Address by Minister Martin announcing Enterprise Ireland and IDA R&D Grant Schemes

Minister Announces €500m R&D Grant Scheme for Industry

I am very pleased to be here to-day to announce a revised and simplified grant scheme being introduced by Enterprise Ireland and the IDA which will make it more straightforward for companies in Ireland to avail of very substantial support to carry out research and development in the years ahead.

The Government has made a major commitment, through the substantial investment set out in the Strategy for Science, Technology & Innovation (SSTI) and the National Development Plan (NDP) 2007-2013, to making the transition to a knowledge-economy. The ambition is that “Ireland by 2013 will be internationally renowned for the excellence of its research, and will be to the forefront in generating and using new knowledge for economic and social progress, within an innovation driven culture.” The Government is committed to providing €8.2 billion to making this vision a reality and making Ireland a key location for leading edge research and development, and a location for high quality jobs that are underpinned by knowledge and high skill levels.

Recent indicators, both national and international, show that Ireland is clearly moving in the right direction and that the significant investment being undertaken is beginning to have an impact. Latest data shows that total R&D spending across all sectors of the economy (GERD) increased by 14.3% to €2.33 billion in 2006, up over 14% on 2005. R&D spending in the business sector rose by over 17% in 2006 compared with the previous year, to reach €1.56 billion. The rapid progress in R&D spending has also allowed for a narrowing of the spending intensity gap between Ireland and the EU and OECD averages. We have a clear vision of what we need to achieve, there is the commitment on the part of Government to provide the necessary funding to get us there and there is both commitment and enthusiasm in the State development agencies – Enterprise Ireland, the IDA and Science Foundation Ireland- to make this happen.

To-day we see a further element of the Government commitment being delivered upon with the introduction of the revised and simplified Grant Schemes which will provide over €500m in support to Irish based industry over a six year period.

I would like to acknowledge the work of Enterprise Ireland and IDA Ireland in bringing together and streamlining their existing R&D supports for companies and re-shaping them into a straight-forward R&D grant scheme which will facilitate participation. A 6 year time frame is being used, which will take us up to the end of 2013, the period covered by the Government’s Strategy for Science, Technology and Innovation, a strategy that - as you know- set out the ambitious targets for increasing the quantity and quality of R&D and innovation in companies based in Ireland.

For Enterprise Ireland, this involves increasing the number of indigenous companies spending more than €100,000 per annum, or what is termed ‘meaningful R&D activity’ from 462 in 2003 to 1,050 and increasing the number of indigenous companies performing significant R&D, that is spending more than €2million per annum, from 21 to 100 per annum by the end of 2013.

IDA Ireland have an equally challenging target – they have been tasked with increasing the number of foreign affiliate companies with a minimum scale R&D activity from 213 to 520 and increasing the number of foreign affiliate companies performing significant R&D from 60 to 150 by the end of 2013.

In addition to getting more companies to engage in R&D activity, the State agencies have to address perhaps the most challenging of the SSTI targets which is to push up business expenditure on R&D in 2003 terms from €1.076 billion in 2003 to €2.5 billion per annum by 2013. Today’s announcement of €500million in State funding for innovation and R&D in companies underpins the effort to achieve this SSTI target.

Behind these targets lies the fundamental requirement that Irish enterprises enhance their innovative capacity and produce cutting edge goods and services that are competitive in international markets, thereby driving exports and providing sustainable quality employment across manufacturing and services.

But while ensuring that funding is available to companies is one thing, it is equally important that the Grants Schemes are user friendly and that companies know how to access this R&D funding. New EU State Aid Guidelines were introduced in 2006, which have eased some restrictions and expanded the definition of expenditure that may be grant aided. In the context of changing the Grants Programme to harmonise with the new Guidelines, the Government directed Enterprise Ireland and IDA Ireland to revise and re-brand their grants programmes in order to produce a simplified, more accessible R&D funding process, to make it as easy as possible for companies to access R&D funding. I am pleased to say that both agencies have met that challenge and to-day and I am happy to present the revised, simplified programme.

Revised and simplified R&D grant scheme for companies

Enterprise Ireland and IDA Ireland have developed a comprehensive, flexible and straightforward R&D Grant Scheme for companies based in Ireland that want to invest in research and innovation. The revised R&D Grant Scheme, allied with the R&D tax credit scheme which was further enhanced in Budget 2008, create a more attractive proposition for companies that want to – and need to - take on R&D projects.

Why do we need a revised R&D grant scheme?

Until now, the State agencies Enterprise Ireland and IDA Ireland have administered schemes that funded R&D projects in indigenous and multinational corporations, separately. Evaluations and feedback indicated that there was some hesitation on the part of some companies about undertaking research spending. This may in some cases have been caused by confusion among companies as to what supports were available, how to access them effectively and how to obtain the benefits of the variety of programmes available without becoming overwhelmed by the process. Now a genuine effort has been made to make the whole process more straightforward and less onerous.

Prior to this streamlining process, Enterprise Ireland administered the “RTI Competitive Scheme” which was open to clients of both Enterprise Ireland and IDA Ireland. In addition, both IDA and EI operated separate “R&D Capability” schemes for their respective clients. The new approach will make it easier for companies to understand and apply to participate in the scheme, as well as facilitate a planned progression for companies doing R&D, with the expected outcome that there will be improving in-firm technological capacity and capability over time. Each category of company is catered for with specific supports for R&D novices, existing R&D performers, and firms capable of more sophisticated research efforts. I consider this to be a very important improvement.

One of the problems to be overcome is that the challenges facing SMEs and multinational corporations in undertaking R&D projects are very different. In very many cases SMEs need to make a beginning, or build upon a low base of their research activity and technological capabilities. The challenge for established indigenous companies is to make a step change in the level of R&D they are engaging in, having established and convinced the decision makers that it links into their commercial strategy and that the investment makes sound commercial sense. In the case of Multinational corporations there is the added challenge that they need to be able to secure research activities for their Irish operations against competition from other corporate locations around the world.

It was with these different company needs in mind that the development agencies set about developing a holistic approach to R&D funding for companies in Ireland. The main thrust of the changes involved the amalgamation of the Competitive RTI Fund and the R&D Capability grants scheme to produce a new, simplified R&D grant scheme which companies can plug into, no matter where they are along the spectrum of development.

Notable Improvements

Improvements worth noting, and which will be expanded upon by Enda Connolly of IDA and Fergal O’Moráin of Enterprise Ireland shortly, include the R&D investigation and stimulation phase, abolition of the old requirement that up to 50% of the grant received would have to be repaid, and a collaboration bonus of 15% if a company wants to collaborate with another company or with third level institutions.

Special emphasis on increasing R&D activity in SMEs

Another aspect of the revised R&D grant scheme that deserves special mention is the specific emphasis on increasing R&D levels in small companies. The revised scheme sees an increase in the aid rates for small companies. This means that where previously the maximum level of aid was 35% or 40% depending on the circumstances, small companies can now apply for funding of up to 45% of eligible R&D expenditure.

The collaboration bonus of 15% was only available to Irish SMEs if they collaborated with SMEs based in other member states but now two or more Irish SMEs can apply for the bonus if they collaborate on a research project together. Other positive developments for small companies include financial support to effectively ‘borrow’ expert personnel from a research organisation or a large enterprise. SMEs can apply for funding to cover the recruitment costs and up to 50% of the salary costs of a research or innovation expert seconded from a research institution or large company for up to three years. Patent costs are also now also eligible for funding. SMEs can apply for funding to cover the costs associated with obtaining a patent or other industrial property rights in Ireland.

Positive impacts expected

All of this will yield benefits for Ireland Inc. Companies that are funded under the revised R&D Grant Scheme should find themselves developing;

• a significant, established R&D capability,
• high quality facilities for R&D
• an established R&D team and
• good R&D management systems and procedures.

I hope that the new simplified R&D fund should instil in companies a way of thinking about R&D that clearly aligns R&D and the overall business objectives. It is imperative that companies link their company growth strategy to their R&D plan so that their investments in R&D lead to increased sales, productivity and growth. The effect, in turn, will be measurable in boosted business expenditure on R&D (BERD). Perhaps most importantly, companies that engage in R&D, whether it is for the first time or if they are seasoned R&D performers, should see a culture of innovative thinking developing throughout the company. It is this cultural shift towards an innovation lead economy that Ireland requires.

Finally, I want to stress that our strength and competitiveness will come from taking a coordinated approach within our national innovation system. Ireland has a unique opportunity to ensure real coordination and coherence in its efforts to build a knowledge-based society and I believe the improved programmes being introduced to-day will continue to play a very valuable role to enhance our economy and society.

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