Thursday 17 January 2019

Lagging: Ireland below European average when it comes to research and development spending

THE BIG PICTURE

Gavin McLoughlin

Gavin McLoughlin

IRELAND lagged the European average for R&D spending in 2017, according to new figures from the EU's statistics agency.

Just 1.05pc of this country's GDP was spent on R&D, compared to an EU average of 2.07pc.

The figures account for R&D spending by business, government, educational institutions, and charities.

The disparity between Ireland and other countries will inevitably give rise to concerns about this country's future competitiveness.

It follows a number of high-profile warnings about R&D activity here.

Ireland's National Competitiveness Council recently said it was "concerned" about a decline in "research intensity" here, saying this posed a threat to productivity growth.

"There is further scope for establishing deeper linkages between the indigenous and foreign sectors as a means of boosting diffusion of knowledge and technology and therefore increasing the competitiveness and productivity of indigenous firms," it said.

The Council said "strong productivity" in a small number of companies was disguising under-performance elsewhere.

In addition, the former head of the IMF's operation in Dublin recently warned that Ireland needed to massively ramp up innovation capability, with R&D a major driver of innovation.

Ashoka Mody said the Irish economy needed to become more productive in order to insulate itself from changes to international tax rules. He pointed to OECD statistics that, similarly to the European figures, showed Ireland lagging on R&D spending.

"Ireland has a unique vent for growth through its relationships with US multinationals. And if that vent for growth goes away then Ireland is stuck," Mr Mody told an audience at the Institute of International and European Affairs.

"The one feature in which Ireland is very much like what used to be called the eurozone periphery is it's got a very low internal innovation capability.

"And growth will belong in the next half century to those who have internal innovation capacity," he added.

He said redressing the problem will require "extensive investment in education" and "creating an economic environment in which domestic companies invest 2pc-3pc of GDP" in R&D.

Ireland's figure of 1.05pc of GDP being spent on R&D was far below the strongest performers. Sweden came in at 3.33pc, Austria at 3.16pc, Denmark at 3.06pc and Germany at 3.02pc.

The so-called "leprechaun economics" factor, where multinational activities with no real impact on Ireland nevertheless boost GDP, may play a factor in explaining why Ireland's figure is so low.

But the EU statistics show that the contribution businesses make to R&D spending here is actually above the EU average at 71pc versus 66pc.

Irish Independent

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