Creating an economy where innovation thrives

Ireland must adapt its strategies to maintain its innovation advantage amidst global changes.

In brief

• Ireland has the potential to become Europe's next innovation hub with the right investments and policy reforms.
• Key areas for improvement include modernizing tax incentives, investing in infrastructure, and enhancing education systems to support innovation.

Ireland has long punched above our weight when it comes to innovation. We have attracted global leaders in technology and life sciences and nurtured a strong base of startups. That success came from foundations laid decades ago with bold policy, strong universities, smart tax, and solid infrastructure. Those investments have delivered an enviable platform for Ireland, and with the right choices now, we have the opportunity to become Europe’s next generation innovation hub.

But the world has changed significantly; hence our strategy needs to evolve.

Global dynamics are shifting. The US is doubling down on reshoring and tariff protectionism. Corporate tax is no longer the differentiator it once was, given the extent of global reforms. Big tech is pivoting to AI, and while Silicon Valley remains influential, that historic influence is being challenged by emerging hubs worldwide. Meanwhile, investment in Ireland’s own infrastructure and higher education has not kept pace. The result? Our innovation advantage is at risk.

Elements of the playbook that delivered past success still applies, but we need to adapt it for today and for tomorrow. With deliberate investment, smarter incentives, and decisive policy pivots, Ireland can capture the next wave of opportunity in AI, life sciences, cyber and greentech.

So what do we do next?

1. Modernise Our Tax Incentives for Innovation

Ireland’s R&D tax credit has been critical to attracting investment and supporting innovation but is now lagging behind other competitors. If we want more companies, especially Irish ones, to develop new technologies here, the system needs to be more flexible, faster, and easier to use.

Here’s how we make it happen: Increase the R&D tax credit rate to 35% to maintain our competitive edge.

• Remove all restrictions placed on outsourcing to encourage greater industry-academia collaboration and broaden the rules to allow related party R&D in scenarios where Ireland owns the intellectual property.
• Simplify the process. The administrative burden is a deterrent particularly for smaller companies and startups. Streamlining claims and providing better guidance can boost uptake and impact.
• Accelerate payments of the credit to make it more accessible to cash-strapped innovators.
• Widen eligibility beyond traditional R&D to include innovation-focused activities in areas like AI, where much of the real-world experimentation is happening.

These changes wouldn’t just benefit multinational corporations, but they would also enable indigenous innovators and SMEs to scale faster and contribute more meaningfully to Ireland’s innovation ecosystem.

2. Invest in Future-Proof Infrastructure

Ireland has made strong commitments through the National Development Plan, but progress is dependent on what gets built and when. Right now, the most urgent gaps are in energy and water systems. Delays in planning and underinvestment are slowing down housing and industrial projects. That includes datacentres, which are essential for AI and other digital industries.

Datacentres do more than store data. They attract universities, startups, and global companies, helping to build innovation clusters. Ireland has already missed out on investment because of questions around our ability to deliver the necessary infrastructure. That was a wake-up call, and responses are already in motion.

Sustainability matters, but the current planning system is causing costly delays. Planning reform is part of the solution, but it must be backed by agreed action. If Ireland wants to lead in AI, then infrastructure delivery needs to match the pace of this ambition and opportunity.

3. Rebuild and Elevate Our Third-Level System

 Ireland’s universities and colleges have played a central role in building our innovation economy and capabilities. Our third level sector has produced world-class research, nurtured talent, and helped position Ireland as a global technology and life sciences hub. That role is still mission-critical for future success, but it needs stronger support and investment.

Here are six key actions to drive the right agenda:

• Boost core funding so universities can expand research capacity and compete globally.
• Set a clear ambition: place three Irish universities in the global top 100 to attract international talent and signal leadership in innovation.
• Position Ireland as a destination for global researchers and entrepreneurs, especially as other academic systems face uncertainty.
• Equip students with the skills needed for AI and digital transformation, ensuring universities have the resources to deliver at scale.
• Strengthen university-industry partnerships to speed up the journey from research to commercial impact.
• Support trades and apprenticeships alongside academic pathways, recognising their role in building the infrastructure and technical capabilities that innovation depends on.

Ireland’s third-level sector is a national asset. With the right support, it can help propel the next wave of economic growth.

4. Unlock Growth Capital for Indigenous Innovators

 Ireland has plenty of promising startups. Many of them can raise early-stage funding, but when it comes to growing their business, access to capital is extremely challenging.   Companies looking for between €1 million and €10 million often struggle to secure the support they need to expand and bring their ideas to market.

We need programmes that offer more than just funding. Founders also need advice, access to customers and markets, and support from people who’ve built successful businesses before.

We need stronger connections between entrepreneurs, investors, researchers, academia and government. When these groups work together, good ideas are more likely to turn into successful companies.

 Ireland has already shown it can produce successful startups, including several that have reached unicorn status. The next step is making sure those companies have the support to grow and that more of them follow.

5. Close the Digital and AI Skills Gap

AI is already changing how work gets done. It has the potential to transform the way we work in almost every sector of the economy. Ireland needs to make sure people have the skills to keep pace with these changes and take advantage of new opportunities.  That starts with two priorities:

• Upskill across all levels. Every citizen should have at least a basic level of AI literacy. That requires new training models that are faster, more flexible, and tailored to real-world needs, not just in universities, but across Skillnet, Solas, and industry.
• Support lifelong learning. As AI reshapes roles and sectors, the ability to pivot and adapt will be critical. We need new flexibility in education to make sure we keep pace with changing skills, emerging technologies, and the different ways people learn throughout their careers.

This is our opportunity to position Ireland as a talent magnet for global innovation.

6. Prepare for the Economic Impacts of AI

AI’s impact on productivity will be profound, unlocking new business models, reshaping roles, and spawning jobs we haven’t yet imagined. But it also comes with risks, from displaced workers to changes in how and where value is created.

There are two essential steps to stay ahead of the curve:

• As a country we need to plan for disruption. The Government must assess and model the fiscal and societal implications of AI replacing taxable human labour.
• We need to be ready for change. That means building resilience by planning ahead, working across sectors, and making sure people have support if their jobs are affected. Handled well, AI could usher in a new golden age of economic dynamism. But we must start preparing now.

7. Tap Into Our Entrepreneurial Edge

Ireland’s greatest resource is its people.  The EY Entrepreneur Of The Year programme proves that with alumni of over 650 entrepreneurs who lead companies that collectively employ over 250,000 people and generate €25 billion in revenue.

These founders know how global innovation works. EY already brings this community together regularly through retreats and international events. Their perspective is a powerful asset - experienced, globally connected, and deeply invested in Ireland’s success. It’s time to bring that expertise more into the conversation and use it to strengthen the systems that support future entrepreneurs.

Conclusion: Time to Lead Again

The scale of the opportunity is significant with the potential to fuel and secure Ireland’s economic future.

To deliver on it means making deliberate choices: smart tax policy, world-class infrastructure, ambitious education reform, and a relentless focus on innovation at every level of the economy.  The foundation is already there. Now we just need the courage to deliver on this ambition.