In a letter sent to the Department of Enterprise in July, IDA Ireland warned that competition for foreign direct investment was becoming more intense and aggressive than ever as the State struggled to deal with its own infrastructure issues. The availability of energy and water and the shortage and cost of housing were highlighted as challenges in attracting inward investment, as were high rates of personal taxation and the need for more competitive incentives for research and development activity.
That warning was timely in light of a downturn in Ireland’s FDI performance during 2023. The EY Attractiveness Survey, published the same month, revealed that the State attracted 100 Foreign Direct Investment (FDI) projects during 2023, placing it 11th on the European league table of the most attractive investment destinations, down from 10th place in 2022. More positively, Ireland ranked fourth for medical devices, seventh for finance, and eighth for software and IT projects.
Putting these findings in context, EY Ireland assurance partner and head of FDI Feargal de Freine notes that FDI into Europe stalled in 2023 following two years of growth.
“The number of projects in Europe in 2023 fell 4 per cent and Ireland’s performance was reflective of this wider trend,” he says. “Investment from the US into Europe declined by 15 per cent in 2023 and, since three in five projects into Ireland originate in the US, this had an amplified impact on Ireland’s performance. In addition, sectors such as technology and global business services, where Ireland has a strong position, experienced significant global adjustments in 2023.”
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Despite an exceptionally challenging external environment, Ireland slipped only one place in the annual ranking of European countries and attracted 100 FDI projects in 2023, some of them highly significant in terms of capital investment and job creation, de Freine adds.
He believes the State’s successful FDI model centred on talent, business-friendly policies, stability and access to Europe’s single market will continue to serve it well.
“These will all continue to be important factors,” he says. “When we surveyed key FDI decision makers earlier this year, 79 per cent said they expected to establish or expand operations here in the next 12 months and 66 per cent expect that Ireland’s attractiveness as an FDI location will improve in the coming three years. Both of these measures are markedly improved when compared to our 2023 survey, indicating an improvement in investor sentiment.”
However, the global FDI landscape is changing and becoming more challenging.
“Stability, transparency and predictability are extremely important in a world that is rapidly changing,” de Freine points out. “Getting the tax, legal and regulatory environment right will demonstrate to overseas companies that Ireland is a location where they can invest with confidence and create long-term value.”
With regard to improving Ireland’s FDI ranking, survey respondents highlighted a number of key areas. These included ensuring we have the right mix of skills in the workforce, together with improving geographic balance and investing in infrastructure.
“With the global landscape continuing to evolve, Ireland will also need to evaluate how our grant, incentives and tax credit regimes can most effectively compete,” says de Freine. “Moreover, we need to ensure Ireland’s credentials in next-generation growth areas like artificial intelligence, digitalisation and decarbonisation are strengthened and enhanced. These credentials, alongside the talent and other attributes that have long made Ireland a location of choice for global investment, and a strategic partner for US corporations in Europe, will be key to supporting Ireland’s FDI attractiveness.”
In light of potential policy changes on the part of the incoming Trump administration in the United States, some concern has been expressed regarding a potential over-reliance on investment from that source.
“The US is the largest originator of FDI globally and Ireland’s overweight share of that is an enduring advantage,” de Freine notes. “That said, Ireland needs to continue to improve its value proposition for companies headquartered in other countries, as well as ensure that we are known in other markets. The UK continues to be an important source of inbound investment, as do our fellow EU countries. Further afield, markets such as Canada, the Middle East and Asia are locations where we can make further inroads”
Calvin Lan, CEO of Huawei Ireland, echoes that sentiment. “Huawei believes that FDI in Ireland should be encouraged from America, Asia and everywhere in between,” he says. “A strong and diverse pipeline of foreign investment helps create an innovation mindset. It also supports the development of Ireland’s home-grown start-up ecosystem, leading to greater collaboration, co-operation and opportunities for Irish companies to go global. The support government agencies, like IDA Ireland, have contributed significantly to our growth, and we are very thankful for that.”