The data shows that the Government’s R&D tax credit directly drives new investment, as companies contend with global uncertainty, international tax changes and competitive pressures.
Industrial Research and Development Group (IRDG) and KPMG have released the 2026 Ireland Innovation Index, the fourth annual report that collects detailed responses from companies involved in innovation in Ireland.
This year’s findings show that, following a jump from 30pc to 35pc in the previous budget, the R&D tax credit has led to a significant boost in R&D activity. Almost 70pc of the 587 organizations that provided their data said they had increased their R&D spending over the past three years and 77pc expected to increase investment in the next three years.
58pc of businesses stated that they would apply an additional 5pc credit directly to existing R&D projects while another 57pc said they would support new R&D activity. About 40% of survey participants said the improved incentive would support them to hire or retain dedicated R&D staff.
IRDG and KPMG research also highlighted the role of tax credits in attraction and retention R&D activities and jobs in Irelandmore than half (54pc) of international donor companies say that without credit, 10pc or less of their R&D will take place in Ireland.
Competitive investment
The report also identified some challenges, for example, despite the R&D tax credit acting as a key pillar of Ireland’s competitiveness, supporting key investment decisions, many forms of modern innovation are outside the mainstream of science and technology, which are eligible jobs.
IRDG and KPMG noted that this often excludes innovation such as digital transformation, design-led design, improved process innovation and business model innovation.
As a result, 71pc of those surveyed said some innovation tax credit would enable innovation to take place in Ireland, while a corresponding 67pc believed it would support new product and service development.
The report also revealed a large participation gap between large businesses and small firms. SMEs were found to be twice as likely to be aware of available support, but not to use it. Those surveyed also remain significantly dissatisfied with the timing of R&D tax refunds, which creates some cash flow challenges for innovation-led small businesses.
The study said, “While Ireland has built a strong R&D support framework, the findings suggest that significant barriers remain for innovative companies, including SMEs, which the Government is keen to encourage.”
Commenting on the report, Dermot Casey, CEO of IRDG, said: “Ireland’s creative economy continues to show resilience and ambition despite global turmoil. R&D tax credit changes are working, 77 percent of the 587 companies surveyed plan to increase R&D spending in the next three years.
“But structural gaps remain. Public investment in R&D is half of the EU average. In non-R&D innovation strategies, Ireland ranks 26th out of 27 in the EU for design applications and retains trademarks. 71pc of companies are reclaiming the Innovation tax credit for AI, digital and design, areas where the current credit cannot reach.
“With 67pc now placing AI and disruptive technologies among their top priorities, up from 45pc two years ago, the case for new debt is urgent. Combined with the doubling of public R&D in three years, this investment will build long-term sustainability, competitiveness and growth.”
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