Budget 2027: R&D and innovation

Looking ahead to Budget 2027, Ireland enters the budget cycle from a position of considerable strength. Economic growth remains robust, employment continues to perform strongly and the Exchequer is benefiting from exceptionally high levels of corporation tax receipts.

However, from our discussions with clients across a broad range of sectors, there is a clear disconnect between the strength of the headline economic indicators and the practical realities many businesses face when seeking to grow, invest and recruit.

The central challenge for Government is no longer whether Ireland can attract foreign direct investment or business investment. The challenge is whether Ireland can deliver the infrastructure, talent and policy environment necessary to sustain that investment over the long term.

Infrastructure must become a competitiveness priority

Budget 2027 represents an opportunity for Government to reinforce Ireland's competitiveness proposition in a broader sense. Businesses will be looking for stability, certainty and a commitment to policies that encourage long-term investment. A key pillar for focus in this respect should be infrastructure, energy capacity and housing. 

Housing availability continues to be a significant issue for employers attempting to attract and retain talent. Businesses are also experiencing delays and uncertainty relating to grid connections, energy capacity, transport infrastructure and planning processes.

A statistic that has attracted considerable attention is that Ireland's infrastructure delivery is estimated to be approximately 25% below European norms. While there is debate around how that figure is measured, many businesses would say it aligns with their lived experience.

The issue is no longer a lack of funding. Ireland has demonstrated its capacity to generate fiscal surpluses and build substantial reserves. The challenge is converting those resources into projects that are delivered efficiently and at scale.

From a business perspective, Budget 2027 should provide greater visibility around infrastructure delivery timelines and prioritise measures that accelerate investment in housing, energy and transport networks. These are not simply public spending issues; they are fundamental drivers of Ireland's future competitiveness.

Strengthening Ireland's innovation ecosystem

Ireland's long-term competitiveness will increasingly depend on innovation, research and development (R&D), productivity and the development of high-value activities.

The R&D tax credit has undoubtedly been one of Ireland's most successful tax incentives for supporting research and development, innovation and business investment. Recent enhancements to the payment mechanism have improved its attractiveness and cashflow impact.

However, there remains scope for further improvement.

Many smaller and scaling businesses continue to find the claims process complex and resource intensive. Simplification of administrative requirements would improve accessibility without undermining the integrity of the regime.

We would also welcome more flexible rules in relation to outsourced R&D activities. Modern innovation rarely occurs entirely within one organisation. Businesses increasingly collaborate with universities, specialist providers and international partners. The rules for qualifying expenditure should be enhanced to allow more increased relief for external collaboration.  

Encouraging entrepreneurship and indigenous growth

While Ireland rightly celebrates its success in attracting foreign direct investment, Budget 2027 should also seek to further strengthen indigenous enterprise.

Many Irish-owned businesses are entering critical growth phases, seeking to expand internationally, invest in technology and create employment. Supporting these businesses should remain a policy priority.

We would like to see a review of the broader suite of entrepreneurial reliefs. There is an opportunity to ensure that the tax system better rewards business creation, risk-taking and reinvestment.

Measures such as enhancements to the Employment Investment Incentive Scheme (EIIS), a review of Entrepreneur Relief and targeted incentives for scaling businesses could help unlock additional private sector investment and accelerate growth within the domestic economy.

A Budget focused on delivery

The overarching message we hear from clients is straightforward. Ireland has many of the ingredients required for continued success. Strong public finances, a highly skilled workforce, an attractive business environment and a proven track record in FDI and innovation provide an excellent foundation.
However, future growth cannot be taken for granted. The next phase of Ireland's economic success will depend on our ability to transform fiscal strength into tangible outcomes. 

Get in touch if you have any queries you might have in relation to Budget 2027.