77% of Firms in Ireland Plan to Increase RDI Investment

Ireland’s Research, Development & Innovation (RDI) sector continues to drive growth and employment, but without easier access to funding it risks dependence on foreign technology and diminishing competitiveness, new research surveying almost 500 companies in Ireland has found.

The research found that 77% (-3% vs. 2023) 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% continuing to drive growth.

60% (+12% vs. 2023) of businesses cited a lack of funding as the primary barrier to increasing innovation, while 41% (+2% vs. 2023) of businesses identified the time-consuming nature of grant administration as a significant obstacle to RDI activities.

The Innovation Index, conducted annually by the Industry Research and Development Group (IRDG) and KPMG, captures the attitudes of domestic to large multinationals companies on the issue of RDI in Ireland.

The research found that 54% of companies employ between 1 and 10 people directly involved in RDI activities, 26% have 11-50 employees engaged, while 18% employ 51 or more.

Barriers to Growth

The Index, now in its second year, 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 80%.

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% of businesses surveyed in the research.

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% up from 29% in 2023), increasing funding amounts/expanding eligibility criteria (32%), and improving access for SMEs (9%).

The Index surveyed 496 companies, split between Irish owned (62%), US owned subsidiary (17%), foreign but not US owned subsidiary (12%), University / Hospital spin – out (4%) and others (5%). The number of survey respondents increased by almost 100 compared to last year.

Benchmarking Ireland’s RDI

The administrative burden is especially an issue for Irish companies, where 58% cited it as a difficulty in claiming RDI tax credits, compared to 31% of 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 78% of respondents believe a higher R&D tax credit rate would boost investment in green technologies.

51% of multinational corporations feel that Ireland’s RDI grants and R&D tax credit support compare equally or favourably to other countries. 13% feel that the Irish system compares negatively and 36% aren’t sure.

It was also noted that half of multinational corporations responded that 10% or less of their R&D would take place in Ireland without the R&D Tax Credit. 83% of the multinational respondents indicated that 50% or less of their R&D would be carried out in Ireland without the presence of the R&D tax credit.

Commenting on the findings, Dermot Casey, CEO of IRDG said: “The Innovation Index highlights the crucial role of Research, Development, and Innovation (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.”