Skills gaps and mismatches are ‘eroding the competitiveness of Irish industry', says Ibec
It comes amid calls for a new innovation tax credit in a separate report examining research, development and innovation activity in Ireland by the Industry Research and Development Group (IRDG) and KPMG.
The suggested measure would build on top of the existing research and development (R&D) credit, without which 56 per cent of the multinational companies in the sample said 10 per cent or less of their R&D would remain in Ireland.
However, constraints such as administrative complexity and time requirements were cited by almost four in 10 respondents as barriers to broader participation, the report said.
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Research performed as part of the 2025 Innovation Index found that a significant amount of innovation 'doesn't always fit neatly into the current R&D Tax Credit'. The report calls for 'an overhaul of the existing system' and suggests the implementation of a green innovation credit to encourage investment in the area.
Three-quarters of the study's 556 respondent firms said a 50 per cent tax credit for green innovation would lead to them investing in the space.
Ibec's report says that, following a 'decade of underinvestment' in research and innovation infrastructure, some graduates are 'entering the workforce lacking necessary knowledge and skills' having received training on 'out-of-date equipment'.
Ibec said it had fallen on employers to retrain graduates on systems that are based on modern technology as a result of the innovation deficit.
In the second in a series of policy position papers on Ireland's competitiveness and productivity, Ibec said 'substantial increases' in core and capital funding for higher education institutions are needed to 'reinforce and boost capacity' and to reverse trends in student/staff ratios.
It warned that skills gaps and skills mismatches are not just 'eroding the competitiveness of Irish industry', but also the State's 'capacity to deliver strategic ambitions' in housing, infrastructure delivery and the development of environmentally friendly industry.
The document pointed to Ibec's recent Skills Survey showing that nearly three-quarters of Irish companies have experienced difficulties in recruiting new workers, with nearly half of businesses reporting that candidates lack critical skills and experience for the roles. Ibec said these responses point to a 'serious underutilisation' of the Irish workforce.
'Ireland already has a significant skills mismatch among the workforce where businesses cannot find workers with the necessary skills to fill vacancies, or workers in their existing jobs do not have the right skills for their roles.'
The paper said it was 'critical that our current and future workforce are ready to meet the shifting demands of the labour market', noting that the National Training Fund (NTF) offers a 'real competitive advantage' if used correctly.
The lobbying group called for employers to have a 'stronger role in setting the strategic direction and allocation' of the fund in order to meet the demands of their respective industries.
It said the availability of apprenticeships, despite their role in addressing competitiveness issues in primary industries, was 'limited by an insufficient funding model and an overly bureaucratic and cumbersome system'.
The paper welcomed the commitment in Budget 2025 to invest €1.5 billion from the NTF over the next six years, but expressed concern over governance issues with the fund.
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