Ireland lagging in global research race due to little public spending on R&D

Mark O’Sullivan, Partner, R&D Incentives, featured in Business Ireland Magazine, published by The Irish Times, to explore how the Government can support R&D incentives in Ireland.

Investment in research, development and innovation (RD&I) is now accepted as a key determinant of economic performance, yet Ireland remains in Europe’s second division when it comes to this hugely important benchmark.

The Department of Business, Enterprise and Innovation published the “Research and Development (R&D) Budget 2019-2020” report on January 20th, 2021. The report outlined that Ireland spent just over €4 billion in 2019 in gross expenditure on R&D, which includes all public and private R&D spend.

As a percentage of total Government expenditure, it has been at about 1 per cent since 2011 but has decreased slightly each year. In 2019, it was 0.92 per cent, which although a small percentage change, is a significant quantum in real terms. Countries with advanced economies like Denmark and Sweden typically invest two to three times this much. Ireland is currently fifth last out of 27 states.

In order to bridge the gap to some of the top innovators such as Denmark and Sweden, increased focus on collaboration within, and between, industry and academia is important.

“The European Commission has made specific reference to the strength of these ties in increasing innovation rankings of such jurisdictions. In practice, I have seen that administrative and IP ownership challenges can make such collaboration difficult but that it is ultimately possible to successfully deliver such collaborative efforts from Ireland,” Mark says.

“There are challenges in terms of attaining the talent needed in key sectors; however, our clients in the RD&I space are generally still looking to expand their efforts here in Ireland so there is clearly a good level of confidence that the talent is here and will be available to support ongoing RD&I,” he adds.

The Government has indeed faced a lot of challenges in a range of areas over the past two years and therefore it is understandable that the focus on RD&I and increasing investment in this space has not accelerated at the same rate as the overall economy, he says. “However, I feel that it is important that we now refocus efforts on supporting the next wave of RD&I, be that in our well-established sectors or in new areas such as AI and sustainability, so that we can once again position ourselves as one of the global leaders in the RD&I space.”.

However, he adds that the “uncertainty and changeable nature” regarding the administration of the tax credit has led in some cases to a diminished appetite to set up or expand RD&I operations in Ireland. “For example, I have had discussions with companies who feel that the ability to claim and successfully defend claims in other jurisdictions is more straightforward,” he concludes.

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Content adapted from Business Ireland Magazine, published by The Irish Times.

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