A good year for R&D

By its nature, research and development is about what’s coming next. To take a quick look back, however, it’s fair to say the past 12 months have been good ones for the discipline.

Among the high water marks were the announcement of four new world-class Science Foundation Ireland (SFI) Research Centres, representing an investment of €74 million from the Department of Business, Enterprise and Innovation over the next six years, with a further investment of €40 million from industry.

The new centres address emerging areas of the economy, including advanced additive and smart manufacturing, neurological diseases and the bio-economy, and between them will directly support more than 650 highly-skilled researchers.

Moreover, they will engage in more than 80 collaborations with industry partners – both indigenous and foreign, large and small businesses.

SFI also announced funding for a fifth new research centre, FutureMilk, co-funded by the Department of Agriculture, Food and Marine.

This brings to 17 the number of SFI Research Centres here, the first 12 having signed collaborative research agreements with more than 300 industry partners to date, representing cumulative company commitments of more than €120 million, and having won €132 million from a range of international funding agencies, including competitive EU programmes such as Horizon 2020.

Such activities helped push Ireland to 11th place in global scientific rankings which, while it doesn’t have the headline-making power of breaching the top 10 – which Ireland achieved in 2016-2017– it is still a significant achievement.

Since their inception, the centres have seen active industry engagement from the multinational sector in Ireland, but what has been particularly marked over the past 12 months has been the growth in engagement of the indigenous business sector too, points out Prof Mark Ferguson, SFI’s director general.

And, of course, conducting world-class research creates a virtuous circle as it attracts world-class researchers to the country.

The past year has seen significant success on this front with, for example, the appointment of Prof Murray Hitzman, a world-leading economic geologist, as an SFI research professor at University College Dublin and as the new director of the Irish Centre for Research in Applied Geosciences (iCRAG). A major heavy hitter, he comes to Ireland following his role as associate director for Energy and Minerals at the US Geological Survey.

Right now, the biggest challenge the SFI faces is budgetary. “It’s a problem of success. I’m making the case for our budget to be increased, not because it has gone down but because right now we have all these opportunities for success that we need to capture,” says Prof Ferguson.

“We know from Ireland 2040 and Innovation 2020 that the Government is aligned behind us in terms of policy so we need to make that happen. Cheap labour or natural resources are not going to make Ireland rich, so we need to innovate and to do that we need to invest in our talent pipeline. We now have excellent projects, the system is working in terms of academic and industrial engagement and we need the vision and ambition to capitalise on this.”

There are good things happening on the commercial side too. Business Expenditure on Research and Development (BERD) is currently 1.3 per cent of GDP. Though this is slightly below the UK’s, and significantly below the 3 per cent of top performers such as Finland, overall spending is up.

Enterprise Ireland client companies spent more than €930 million on R&D last year, up €100 million on the previous year, which itself was up €100 million on the year before that.

If there is a challenge in relation to spend, here too it’s one of success: “As GDP goes up generally, the gap between where BERD is at as a percentage of GDP opens up,” says Gearóid Mooney, division manager of research and innovation with Enterprise Ireland.

“GDP is very healthy so it means we have to run faster to stand still. But if you leave the percentages out, and look only at the quantum, the amount of spending is up significantly, by around 12 per cent year on year.”

Companies are increasingly collaborating with the research system too. “It’s not deep research but the kind that helps them solve problems closer to market,” he says. To do it they are availing of a raft of EI supports, from innovation vouchers which give them €5,000 worth of third-level research to innovation partnerships worth up to €200,000. Such activity is up 45 per cent in the past four years.

More than that, “companies are also spending more on projects that are not subsidised, which is a very strong sign that the innovation message is getting through”, Mooney says.

Cheapest money

The other big contributor to commercial R&D here is the SME element of the EU’s Horizon 2020 initiative. What is atypical about this funding stream is that recipient businesses don’t need a partner to access it and it’s the cheapest money they will ever get, because they don’t need to pay it back. EI’s HPSUs have a 30 per cent success rate for applications, compared with an general success rate of 14 per cent.

“One of the best indicators of progress in R&D is the performance of the R&D tax credit,” says Ken Hardy, head of KPMG’s R&D Incentives practice.

“The RDTC was first introduced in 2004. In that year, 73 claims were made, with €70.5 million of RDTC incentives claimed by companies in Ireland. In 2015, that had risen to 1,534 claims made, with €708 million of RDTC incentives being provided.”

Another indicator is the increase in R&D expenditure in Ireland between 2006 and 2016 – from €2.217 billion to €3.243 billion, according to Eurostat.

"KPMG's own publication, Innovation Monitor 2017/2018, indicates that across Ireland, business of all sizes consider themselves to be innovators, with 88 per cent reporting that they are engaged in innovation, an increase of eight percentage points on last year," Hardy says.

Here too, the challenges arising are those of success: “The issues I hear KPMG clients raise time and time again is the lack of availability of suitably qualified R&D professionals – at a cost that can be sustained.”