Over three-quarters (77 percent) of firms in Ireland plan to increase Research, Development & Innovation (RDI) investment but cite concerns over funding barriers, according to the Ireland’s Innovation Index report published by KPMG and the Industry Research and Development Group (IRDG).
Ireland’s RDI sector continues to drive growth and employment, but without easier access to funding it risks dependence on foreign technology and diminishing competitiveness, the research surveying almost 500 Irish companies has found.
The research found that 77 percent of businesses plan to increase RDI spending in response to challenges like AI and talent shortages, with the recent R&D tax credit increase to 30 percent continuing to drive growth.
Key findings
Lack of funding
However, it found that 6 in 10 businesses cited a lack of funding as the primary barrier to increasing innovation, while 41 percent identify the time-consuming nature of grant administration as the primary obstacle to RDI activities.
The Innovation Index, conducted annually by IRDG and KPMG, captures the attitudes of domestic to large multinationals companies on the issue of RDI in Ireland.
The research found that over half (54 percent) of companies employ between 1 and 10 people directly involved in RDI activities, 26 percent have 11-50 employees engaged, while 18 percent employ 51 or more.
Barriers to growth
The Index examines how Ireland compares to other countries in RDI and what improvements can be made to maintain and enhance the country’s performance. Ireland ranks 22nd on the Global Innovation Index, behind leading countries like Switzerland (1st), Sweden (2nd), the United States (3rd), the United Kingdom (4th), and the Netherlands (5th). Despite a lower government R&D budget, Ireland leads Europe in private sector R&D investment at percent.
RDI is a key driver of economic growth and is fundamental to tackling complex economic and social challenges including climate change, digitalisation, and public health.
The Index cites that to achieve the Government's “Impact 2030” goal of doubling business expenditure on RDI by 2030, funding availability will need to increase. To maintain and enhance its competitive edge, Ireland must prioritise streamlining RDI support processes, a need highlighted by 40 percent of businesses surveyed in the research.
Remaining competitive
The main factors Ireland needs to look at to remain competitive in the evolving international landscape are simplifying the claims process/reducing admin work (40 percent up from 29 percent in 2023), increasing funding amounts/expanding eligibility criteria (32 percent), and improving access for SMEs (9 percent).
Benchmarking Ireland's RDI
The administrative burden is especially an issue for Irish companies, where 58 percent cited it as a difficulty in claiming RDI tax credits, compared to 3 in 10 multinational companies.
Without significant investment in sustainability research and innovation, Ireland risks dependence on foreign technology, diminishing competitiveness, according to the research, which found that the majority (78 percent) believe a higher R&D tax credit rate would boost investment in green technologies.
Over half (51 percent) of multinational corporations feel that Ireland’s RDI grants and R&D tax credit support compare equally or favourably to other countries. 13 percent feel that the Irish system compares negatively and 36 percent aren’t sure.
It was also noted that half of multinational corporations responded that 10 percent or less of their R&D would take place in Ireland without the R&D Tax Credit. Most (83 percent) of the multinational respondents indicated that 50 percent or less of their R&D would be carried out in Ireland without the presence of the R&D tax credit.
Crucial role of RDI
Commenting on the findings, Dermot Casey, CEO of IRDG said: “The Innovation Index highlights the crucial role of RDI in shaping Ireland’s economic future. We must choose to create our own future, not rent someone else’s. By addressing the identified funding and administrative challenges, Ireland can fully unlock our innovation potential, secure sustainable employment and strengthen our economic future.”
Ken Hardy, Head of KPMG’s RDI Incentives Practice noted: “Investment in RDI is not just an answer for immediate innovation but a key factor for sustained economic growth and job creation across the country. Strengthening our RDI framework is crucial to maintaining Ireland's competitive edge.”
About the Innovation Index
The Innovation Index 2024 captures insights from 496 stakeholders, detailing strengths and areas for improvement in Ireland’s RDI sector. It is the IRDG and KPMG’s second annual examination of Ireland’s innovation landscape, following the Index’s inaugural launch in 2023.
The respondents, 62 percent of whom represent Irish-owned enterprises and 29 percent from foreign subsidiaries, reflect a diverse cross-section of the country’s innovation community. This feedback helps benchmark Ireland’s RDI capabilities against global standards and identifies areas to enhance the country’s competitive edge in a rapidly evolving climate.
Get in touch
For further information on Ireland's Innovation Index report, please contact Ken Hardy. We'd be delighted to hear from you.
Ken Hardy
Partner
KPMG in Ireland