Ireland is critically dependent on its export performance for economic and employment growth. For the most part, and despite various headwinds, this year has turned out to be a relatively good one.
“CSO data shows that Irish exports are performing well‚” says Loretta O’Sullivan, EY Ireland chief economist and partner. “Led by a rebound in pharma-chemical products, the value of goods exports increased by 7.8 per cent in the first eight months of 2024 compared with the same period of 2023, while the global tech and business services sectors drove a strong expansion in services exports in the first half of this year.”
Prospects for key trading partners are broadly favourable and EY is forecasting further export growth in 2025, she adds.
The easing of inflation has helped. The annual rate stood at 0.7 per cent in September 2024, down from 9.2 per cent in October 2022.
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“The fading of the energy price shock triggered by Russia’s invasion of Ukraine, the abatement of pandemic-related disruption to global supply chains and aggressive monetary policy tightening by the main central banks have all helped tame inflation. This is good news for households and businesses, and means that the European Central Bank, the US Federal Reserve and the Bank of England are now cutting interest rates,” says O’Sullivan.
But there are challenges too, she adds: “Due to its small size and openness, the Irish economy is vulnerable to increasing trade protectionism. At a global level, trade and investment policies have become more inward orientated, something that has come into sharper than ever focus in this ‘year of elections’.”
With a 10-plus per cent “universal tariff” one of the platforms on which Donald Trump canvassed in the recent US elections, fears of a rise in protectionism were keenly felt this year, even if Kamala Harris, his rival, countered that they would simply constitute a “sales tax on the American people”.
For indigenous Irish companies, anything that puts the brakes on international trade would be keenly felt, not least coming after a period of record export growth. Enterprise Ireland client company exports reached €34.5 billion in 2023, a new high. Overall, non-food exports increased by 8 per cent. The largest export gains were in the UK market, up 6 per cent in 2023 to €9.97 billion. Technology and services exports were up 10 per cent to €8.49 billion last year, while industrial and life sciences exports were up seven per cent, to €10.38 billion.
The UK remains the largest export market for Enterprise Ireland client companies, accounting for 29 per cent of total exports. Exports to the UK by Enterprise Ireland companies grew 6 per cent in 2023, to €9.97 billion. Food exports grew by 7 per cent, to €4.76 billion; industrial and life sciences exports grew 3 per cent, to €3.25 billion; while technology and services were up 8 per cent to €1.96 billion last year.
“This year looks like it’s going to be another strong year for us in the UK,” says Tom Cusack, Enterprise Ireland’s head of global markets.
That’s good, because the UK is the traditional first stop for rookie exporters. “All of our companies tend to start their export journey in the UK. But it’s also proven as a market where companies can achieve scale and can achieve market leadership,” says Cusack.
So far, Brexit has only had a positive impact on Enterprise Ireland-supported exporters, he reckons. “We’ve probably taken business from other European countries that would have been active in the UK,” he explains, attributing that both to the unique relationship Ireland has with the UK, and the fact that Irish exporters “really doubled down on the UK throughout the challenging time”.
Exports to the Eurozone, the second largest export market for Enterprise Ireland client companies, accounting for 25 per cent of total exports, grew by just 2 per cent however, to €8.61 billion, in 2023.
Within that modest figure lie some stellar performers. Industrial and life sciences exports, at €2.86 billion, were up 9 per cent, while technology and services exports were up 19 per cent, to €1.47 billion.
North America is Enterprise Ireland client companies’ third-largest export market, accounting for 19 per cent of total exports. In 2023 that cohort’s exports to the region were up by 5 per cent, to €6.48 billion. Of those, €5.9 billion were to the United States, which is why talk of tariffs there caused such concern.
However things pan out, diversification will be the key to coping. Happily, for the most part, indigenous Irish companies that sell into the US tend to do so having already cut their exporting teeth in other markets, which helps provide a buffer.
“We are really strong in ensuring companies are diversified and not overly committed in any single market, because things can change,” says Cusack.
There is scope for greater diversification, however, says Simon McKeever, chief executive of the Irish Exporters Association, given that just 10 countries account for 82 per cent of all Irish exports.
Despite a strong year overall, difficulties in these markets could have an impact here. Property woes are still impacting China’s economy, he points out, while EU powerhouse Germany has only narrowly avoided falling into recession. Moreover, Ireland’s overall trade with Britain, both exports and imports, were down significantly in the first half of the year. According to the CSO, Irish exports to Britain in July were down 28 per cent on the same month last year.
Difficulties in the UK economy augur poorly for next year too, following a budget in which Prime Minister Keir Starmer warned about the need for its citizens to “embrace fiscal reality”.
As 2024 draws to a close, exporters are understandably cautious. “When I talk to companies,” says McKeever, “they are expressing concerns about next year.”
