R&D across Irish economy almost €1.8bn

1 Jul 2005

Gross expenditure on research and development (R&D) across the Irish economy is estimated to have risen to €1.79bn in 2004, an increase of 10.3pc on 2003, said state agency Forfás in its 2004 annual report.

Forfás reported that 2004 was a year of strong economic performance for Ireland and there was evidence of continuing structural change in the profile of enterprises consistent with moving towards a knowledge economy.

If anything, Forfás said Ireland will have to pursue its status in the knowledge economy with vigour. Chief executive Martin Cronin warned: “In the future, Ireland will increasingly have to compete on the basis of its ability to manage the development, efficient production and sale of high-value products and services tailored to meet global market demand.

“Firms with an eye on long-term growth in international markets will ensure they have clear plans to introduce higher-value products and services, improve operating efficiency and build and leverage international sales and marketing capability,” he warned.

At the end of 2004, employment in firms assisted by enterprise development agencies stood at 127pc of their 1995 levels and exports in 2003 at more than 200pc of their 1995 levels.

Traditional manufacturing sectors, Forfás reported, experienced a fall off in employment while more modern sectors with strong export bases enjoyed increases in employment and output.

This shift it said has been underpinned on the one hand by multinational firms, largely concentrated in the chemicals, pharmaceuticals and ICT sectors; and on the other by the initiative and imagination of entrepreneurial indigenous firms, operating in sectors such as software and food products.

Declining employment is seen in more traditional manufacturing sectors and indicates limited further opportunity in lower value-added areas of activity. Internationally traded services continued to expand in 2004 and recorded a net gain in employment.

“At this time of great economic success it remains important to focus on the considerable challenge of maintaining our flexible and robust competitive environment. Unemployment stood at a low 4.3pc at the end of 2004 and inflation has converged on the euro-area average. But with price levels still well above the euro-area average and in such a tight labour market, preserving a competitive cost environment must remain a priority,” Cronin added.

Cronin said a key focus of the development agencies will be on policies to maximise knowledge transfer between university research programmes and enterprise, particularly SMEs, ensuring that national investment in R&D translates into new product, process and service opportunities.

Gross expenditure on R&D across the Irish economy is estimated to have risen to €1.79bn in 2004, an increase of 10.3pc on 2003.

Business expenditure on R&D rose by 19.5pc between 2001 and 2003, outpacing the 15pc increase in the previous two year period. Cronin described this as an impressive performance given the heightened economic risks taken in that period and the sector-specific shock that hit the ICT industries.

R&D in the higher education sector increased by 35pc to €322m from €238m in 2000. While the 2004 figures aren’t available yet, Cronin projects expenditure is expected to reach €500m.

State expenditure on science and technology increased to €2bn in 2004 from €1.8bn in 2003, a rise of 9.6pc. Government budget outlays on R&D rose to €591m in 2004, up 23pc on the previous year.

Cronin commented: “The Enterprise Strategy Group concluded that our competitive advantage will be defined by our demand-led innovative, products, services and business solutions, by our productivity and by our ability to sell into international markets. This new enterprise reality requires fresh and innovative responses and the focus must be on driving innovation in every aspect of how firms in Ireland do business.”

“The Government and the enterprise development agencies are responding and are increasingly targeting their supports at firms who demonstrate commitment to innovation in products and services, driven by in-depth knowledge of customers and markets. These new approaches are highlighted in the Government’s Enterprise Action Plan — its response to the Enterprise Strategy Group Report and in the new strategy recently launched by Enterprise Ireland,” he concluded.

By John Kennedy