71% of overseas business already invested in Ireland are planning to increase investment in coming year.
Ireland remains a highly attractive location for foreign direct investment (FDI) with seven in ten (71%) overseas businesses currently operating in Ireland planning to increase investment in the coming year.
Not only that but almost half (46%) of global investors surveyed expect Ireland’s attractiveness for foreign direct investment to improve over the next three years, with just 18% expecting that it will decrease.
“Relative to our population, Ireland commands an outsize share of foreign direct investment into Europe”
According to the latest EY Europe Attractiveness Survey, the key to sustaining Ireland’s FDI success and securing the next-generation of investment in knowledge-intensive, high value-added and cutting edge industries will be a focus on three core areas: Talent, Technology and Sustainability.
This latest report builds on recent (May 2023) data published by EY measuring FDI performance across 44 countries in Europe during 2022.
Irish FDI growth trumps EU norm
This found that the number of FDI projects in Ireland increased by 21% in a year where overall FDI growth across Europe was just 1%. Ireland secured 184 new greenfield and expansion FDI projects in 2022, up from 152 in 2021 and was in the top 5 countries in Europe for investments in the crucially important high-value, knowledge-intensive sectors of pharmaceuticals, medical devices, and research and development centres.
In total 80% of respondents to the EY Europe Attractiveness Survey 2023 believe the country’s appeal will improve or remain the same over the next three years, with fewer than one in five (18%) believing that Ireland’s attractiveness will diminish over the next three years.
For these respondents, the top concerns were increased geopolitical instability, Ireland’s cost base and increased incentives available elsewhere. Just over half (52%) of respondents expect software and IT services to be the top driver of Ireland’s growth over the coming years. Notably, investors viewed utilities, including cleantech and renewables, as the second most impactful sector driving growth (35%).
“Relative to our population, Ireland commands an outsize share of foreign direct investment into Europe,” said Feargal de Freine, EY Ireland Assurance Partner and Head of FDI.
“FDI project numbers are growing strongly and senior executives in the organisations investing or considering investing anticipate a further improvement in the country’s attractiveness over the next three years.
“This success is built on decades of hard work in developing the right policy framework across a range of areas, as well as our highly skilled workforce and business-friendly environment. By sustaining successful investments in high-value sectors over many years, we have developed a credible track record, a deep talent pool, and ecosystems that foster innovation.
“One particularly noticeable feature is Ireland’s enduring and continuing appeal to US companies as an FDI location. Across Europe, 21% of FDI projects are from the US, however, in Ireland 59% of projects originate in the US.”
de Freine said the challenge for policymakers and other stakeholders was to ensure that existing investments form the bedrock for future investments in new and emerging technologies such as personalised medicine, renewables and greentech, AI, quantum computing and Industry 5.0.
“With competition for investment intensifying globally, Ireland needs to ensure that it maintains and strengthens its attractiveness for FDI. Key to this will be three areas of focus: talent, technology and sustainability.”
“Countries competing for investments will need to demonstrate high levels of expertise and research capability, along with a ready supply of top-level talent. Encouragingly for Ireland, almost 6 in 10 (58%) of investors surveyed saw the availability of technology skills in Ireland as better than in other countries, up significantly from 45% last year. Combined with the finding that half (50%) of respondents considered Ireland’s network of technology start-ups and research institutions as stronger than other counties, this gives Ireland a strong platform for continued success,” he added.
Ireland’s long-standing reputation for having a highly skilled, English-speaking workforce, coupled with access to the single market and favourable demographic composition, places us in a strong position in terms of talent. Crucially, Ireland performs best in the EU with the highest number of STEM graduates per capita in the 20-29 age bracket (40 per 1,000 population compared to the EU average of 21).
Investors also cited sustainability as a key factor for forward planning. The important element for attracting future investments in Ireland is the ability of a location to support companies on their decarbonisation and sustainability journeys. Encouragingly, Ireland performs significantly better on the percentage of renewables in the supply chain versus other European investment locations according to almost half (47%) of investors surveyed, a marked increase from 29% a year ago.
At a European level, EY’s regional survey results identify opportunities for institutions and national governments to take six steps to help retain business confidence and attract more foreign direct investment into the continent. These are: refresh the business case for Europe; reinforce support for SMEs; encourage investment in R&D and manufacturing; take the lead on climate change and ESG; develop next generation talent; and modernise the tax and regulatory regimes.
“The reality is that Europe has been set back by the shocks of 2022 and we are yet to see solid signs of recovery,” said Julie Linn Teigland, EY EMEIA Area Managing Partner.
“We are now facing a series of era-defining challenges, including digital and sustainability, on top of serious competition from the US and emerging economies. Despite the challenges, confidence is high and now is the time for a strong political commitment and refreshed business case for Europe that reminds investors of its power. This is embodied by Europe’s strength as a collective, above and beyond the individual economic interests of nations, regions or cities.”