Return to growth drives trend to increased innovation

Return to growth drives trend to increased innovation

KPMG research highlights SMEs are missing opportunities to claim tax credits

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Ken Hardy, Partner and R&D Incentives Practice and Suzi Jarvis, founding Director of the Innovation Academy at UCD, at the launch of KPMG’s Innovation Monitor.

Ken Hardy, Partner and R&D Incentives Practice and Suzi Jarvis, founding Director of the Innovation Academy at UCD, at the launch of KPMG’s Innovation Monitor.

A new survey of 200 Irish business leaders by KPMG in conjunction with RED C Research has found high levels of confidence for innovation prospects among Irish-based businesses, with over 4 in 5 (84 per cent) either innovating or planning to do so.

The results are published in KPMG’s Innovation Monitor survey which assesses attitudes to innovation in Ireland and reveals that, coinciding with the end of the recession, 61 per cent of Irish businesses have become significantly more innovative. There has also been an increase in the number of those planning to innovate from 13 per cent to 23 per cent, year on year.

Reasons for Irish businesses deciding to innovate include:

  • 62% of respondents cite the availability of qualified in-house personnel;
  • 50% list grant funding as a key influencer;
  • 42% are innovating due to the R&D tax credit – the biggest factor for large companies;
  • 30% innovate based on the availability of bank lending (which is twice as important to SMEs as it is to large companies);
  • 86% say access to funding is important in innovation projects.

Innovation improving but complacency a danger

Commenting on the findings, Ken Hardy, Partner and Head of the R&D Incentives Practice at KPMG said: ‘The research reveals strong support for the existing Government’s backing for innovation but a lack of awareness of those supports among smaller companies in particular. Ireland is doing very well in innovation terms according to our latest survey but we must warn against complacency given the highly competitive international environment. The report highlights that Ireland benefits from inward investment tax policies, but that there is an equal need to focus on indigenous and smaller businesses.’

Large companies more positive about innovation

The survey also finds that large companies tend to be more positive about the innovation environment than SMEs, with only 16 per cent believing that innovation levels have declined or remained the same since Ireland’s emergence from recession. In contrast, 27 per cent of small businesses feel that Irish companies are less innovative or static when it comes to innovation.

US most innovative country

The report also highlights the continued perceived dominance of the United States as the world’s most innovation-friendly economy (37 per cent) whilst Ireland has moved from third to second place (13 per cent) with the UK moving from sixth to third place.

R&D Tax Credit

The report highlights a continued need to refine the tax treatment of R&D and innovation. Only 44 per cent of companies say they have claimed the credit, and large companies almost twice as likely to claim as smaller companies (60 per cent versus 35 per cent). Also:

  • One third of companies have received a grant to conduct an R&D/Innovation project;
  • 60% of companies who haven’t claimed the R&D Tax Credit may be able to do so as half describe themselves as innovative;
  • 43% of companies claiming the credit have experienced a Revenue audit/inquiry – a seven-fold increase since 2009/10.

An industry view

The report also highlights perspectives from business, state agencies and third level colleges on the state of innovation in Ireland with insights gained from Enterprise Ireland, UCD and others.

ENDS

For more information, contact:
Paul Gray
Communications Manager, KPMG Ireland
paul.gray@kpmg.ie; (01)700 4728

Notes to Editors

About the survey

KPMG has conducted annual research of Irish business attitudes to innovation and research and development (R&D) for the past four years. We see this research and associated commentary as essential in encouraging an informed debate about how we further develop Ireland’s strengths in this area. The survey, conducted on our behalf by RED C Research, gauges opinion amongst a representative sample of 200 Irish business leaders.

The priorities highlighted by business and innovation leaders interviewed for this report include:

  • Smaller companies innovating to secure future growth (Julie Sinnamon, Enterprise Ireland) 
  • Developing greater synergies between multinationals and SMEs (Bill Kearney, IBM)
  • The recruitment of industry partners for third level students (Suzi Jarvis, UCD)
  • Continued innovation collaboration amongst Irish companies (Vincent Carton, Manor Farms).

About KPMG in Ireland

KPMG in Ireland employs 2,200 people across its audit, tax and advisory services from offices in Dublin, Belfast, Cork and Galway. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services.

 
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