Foreign direct investment (FDI) has long been key to Ireland’s economic success. But 2023 looked as if it might be a difficult year for FDI, as the cost of inflation and the increased cost of capital caused many international companies to reassess their investment strategies.
Jobs were lost in the technology sector, with LinkedIn laying off nearly 1,400 staff worldwide and cuts in Meta, Google and other well-known firms. In Ireland alone, almost 900 jobs were cut at Accenture, while food giant Nestlé is to axe 540 jobs with the closure of its baby formula plant in Limerick.
In spite of this, experts say Ireland had a good year for FDI. So how did this negative outlook seem to end on a positive note?
“Ireland’s notable FDI performance in 2022 saw the number of new projects increase by 21 per cent, while the number of projects in Europe remained largely flat,” says Feargal de Freine, EY Ireland assurance partner and head of FDI.
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“Some of the challenges facing FDI this year, however, included an elevated interest rate environment, high (albeit moderating) inflation, the continuing war in Ukraine, global geopolitical tensions, uncertainty relating to the global tax reform agenda and a tendency towards deglobalisation.”
Emma Doherty, corporate partner and member of the US business and inward investment groups in Matheson LLP, says these challenges contributed to market uncertainty.
“Notwithstanding global headwinds, however, Ireland has performed strongly, continued to attract FDI and has proven its resilience,” Doherty says.
“With almost 1,800 global organisations in Ireland, it is clear that a diverse range of companies see the value proposition that Ireland continues to offer. The companies range from start-ups to large-scale multinationals across many sectors.”
Encouragingly, the positive result of 2022 for investment in research and development centres – Ireland ranked among the top five countries in Europe – has continued in 2023, says de Freine.
“Some large life sciences greenfield manufacturing operations have been announced in both medical devices and biopharma, as well as exciting developments in high-end technology,” he says.
Early in 2023 Siemens announced a new Centre of Excellence for immunoassay instrument research and development – focused on laboratory instruments used to detect disease – in Swords, Co Dublin, which will create up to 100 jobs.
There were significant announcements from food and drink giant PepsiCo: a €127 million investment at its plant in Little Island, Cork, followed by the launch of a further €39 million expansion plan in November.
In Shannon, meanwhile, Lufthansa Technik announced the expansion of its Irish operation, which will create highly skilled engine mechanics jobs in the region.
Doherty says that, while some global companies pressed pause on their Q1 investment plans, there were 139 Irish FDI projects in the first half of 2023 alone.
“There are many fantastic FDI success stories from 2023, including significant investment by companies across a range of sectors including tech, biopharma, medtech and the green economy,” she says. “This [has] employment potential of over 12,000 jobs spread across the country.
“It is also exciting to see increased scale and complexity in the types of investment being made, with a focus on research, development and innovation projects and sustainability projects. These investments are further evidence of Ireland’s position as a mature and sophisticated FDI location.”
Both de Freine and Doherty say FDI announcements made this year bode well for Ireland.
“EY’s survey of investor sentiment – conducted in the first half of 2023 – corroborates this positive view, with 80 per cent of respondents believing the country’s appeal will improve or remain the same over the next three years,” says de Freine. “And 71 per cent of overseas businesses established in Ireland plan to increase investment in the country over the next year.
We are seeing a lot of companies that already have a base here expand their operations – not just in terms of scaling up but also through diversification and choosing Ireland as a location for new business lines
— Emma Doherty
“Ireland can attract investment in key knowledge-intensive sectors including cleantech, renewables, AI, quantum computing, cell and gene therapy, and other forms of advanced personalised medicine.”
Ireland has done very well in the global battle for investment, with many companies seeing it as a safe, stable option with a proven track-record, says Doherty.
“We are seeing a lot of companies that already have a base here expand their operations – not just in terms of scaling up but also through diversification and choosing Ireland as a location for new business lines,” she says. “This should lend well to sustainable growth for Ireland in the future.”