The presence of so many multinational companies in Ireland is testament to our ability to adapt to change and positions us well to continue our record of FDI success according to Anna Scally, Partner, KPMG in Ireland.
Ireland consistently punches above its weight in attracting foreign direct investment. The reasons are well documented and include pro-business policies, EU membership, an attractive corporate tax regime and a highly educated workforce.
Obviously, all businesses have been impacted by the pandemic to one extent or another, but US business in particular has been incredibly resilient. A lot of that is due to the type of US business which has invested in Ireland. They tend to be in sectors like pharma, medtech, ICT and financial services – all areas which performed well during the pandemic.
However, the impact of COVID-19, and keen global competition for FDI are amongst the many factors to consider when assessing Ireland’s future FDI prospects. How we react and respond to these challenges will be critical in maintaining and developing Ireland’s appeal to global FDI decision-makers.
Ireland’s Government has made a strong commitment to support Ireland’s position as a hub for FDI. In a period of ongoing uncertainty and global political instability, all businesses operating in Ireland and those looking to invest here will welcome the continued commitment to the 12.5% tax rate outlined in the Programme for Government and the budget. The Programme also sent a strong message by reaffirming support for existing investment and attracting new investment. For example and related to one of the crucial issues facing many businesses in managing their supply chains in light of COVID-19 and Brexit, the programme contains a commitment to develop Ireland as a location of choice for resilient supply chains. Meanwhile, Ireland’s appeal as a location of choice for FDI post Brexit is reinforced by our position as an English speaking base from which to access the EU single market of over 440 million people.
Ireland benefits from a virtuous circle of successful FDI stories and IDA Ireland and others have excelled in getting this message to decision-makers. The role of the American Chamber of Commerce in Ireland and platforms such as the KPMG supported US-Ireland Research Innovation Awards are essential in showcasing the value of the US Ireland economic relationship.
Whilst emphasising the importance of Ireland to multinational companies, it important to note that it’s not possible to bring everything back to the US and still serve the world market. The pandemic has underlined the need for multiple locations and Ireland with its pro-business environment and proximity to key markets will continue to play an important role there.
As a reminder, we are home to the top 15 US tech companies, the top 10 global pharmaceutical corporations, 20 of the 25 leading financial services firms globally and 9 of the 10 global aviation lessors. We are the 2nd largest exporter of software in the world and recognised as the data capital of Europe. More recent affirmation of our continued appeal was highlighted as both Dublin (2nd) and Cork (5th) rank in the fDi and TNW Tech Cities of the Future for 2020/21 report on economic potential. Meanwhile and in the same report, Galway demonstrated that smaller cities can also benefit hugely from well thought out strategies with the Western capital ranking 9th on the innovation and attractiveness index, underpinning the value of quality of life appeal in the overall FDI mix. Ireland also excelled in various country level data points, including the 2020 Index of Economic Freedom. Dublin also shone in the FDI Performance category, for example with the highest level of capital investment in software R&D out of all locations analysed. Whilst the aforementioned are success stories in their own right, they are also valuable proof points for IDA and others in reaffirming why to choose Ireland in the future. Irish businesspeople should always consider the opportunity to reaffirm this appeal whenever possible to their own global contacts.
It’s also worth noting that the economic relationship between Ireland and the US is very much a two-way street. Ireland has proven to be a very good place for American companies and Irish companies are doing very well in the US. Ireland is the ninth-largest investor in the US economy with more than 900 Irish firms present there, employing more than 110,000 people. These include big names such as CRH and Kerry Group, but also many smaller Irish companies that make a significant contribution to the American economy.
The adaptability and flexibility of the Irish workforce and the ability of our education system to provide talented people has also long been recognised by multinational business here as a huge positive. IDA Ireland reports that there are over 245,000 people directly employed in our multinational sector, and if that number is to continue to grow, we need to stay ahead of the innovative solutions that will be embedded in new workforce models. This has been reinforced in recent months as so many people have embraced technology and continued to deliver successfully for their organisations whilst working from home. The global pandemic has accelerated underlying trends of enhanced flexibility and digitisation here in Ireland and we have an opportunity to embrace new business and workforce models and demonstrate that we’re able and ready for what the future of work might look like.
Irish indigenous business and the FDI community are inextricably linked, with multinationals acting as primary customers for many SMEs, and many of them also dependent on indigenous companies to supply them with goods and service ranging from ranging to industrial goods and traditional services to “IP rich” services in the technology and pharmaceutical sectors. The future success of FDI in Ireland will go hand in hand with the success of our indigenous businesses, and how well they recover, adapt and stay relevant to the future needs of the multinational business community is of great importance. In this regard the Programme for Government is also highly relevant and it is critical that our indigenous businesses get the right supports to help them survive in the current environment.
As a small open economy, Ireland is accustomed to managing external challenges and adapting to market, technological and economic change. The longevity of our relationships with the multinational companies who choose Ireland is testament to our success. This success is also predicated on continually refining what we have to offer while delivering certainty on some core principles. Ireland has reaffirmed our commitment to these principles and with the right policy choices, we can look forward with some confidence to a positive FDI experience for our country and for those who choose Ireland.
Inward investment requires informed decision making. For more on what’s next for FDI, please get in touch with Anna Scally, tax partner and Head of Technology and Media at KPMG in Ireland.