Joanne McEnteggart, co-managing director for First Names Group in Ireland, considers what’s next for foreign direct investment in Ireland.
From Brexit to the EU ruling on Apple’s tax bill and Trump’s success in the US presidential elections, 2016 was the year in which we learned to expect the unexpected. So what does that mean for 2017?
We are certainly starting the year in good shape. The economy is still growing at a healthy rate – forecasts for 2017 generally see Irish GDP growth of at least 3% and, at 7.2%, our unemployment rate is at its lowest since August 2008.
The generally positive economic outlook is reflected in the FDI sector, as illustrated by the IDA’s announcement in early January that total employment at overseas companies now stands at 199,877 people, the highest level on record.
All encouraging signs, but any optimism is necessarily tempered by ongoing uncertainty from the largely unforeseen and unprecedented political upheaval that has marked 2016. I believe however that with change comes opportunity.
Post-Brexit, Ireland’s membership of the EU offers a number of advantages to investors and companies, including: access to a common market and a European talent pool that can freely travel and work in Ireland; passporting rights that allow financial services providers to sell their services freely across the EU; and a harmonised data protection regime under the forthcoming General Data Protection Regulation (GDPR).
Indeed, in the wake of the UK’s referendum decision in June 2016, corporate service providers have received a number of specific enquiries from companies in the UK, the US and Asia seeking to mitigate risk and ensure that they have access to the European market post-Brexit.
In the succeeding months, we have seen that interest translate into action. Citigroup is looking at moving jobs from London to Dublin as part of its preparations for Britain’s exit from the EU, as is Barclays – and more financial institutions look set to follow.
We can’t ignore the fact that our open, highly globalised economy is affected by international events, but we can continue to play to our strengths and seek out and exploit FDI opportunities as they arise
CHALLENGES ON THE HORIZON
Indications that businesses are giving serious consideration to Ireland as an alternative to the UK are borne out by my own experience. At First Names Group, we are currently speaking with a UK-based cyber security company that is looking at Ireland rather than the UK as part of a planned European expansion.
Of course, there are companies that are adopting a wait-and-see position until it becomes clearer whether it will be a ‘soft’ or a ‘hard’ Brexit, with the latter looking increasingly likely in light of Theresa May’s speech on January 17th in which she outlined the UK’s objectives for separation from the EU.
Investors are also keeping an eye on the ongoing issue of the EU’s ruling on Apple’s tax position in Ireland, which it is expected to continue within the courts for a number of years to come, and on Trump’s plans for bringing capital and jobs back to America through tax reform.
In my opinion, tax has moved further down the priority list for corporations from the US and other jurisdictions. This is especially true for businesses interested in growing their companies by expanding into Europe and that look to Ireland as an ideal location to manufacture their goods and develop their services.
Indeed, Ireland still retains – and in some instances has improved on – the benefits that have long made it a jurisdiction of choice for investors. These include a pro-business environment, a young, educated workforce, competitive costs and, perhaps most importantly, EU membership.
Benefits that have no doubt contributed to Ireland ranking fourth in Forbes’ recent Best Countries for Business 2017. We can’t ignore the fact that our open, highly globalised economy is affected by international events, but we can continue to play to our strengths and seek out and exploit FDI opportunities as they arise.