In 2011 and as part of the Europe 2020 Strategy to support growth that is smart, sustainable and inclusive, the Government committed to raise gross investment in Research and Development to 2.5% of GNP by 2020. This commitment was reiterated in Innovation 2020 in 2015.
Expenditure on Innovation, Research & Development consists of both public and private expenditure. Gross investment in R&D was €3.2 billion in 2016. This is an increase of over half a billion euro since 2011. The estimated expenditure on R&D by Government Departments in 2017 is €768 million. This represents an increase of almost €40 million over 2016 and is the highest level of public expenditure on R&D since 2012.
A very significant part of our innovation policy has been to align public investment efforts in a manner that leverages R&D activity in the enterprise sectors. While private spending on R&D slowed during the financial crisis, it has been increasing steadily since 2011. Business Expenditure on RandD rose to €2.3 billion in 2016 from €1.7 billion in 2011, an increase of over 35%.
Despite the fact that overall expenditure in R&D has increased every year since committing to Europe 2020 targets, reaching the 2.5% of GNP intensity rate target presents a very significant challenge. In 2016 our GNP intensity level stood at 1.43%, down from 1.91% in 2012. Even when using GNI* as a complementary indicator (GNI* removes globalisation impacts on the Irish economy), the R&D intensity rate is estimated at 1.72% for 2016.
This is in part due to the strength of our economic performance and subsequent increases in GNP growth rates year on year over the last number of years. Our challenge is to increase the level of investment in R&D to keep pace with GNP growth rates, in the context of significant demands on the public purse.
Notwithstanding the level of the R&D intensity rate, I am pleased to note that Ireland performs well in international comparison tables. In the European Innovation Scoreboard published by the European Commission in June, Ireland gained one place to be ranked 9th in the EU for innovation performance.
In aggregate terms, Ireland is one of the best innovation output performers, making it one of the most efficient performers overall in terms of outputs relative to investment.
However, it is clear that significant investment in RandD is a key characteristic of the top four Innovation Leaders in the EU (Sweden, Denmark, Finland and the Netherlands). The Government must continue to prioritise investment in R&D in order to realise its ambition of becoming a Global Innovation Leader.
My Department is commencing an interim review of Innovation 2020 this year and this will give us the opportunity to take stock of what has been achieved under Innovation 2020 since December 2015 and will inform the development of its successor.