Martin Shanahan, CEO, IDA Ireland
IDA chief Martin Shanahan speaks to Ruraidh Conlon O’Reilly after announcing record-breaking FDI results, and reveals when he thinks companies will decide whether to move in the wake of Brexit.
It’s the first working day of a new year, but perhaps the blow is softened somewhat for Martin Shanahan and his IDA colleagues by the fact that the results he will shortly announce are among the most impressive in his organisation’s history.
Then there’s an added bonus, too: not only does he get to announce those headline figures of almost 19,000 jobs created, a record 200,000 people employed in FDI companies, and 244 new investments – up from 213 the previous year… he gets to do so with the help of a talking robot.
Shanahan follows up his interview with IBM’s Watson artificial intelligence robot to talk exclusively to Business & Finance about what lay behind 2016’s figures. “I think it’s a combination of factors,” he explains. “I think it’s the fact that Ireland has remained so attractive: all of the fundamental things which we have marketed – the availability of talent and skills, the pro-enterprise environment that exists here and has been built up over years, the fact that we have a competitive, consistent and transparent taxation regime, Ireland looks extremely stable as a country… All of those things contribute. And obviously the work my colleagues in IDA do right across the globe in marketing Ireland and how we have positioned ourselves I think has all contributed to a really strong year.”
Shanahan – not to mention the press corps – devote plenty of attention to Brexit throughout the morning, addressing a scenario whereby UK-based firms – and particularly London-based financial services companies – are weighing up their options and considering moving here.
He reports a “significant increase” in enquiries from UK, US and Asian companies since the vote to leave the EU, and is “cautiously optimistic” about winning new business.
As the new year dawned, Shanahan – along with everyone else apart from Theresa May – was aware that “Brexit means Brexit” – but was otherwise faced with preparing for a wide variety of scenarios regarding precisely what form it would take.
But it would happen. “What kind of Brexit it will be or how the EU-UK negotiations will progress is too difficult and too early to say,” he says. “At this point I think a lot of companies are looking at what it means for them and they are working on the basis that it will happen – and that they are not necessarily awaiting the outcome of the political process. They’re going to make their own decisions separate to it.”
However, he does point out that the political and the commercial timelines for Brexit move at two very different speeds. Politicians are working to an electoral cycle and a negotiation timetable measured in years. Large corporations need certainty, contingency plans, and have to factor in enough lead-time to move facilities and people as well as become regulated in a new jurisdiction if needs be.
they are not necessarily awaiting the outcome of the political process
“What that means is that companies will make decisions before, maybe, an ultimate trade deal or a post-Brexit UK-EU scenario is clear, but at whatever point companies are making decisions we will be there to support them,” Shanahan says. “So that poses no difficulty for us at all.”
A financial services company that decides to move to Ireland – or any other new jursidiction, for that matter – will have a new regulator to satisfy, a new legal framework with which to comply and new tax arrangements to realign with, even before factors such as workforce or location are considered.
“I think it’s not a decision that’s taken lightly,” acknowledges Shanahan. “They have done significant amounts of due diligence and will do significant amounts of due diligence before they make those decisions. So we’re talking certainly in terms of months. Many of them have already been doing that due diligence for months. My expectation is that from the second quarter of this year we will start to see companies making decisions to potentially locate elsewhere.”
Brexit may be the biggest headline of the day, but when the IDA’s results are broken down there are other interesting stories to be found. Some 176 of the year’s new foreign direct investments came from the USA, 49 from Europe – and 19 from less familiar territory. Six of these were from Japan and five from China. “That would not have been the case for or five years ago,” Shanahan told the room.
“Yes, we’ve seen a significant diversification in the number of companies coming from what we term growth markets,” he says. “It varies across the various countries, so it includes everything from financial services to technology to business services and, in some cases, pharma and medical devices. So it’s across the whole panoply.”
R&D activity is another important piece of the puzzle because it generates demand for highly qualified employees above and beyond the norm, a trend that Shanahan deems “very significant”. One such company to invest last year was First Data, which established an R&D hub in Nenagh to house up to 300 highly skilled employees.
“Again, they’re across a range of sectors. Technology – we saw a range of that this morning in terms of IBM’s Watson – pharmaceuticals and medical devices… there’s also R&D investments in business services and in financial services. That often places the Irish operation at the centre of what the next wave of development is for the company. In many cases they have won a new mandate in order to undertake this research and development. It is moving the company up the value chain. That’s hugely important from IDA’s perspective.”
My expectation is that from the second quarter of this year we will start to see companies making decisions to potentially locate elsewhere
Shanahan took the helm of the IDA in 2014, having previously led government policy agency Forfás and served with the National Competitiveness Council, the Expert Group on Future Skills Needs, and Fáilte Ireland. The last new IDA office to open was in Austin two years ago – the 19th, he recalls – and the agency received extra funding along with Enterprise Ireland in the most recent budget, with one eye on fighting for Brexit business.
“We don’t have a plan to open up a new office anywhere else at the moment, albeit that we are exploring some new markets from existing offices. The number of people we’ve located overseas has increased in the last two years: we received 35 additional headcount people under [five-year strategy] Winning, of a broad programme in 2014; they are all now well in-situ and winning investment for Ireland.”
As for his personal highlight of the year, Shanahan is too diplomatic to be drawn – no surprise, given that he shares the top table with the minister and is a seasoned media performer. “Achieving the results that we announced today is always my personal highlight. If you don’t achieve the results it would be the lowlight.”
Achieve them they did, and at the end of a particularly unpredictable year. Although currently ahead of target, what happens over the next 12 months, with attention focused on the prospect of firms exiting a Brexiting Britain, will have a major impact on the IDA’s goal of 80,000 new jobs and 900 new investments by 2019.