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Ireland’s R&D spend needs to play catch-up with rest of EU

Ireland rated as a ‘strong innovator’ in EU, but there is still room for growth

Government spend on R&D in 2019 was just over €800 million, with close to €900 million allocated in 2020.

Figures from Eurostat for 2019 show that Ireland is one of just eight EU member states in which expenditure on R&D amounts to less than 1 per cent (0.78 per cent in the case of Ireland) of GDP. By contrast, expenditure on R&D in Sweden, Austria and Germany exceeds 3 per cent of GDP. The average expenditure on R&D across the EU in 2019 stood at 2.19 per cent.

Meanwhile, the European Commission (EC) published an Innovation Scorecard in 2020 which gave a very good summary of where Ireland sits compared to other countries in terms of R&D spend. It rates Ireland as a “strong innovator”, which is positive as it ranks the country just above the EU average. It leaves room for further growth if Ireland wishes to join those ranked as “innovation leaders” such as Denmark, Finland, the Netherlands and Sweden.

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Ireland is also 11th in global scientific ranking for overall quality of scientific research – this is a climb from a position of 48th just 13 years ago. “The R&D tax credit made a significant contribution to the increase, and has undoubtedly led to more innovation in Ireland and the location of high-paying jobs,” says John Burke, assistant tax manager, Mazars in Ireland.

Irish-owned companies

Almost 28,000 (27,855) people were employed in research/technical roles in 2019, 12,000 of these roles being in Irish-owned companies and 16,000 (15,955) in foreign-owned companies, he adds.

But as the Irish economy has seen tremendous growth over the past number of years, the investment in R&D has not been made at the same rate. This has resulted in Ireland lagging behind EU counterparts, with the Irish Government spend on R&D as a percentage of GDP being less than half the EU average, says Mark O’ Sullivan, partner, R&D Incentives at BDO.

“The 2020 EC survey demonstrates that while expenditure on R&D by government has been steadily increasing over the past number of years, we are falling behind in terms of innovation intensity when compared to other EU countries,” he says.

However, the spend in 2019 and 2020 represents levels not seen in over a decade, which is “extremely positive to see”, he adds.

Furthermore, enterprise expenditure in Ireland topped €3 billion in 2019, leading to a combined spend on R&D of over €4 billion.

This expenditure can be seen in pillar sectors of the economy such as medtech, pharma and technology.

Government agencies

Of the €800 million-plus of government spend on R&D, over half of this was spent through government agencies such as the IDA, Enterprise Ireland and Intertrade Ireland. There were constant announcements over the course of 2021 from these agencies regarding the expansion or set-up of new R&D functions in Ireland.

“The direct impact of this has been increased jobs in Ireland, as well as increased capacity for export opportunities from Ireland through these supports. This clearly has positive impacts on upstream and downstream enterprises engaging directly with these growing R&D enterprises, as well as contributing to the economy of the communities where they are based,” O’Sullivan says.

“Similar impacts can be seen as a result of the enterprise spend of over €4 billion, which is acting to further position Irish entities as valuable assets within their respective global organisations.

“The key challenges and opportunities that I see Ireland having in the coming years are to ensure we continue to bring through and make available high-calibre talent, keep our R&D grants and tax-credit regimes best-in-class globally, and continue to improve our position within the EU such that we are ranked as one of the top jurisdictions for R&D.”