The Government of Ireland is putting together a new enterprise strategy called Enterprise 2035, which is described ‘as a long-term ambition for enterprise growth and job creation over the coming decade’.
To help develop their strategy, they’ve opened a public consultation on the preparation of Enterprise 2035.
As specialists in supporting businesses of all sizes with innovation funding and growth, we welcome the opportunity to respond to this consultation.
Responses to questions
What should Ireland’s enterprise economy look like in 2035?
We want to see home-grown Irish enterprises thriving across all of Ireland. Even with strong economic growth, Ireland will still be vulnerable if that growth disproportionally comes from large multinational expansion in Dublin alone.
A government study on post-pandemic employment growth found that, in the immediate years following the pandemic, employment growth came from every region of Ireland. These regional gains were seen in high-paying sectors that are crucial for economic growth, including the Professional, Scientific, and Technology sector, along with ICT.
For Ireland’s enterprise economy to be truly successful in 2035, we need to build on that progress and see greater regionalisation across the country. Remote and hybrid working arrangements were noted as potential contributors to regional employment growth, but they do not provide a strong enough foundation for continued regional success. The particular concern is that, as more employers encourage staff back into the workplace for four or five days a week, some of the progress we saw after COVID will be reversed, with high-value jobs becoming centralised again to such an extent that growth across the rest of the country suffers.
There is, of course, a balance to be struck here. We welcome investment in Dublin, but we need to take steps to protect and build on the progress made across our regions. We need a targeted strategy for 2035 to boost long-term growth across Ireland, incentivising regional investment so more high-skilled jobs and home-grown businesses can develop outside of just one central area.
How should Ireland strengthen enterprise resilience?
Ireland’s SME sector has the potential to become a stronger backbone of our economy, including contributing a greater share of corporation tax and exports. We see this as a clear pathway towards reducing our reliance on multinational businesses and building home-grown resilience to protect our economy and safeguard skilled employment.
Germany’s Mittelstand is a strong example of an SME policy to aspire to. Mittelstand has strengthened enterprise resilience thanks to a large base of specialised businesses that export internationally rather than relying overwhelmingly on a relatively small number of very large multinationals (58% of jobs in Germany are created by SMEs and 44% of companies export their goods). Crucially, as part of the policy’s design, these SMEs are based across all of Germany, including small towns, not just one centralised location so that all regions can benefit.
Germany strongly encourages and supports SMEs to aim for long-term success, creating a different mindset around growth and ownership. In Ireland, too many start-ups never progress to scale-up or enterprise size because acquisition is often seen as the only realistic pathway to growth. Irish start-ups have huge opportunities in the decade ahead, particularly in sectors such as mechanical engineering and construction, driven by growth in data centres. Still, more needs to be done to support non-acquisition-led growth. In the vein of Mittelstand, rather than building startups primarily with acquisition or a quick exit in mind, the emphasis needs to be on developing strong, independent companies that can continue to grow as Irish-owned enterprises.
How should enterprise policy support the adoption of artificial intelligence and automation?
R&D Tax Credits will naturally play an integral role in helping businesses develop new AI-powered technologies, but the scheme is in desperate need of modernisation. Specifically, the scope of qualifying activity must be widened to include areas such as AI large language model development, as well as disciplines like pure mathematics and quantum modelling, which are fundamental for developing the advanced software systems and algorithmic models needed for AI and intelligent automation breakthroughs.
Beyond this, industry needs clearer government guidance and practical support on how to adopt AI and automation. Key industries like agriculture, construction, engineering and manufacturing need to see industrially applicable use cases for adopting AI and automation. Ireland should also examine how other countries, such as the UK, have taken a proactive approach by offering free government-backed webinars and other online resources for industry, explaining how to adopt AI and automation.
There is also a case for looking at how the tax system can encourage investment in these technologies. Just as Accelerated Capital Allowances encourage investment in energy-saving technology, similar allowances could be considered for automation and AI expenditure.
How can Ireland strengthen innovation across enterprises of all sizes?
We believe that both the R&D Tax Credits scheme and R&D Grants in Ireland need reform to reduce the administrative burden on SMEs. While Ireland’s R&D incentives are generous, we know from our own experience of working with businesses of all sizes that many find the processes to be administratively onerous and complex.
One way to fix this would be to align allowable expenditure across both R&D Tax Credits and Irish innovation grant schemes, so that it is easier to apply for both together. Companies can currently receive both grant funding and R&D Tax Credits, a lucrative combination with huge benefits for SMEs, so it makes sense to align the allowable expenditure criteria and expand eligible grant costs to match R&D Tax Credits (within state aid guidelines).
Other areas to consider include doubling the current subcontracting cap for R&D Tax Credits. Currently, the subcontracting rules are 15% of qualifying R&D expenditure or €100,000, whichever is greater. We believe this limit should be doubled because it is far too restrictive. For example, the ICT industry is already a major driver of innovation, and its role will only grow as AI continues to roll out. Yet it relies heavily on subcontractors.
We also want to see Revenue reach out more proactively to the SME community, which has traditionally been hesitant to claim tax incentives for fear of burdensome scrutiny. Revenue needs to reassure these businesses by offering clearer guidance on qualifying R&D expenditure and showing how generous the scheme’s financial benefits can be. For example, industry-specific case studies could help SMEs understand what qualifying R&D looks like.
How can Ireland become a leading location for the commercialisation of new technologies?
Closer links between academia and industry are needed to boost the commercialisation of new technologies. By connecting researchers with enterprise and strengthening the pathways from discovery to real-world commercial application, more promising ideas can move beyond just the initial research stage.
Research Ireland’s recently published strategy is a welcome step forward in this respect, with its focus on strengthening connections between academia, enterprise, public policy, and society.
How should enterprise policy respond to changing global trade and investment patterns?
The global trade and investment environment has become challenging for every country. Not just because of the rise of protectionism and global conflicts, but also because of the disruption caused by climate change. With volatility virtually everywhere you look, Ireland should leverage its political and economic stability to remain an attractive location for foreign investment.
Not only are we a stable place to do business, but we also have some uniquely beneficial characteristics as a country. Ireland effectively serves as a bridge between US, UK and European markets. At the same time, our relatively temperate climate could become an increasing advantage as other parts of Europe face more extreme weather conditions. Both factors will make us an even more attractive place for investment in the near future, but we must address clear challenges first to capitalise on these opportunities fully.
For example, we are far too reliant on global supply chains, which have exposed us to energy and supply shortages. The government should treat this as an opportunity to support local enterprises, offering support to businesses looking to reshore their supply chains and bring more manufacturing back to Ireland.
We also desperately need to invest in improving tangible infrastructure. Dublin is now one of the most congested cities in Europe, so significant investment is needed in public transport, as well as the wider infrastructure that businesses and regional communities depend on, including water, energy and housing. This would not only encourage greater foreign investment, but also support a strategy of regionalisation by making it easier for businesses and high-value jobs to grow outside of Dublin.