to establish Ireland as a hub for green technology.

6. Introduce a grant to encourage innovation into green technology.

7. Introduce a super-deduction (e.g., 150%) for green technology.