Irish manufacturers maintain expansion in early 2026, reports head of Manufacturing Sector at Bank of Ireland Conor Magee, but shifting trade dynamics, energy costs and supply chain pressures reshape outlook.
Irish manufacturing has continued to expand in 2026, supported by steady demand and resilient business activity, though the sector is settling into a more measured phase following an exceptional export performance last year.
The latest data shows the sector firmly in growth territory, with an April Purchasing Managers Index reading of 54.9 and a 12‑month average of 52.7. This places Ireland ahead of a broader European manufacturing base that has recently returned to expansion after several years of contraction.
Industry activity has also been supported by forward ordering, as firms moved early to secure supply and manage potential disruption linked to geopolitical tensions and rising costs.
Export picture resets after record 2025
Last year marked a high point for Irish manufacturing exports, with overall growth of 16% and particularly strong demand from the United States. Exports to the US rose by 52%, while pharmaceutical shipments surged by 86% as companies built inventory and managed tariff exposure.
Those elevated levels have not carried through into 2026. Export values in the opening two months of the year reached €29 billion, down 38% year on year, reflecting the exceptionally strong comparative base in 2025. Compared with 2024 levels, exports are down 8%.
Industrial production data shows a similar pattern, with output easing by around 4% on both a quarterly and annual basis.
Despite this adjustment, employment across the sector has remained stable, with companies maintaining headcount while moderating growth expectations. Around 38% of firms surveyed still expect activity to rise over the course of 2026.
Energy and logistics pressures reshape cost base
The operating environment for manufacturers has been influenced by developments in global energy markets and logistics networks.
Oil and gas markets continue to play a central role, with supply concerns and price volatility feeding directly into input costs. Oil price movements have driven significant increases amid disruption risks in key shipping routes, while jet fuel costs have climbed sharply, pushing up air freight pricing.
Shipping routes have also been affected, with rerouting adding between 10 and 20 days to delivery times and increasing freight costs through higher insurance premiums.
This has had knock‑on effects across key manufacturing inputs. Petrochemicals, aluminium and fertiliser-related materials have all seen cost increases, affecting sectors from packaging to automotive production.
Supply of specialised inputs is also in focus. Materials such as helium, widely used in semiconductors and medical devices, and pharmaceutical ingredients face tighter logistics conditions due to higher energy costs and transport disruption.
Investment continues with a sharper lens
Against this backdrop, manufacturers are taking a disciplined approach to capital allocation. Investment decisions are being assessed more carefully, with companies placing greater emphasis on return on capital and scenario planning.
“Investment decisions are being delayed to evaluate how different shocks will evolve over time,” notes report author Conor Magee, adding that firms are “forensically assessing financial rationale, value add and return on capital.”
Capital is being directed towards areas where businesses have greater operational control. Automation, sustainability initiatives and artificial intelligence are emerging as focal points for investment, particularly where they can improve efficiency or strengthen competitive positioning.
Examples highlighted include funding for renewable energy integration, remote monitoring of industrial assets and scaling production capabilities to meet evolving client demands.
Supply chain strategy becomes central to competitiveness
One of the clearest themes to emerge is the increasing strategic importance of supply chain design.
“Supply chain visibility, resilience and agility capabilities are no longer optional,” Magee says pointing to a series of recent global disruptions that have reshaped how manufacturers approach risk.
Businesses are now mapping supply chain risks in greater detail and introducing mitigation measures such as dual sourcing, reshoring elements of production and building inventory buffers.
Digital tools are also playing a growing role, with companies using data and analytics to anticipate disruption and respond more quickly.
Firms that can “look around corners” and anticipate potential bottlenecks are expected to be better placed to maintain operations and protect margins in a volatile environment.
Outlook grounded in operational capability
The outlook for the remainder of 2026 reflects a sector adjusting from a period of exceptional growth to a more stable footing.
Growth remains achievable, though it is shaped by cost management, operational efficiency and the ability to navigate external shocks. Companies that continue to invest in core capabilities are expected to sustain performance as market conditions evolve.
In her foreword to the report, Paula Feehan, Head of Sectors at Bank of Ireland Corporate and Commercial Banking, acknowledged the complexity facing businesses, noting that Irish firms are “operating in an ever‑changing economic and trading environment,” shaped by global events, supply chain disruption and rising costs.
She added that the bank’s sector specialists work closely with businesses and advisors and bring “a deep understanding of the challenges and opportunities that you face,” with a focus on practical strategies to support growth.
Feehan said the intention of the report is to provide “analysis on the current Irish business landscape” and help companies prepare for the months ahead, with the bank remaining “committed to supporting our customers” through a period of continued change.
For manufacturers, that support comes as the sector continues to balance steady demand with a renewed focus on resilience, efficiency and long‑term competitiveness.
Read the full report on the various sectors including Retail, Agriculture, Manufacturing, Healthcare, Technology & Telecoms and Food & Drink:
Top image: Photo by Simon Kadula on Unsplash
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