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FDI Jobs in Ireland rises 56% however European inward investment stalls as recession looms
Jun 10, 2009

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Job numbers in Ireland which have resulted from foreign direct investment (FDI) have jumped a staggering 56% (2007/2008) according to a report published by Ernst & Young.

Over 6,300 jobs were created in Ireland in 2008 in comparison to just over 4,000 in 2007. The firm’s 2008 Country Attractiveness Survey also lists Ireland as 9th overall in terms of its position in the top 15 most attractive destination for inward investment in Europe. This is despite a year of news reports which has seen plans by multinationals based in Ireland to move jobs to more cost-competitive locations.

Indeed, today’s report confirms that 2008 saw a 35% increase in the number of FDI projects announced in Ireland with 108 new FDI projects announced for Ireland compared to just 80 in 2007.

Commenting on the report, Mike McKerr, Senior Partner with Ernst & Young’s Irish firm confirmed “Today’s report is positive news for Ireland’s international competitiveness. Our own economic forecast unit reported earlier this month that competitiveness is key for future growth and that exports will take centre stage in leading recovery. Low corporate tax, skilled workforce and our international reputation make Ireland well positioned to attract foreign investment – today’s report confirms this”.

Ireland’s attractiveness as a location for FDI was in strong contrast to overall European figures which show that inward investment into Europe was flat in 2008, demonstrating the global recession’s toll on investment projects into the region.

The 7th annual report, which examines figures for international investments into Europe, new projects or expansions, revealed that in 2008 Europe secured 3,718 investment announcements, six more projects than in 2007. The number of projects remained steady but the impact of the impending recession on new employment was severe. The number of jobs created fell 16% to 148,333, accelerating a downward trend underway since 2004.

“Five years of sustained inward investment growth in Europe came to an end in 2008,” said Marc Lhermitte, Partner at Ernst & Young and author of the report. “But, the true picture of how the global recession has hit inward investment has yet to emerge. Investment decisions for 2008 will have been made many months earlier, which explains why in 2008 Europe secured as many FDI projects as the year before. We expect 2009 to tell a very different story.”

FDI into Ireland - the details

Ireland’s 108 FDI investment projects in 2008 is 35% more than in 2007. These 108 investments created over 6,300 jobs (56% more jobs than 2007), ranking Ireland as the 9th highest location for FDI job creation in Europe.

The largest investor in Ireland remained the US (61 projects), followed by UK (20), Germany (5), France (3), with additional investments made by countries including Japan, India and Australia.

Key areas for investment included Business Services (19 projects), Software (13 projects), Scientific Instruments (10 projects), Electronics (9 projects), Pharmaceuticals, Insurance and Pensions and Financial Intermediary services (7 projects each) with additional investments made in areas including Telecommunications, Publishing and Food services.

Europe – The winners and losers

Apart from Ireland, there were positive or relatively stable trends in Germany, Switzerland, Sweden and Italy. Germany’s 28% increase - was fuelled by new regional headquarters for German or Eastern European markets, and by industrial demand for business services and software.

Some industries are so far weathering the recession better than others.

Machinery and equipment saw a 19% increase in FDI projects due to a surge of projects to supply wind turbines, solar components, fuel cells.

Marc Lhermitte said: “One of the biggest winners has been the renewable industries due to new green market opportunities, with almost 6,000 new FDI jobs in 2008. Astute businesses will be positioning themselves to take market share and gain access this sector.”

IT outsourcing, financial and business services were early victims of the downturn as their clients struggled, especially in the UK, France and Spain. New jobs from these sectors and countries slumped by 33% in 2008. Former FDI hotspots such as the Czech Republic, Slovakia or Turkey, saw numbers fall dramatically especially in automotive and electronics.

Where the investment in Europe is coming from

Europe's inward investment market remains mostly fueled by European (German, British and French mostly) and US investors (51% and 25% respectively). BRIC (Brazil, Russia, India and China) investors contributed to a relatively small number of projects into Europe (6%), but the trend is rising fast: projects from China and India have jumped from 118 to 182 projects.

2009 outlook

The recession will impact European FDI even more in 2009. Provisional data from the first quarter already indicates an 8% drop in project announcements compared with the first quarter of 2008. For the rest of the year, 53% of business leaders interviewed in the study say they have no green field or expansion plans for 2009.

Europe as a refuge - emerging economies lose favour in short-term

The uncertain climate has resulted in a temporary mood-shift amongst investors to more familiar markets. For the immediate future, businesses see Europe as the safer option to make their investment.

According to the survey, which interviewed 809 global investors in February 2009, Western (40%) and Central and Eastern Europe (39%) were neck-and-neck as the “safest” regions for being the most attractive regions in which to establish or expand operations.

There has been a retreat in investor sentiment from the emerging BRIC markets. After topping the attractiveness table in 2008, China loses the lead as the most attractive region in which to establish operations in 2009, ranking third. India is fifth, behind North America, whilst Russia and Brazil, previously rising stars, trail in sixth and seventh place respectively.

Marc Lhermitte said: “Today, business leaders are focused on living through the crisis and maximising returns on existing assets. Though entering and operating in new markets can offer tremendous opportunities, this can also increase risks which decision-makers can ill afford.

“The BRIC regions are not providing the absolutely safe ground international investors are looking for. Europe is seen as predictable and safe. Investors are showing greater loyalty to their countries of origin and historical markets, launching fewer projects in Emerging Europe. And that’s why - for the moment - at least they’d sooner stay at home than venture abroad.”  

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