Martin Shanahan is just back from a visit to the US, the first business trip since coronavirus sent the world into lockdown last year.
In pre-Covid times the IDA Ireland chief executive was on the road two weeks in every four. So visiting New York, New Jersey, Illinois, Minnesota and Indiana marked some kind of a return to normality and an important mission in its own right.
Days previously the Government had increased the corporate tax rate on the largest international companies to 15 per cent from 12.5 per cent, changing in one sweep a policy that was an article of faith since the 1990s. The move brought Ireland into line with efforts by world leaders and the OECD to introduce a global 15 per cent rate in 2023.
But the stakes could hardly have been higher for Shanahan, now in his eighth year in charge of the inward investment agency. Some 1,600 client companies spend €22 billion annually in the Irish economy, they directly employ 245,000 workers and comprise two-thirds of the State’s exports. So how did they react?
“I could count on one hand the companies which would have expressed any reservations about this – and those reservations, they were kind of a mixed bag,” he says.
“I would say overwhelmingly companies understood it, accepted it, understood that Ireland had made the best decision both for Ireland and the companies operating here.”
Based on his US meetings and talks behind the scenes before the Government made its move, Shanahan is adamant that the tax rise will not lead companies to pull operations or capital from Ireland. “I think investors still remain very confident in Ireland,” he says.
“Clearly moving from 12.5 [per cent] to 15 [per cent] does impact on competitiveness to some extent. But do I believe that that in itself will lead to either an impact on the existing base of foreign direct investment or future flows? No is the answer. I believe that we can still win investment at a rate of 15 per cent, I think that’s an important point.”
Eighth floor
He is sitting in a glassy meeting room in the IDA’s swish new headquarters at Upper Hatch Street, Dublin. The building overlooks the Iveagh Gardens, and the National Concert Hall is nearby. Virtually the entire city can be seen from the eighth floor: the Spire, the Bailey lighthouse at Howth, Dún Laoghaire harbour.
Cranes moving on the skyline are a sign of economic revival after the worst pandemic disruption, even if the city streets still seem quiet by day. Although the latest Covid-19 wave shows that the virus remains a potent threat, housing dominates politics more often than not.
So is the housing crisis an issue for multinational investors who employ legions of young people caught in the property trap?
Shanahan replies that policy certainty under the Housing for All plan is important and says it is important now that such policies are implemented. “I think investors are keenly aware of both the policy and the tangible things that are being done to address this.”
Housing is, of course, a major issue for Sinn Féin, whose big leap forward in the general election last year led to claims by rival parties that it would threaten business investment if it was in power. With Sinn Féin riding high in polls, is its advance coming up in engagements with business?
“No, it genuinely isn’t,” Shanahan says. “That’s not something that has come up in any of my discussions.”
Similarly, he says questions over power supplies did not feature in his visit to the US. But these are a concern nonetheless, not for “the vast majority of companies” but for large energy users who need reliable supply.
With Shanahan calling for action to avert any blackout risk, were recent moves by the Commission for Regulation of Utilities and grid operator EirGrid sufficient to protect supply?
“They are the experts in this area and we have to rely on them to some extent to assess whether what they are proposing will meet the demand that’s there,” he replies.
“From an IDA perspective, we would urge that everything that can be done should be done to ensure that it does not impact on the enterprise space or, indeed, on citizens. Obviously I think outages are not going to be helpful to anybody, just be very clear.”
Data centres
Still, he is most definitely not at one with those who say the answer lies in curbs on new data centres. “If we are to continue to build out Ireland as a technology hub, I believe we have to find a way to provide the energy required.”
Increased data centre demand over four years was the same as adding 140,000 households to the grid each year, prompting anxiety about carbon emissions on top of worries about the continuity of supply.
But Shanahan insists that such centres provide crucial support for renewable energy because of their preference for wind power and their consistent demand for electricity rather than fluctuations. The problem, however, is that the wind does not blow all the time so non-renewable generation will be needed as a reserve. That remains in short supply and is slow to develop.
For all that, he argues that data centres are more efficient generally than the alternative of housing individual processors in offices and homes. He also says the centres are better suited to a “temperate” climate such as Ireland’s because machines don’t need to be cooled down as much as in hot countries.
“Then you have those who say: ‘That’s fine, we have our fair share, we shouldn’t have them in Ireland and we should only have the amount of data centres that we require for Ireland.’ If we follow that logic well then we produce a hell of a lot of medical devices that we don’t require in Ireland that we’re exporting to the world,” Shanahan says.
“We produce a hell of a lot of pharmaceuticals because we’re an exporting country. This is our model. Our model is trade and investment exporting is a core part of that. So when you trace thought the arguments they won’t really stack up to be honest.”
