Measures to encourage spending on research and development in Budget 2026 have unlocked investment into the sector, according to a new KPMG report.
The budget enacted an increase to the research and development (R&D) tax credit by five percentage points to 35 per cent. The measure has spurred an increase in the number of companies planning to scale up their investment in the key area, the report says.
In May 45 per cent of businesses anticipated increasing their investment in R&D over the next 12 months, KPMG said. Now, 60 per cent are planning to invest more in developing new technology over the next year.
The Big Four accounting firm collected insights from 285 companies actively investing in research, development and innovation (RDI) activities across different sectors. The report was intended as a follow-up to the Irish Innovation Index report the firm published in May, shortly after the introduction of US import tariffs.
READ MORE
Investment in research, development and innovation is “critical for long-term economic growth and job creation across the country”, Ken Hardy, the head of KPMG’s research, development and innovation incentives practice, said on publication of the report.
He linked the surge in firms’ willingness to invest in R&D to the increase in the rate of the tax credit but warned that geopolitical challenges affecting international trade had seen confidence in the sector fall.
“We need to continue to improve the attractiveness of investing in RDI to maintain Ireland’s competitive position,” he said.
The survey also sought companies’ perspectives on the impact of an innovation tax credit. Almost three-quarters, 74 per cent, of those surveyed indicated that such a tax credit would lead to more innovation in Ireland. Seventy-two per cent suggested it would support the development of new products and services in the State.
Dermot Casey, the chief executive of Industry Research and Development Group (IRDG), a business-led body that represents more than 300 member companies, said innovation is the “difference between thriving and stagnating” for the economy.
He called for bravery in the face of challenging global economic conditions in supporting R&D.
The KPMG report also reflected on the widespread use of AI in the workplace, with 72 per cent of respondents saying it was either in use in work or would probably be over the next six months. The technology has boosted productivity, with nearly six in 10 – 59 per cent – of responding companies reporting higher productivity from its use.
Just 4 per cent of businesses reported that their adoption of AI had led to a reduction in graduate recruitment or entry-level roles.
