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Ireland Compas Growth

Ireland Continues To Attract Foreign Direct Investment (FDI)

Feb 26, 2015
Over the past few decades Ireland has become a destination of choice for Foreign Direct Investment (FDI).  The announcement this week by Apple to invest €850 million in the development of a new data centre in Co. Galway is further evidence that Ireland remains one of the top European destinations for FDI. The investment by Apple in a new data centre is expected to create over 300 jobs during each of the phases from construction to operation, with an expected 100 to be created once the centre is fully operational.  In recent years other companies such as Ericsson, Microsoft and Google have all invested their data capabilities in Ireland as our predictable climate and temperatures allow such companies to minimise the cost of cooling the vast level of equipment stored in the data centres.  

World Bank “Doing Business 2015” Report

Apple’s €850 Million investment is not the only good news for FDI into Ireland.  In recent months the World Bank’s “Doing Business 2015” report placed Ireland 13th out of 189 countries for ease of doing business, which is a jump of four places on last year.  In addition to this, the report indicates that Ireland has ranked as 5th for ease of trading across borders and 6th for ease of paying taxes and protecting minority investors. When reviewing Irelands ranking for ease of paying taxes with comparator economies such as Canada, United Kingdom or New Zealand Ireland’s ranking increases to 1st  place.  

Ireland Continues To Grow FDI

A recent briefing issued by IDA Ireland shows that there were 197 investments during 2014 which is an increase of 20% on the prior year.  Of these investments 88 came from new name investors.  Some other key indicators from the IDA briefing are as follows:
  • Employment in IDA client companies rose by 7,131 to 174,448
  • 10,000 people are currently employed in construction projects with the IDA
  • Exports increased by 2% to €124.5bn
  • Irish economy spends increased by 8% to €22.4bn
  • Research and Development (R&D) expenditure increased by 7% to €1.4bn
  • Employees working in R&D increased by 9% to 11,522

Why FDI continues to grow for Ireland

As outlined above, Ireland has been a destination of choice for FDI for many years.  This fact is further substantiated by the FDI Intelligence Report for 2014 which reports that Ireland was the only country within the European top 10 to record a growth in FDI project numbers.  Given Ireland’s size and population securing FDI of €4.2bn is a strong result, especially when compared to FDI of €6.6bn secured by France. The principle source of FDI for Ireland is from the US, with investment of more than US$165bn.  This level of investment by the US reflects higher than the total invested in the BRIC (Brazil, Russia, India and China) combined. So why does Ireland attract such levels of FDI?  When we considered this question we identified a number of factors which contribute to Ireland’s attractiveness as a place to do business within the global market.  Some of these factors include the following:
  • A skilled, flexible and adaptive labour force
  • Corporation Tax Rate of 12.5% on trading activities
  • Adaptable and efficient business legislation
  • Barrier-free access to over 500 million customers in Europe
  • The only English speaking country in the euro currency zone
  • 25% R&D Tax Credit
  • Double Taxation Agreements with 72 countries, of which 68 are in effect
While each of the above are significant factors in attracting FDI to Ireland the factor which has received most attention in recent months is the 12.5% Corporation Tax Rate.  While there has been much debate surrounding Irelands Corporation Tax Rate, the Minister for Finance made it very clear in his Budget 2015 speech that the rate will remain unchanged when he announced that: “The 12.5% tax rate never has been and never will be up for discussion. The 12.5% tax rate is settled policy. It will not change.”  

The Future for FDI in Ireland

The recent announcement by Apple is a positive indicator that Ireland will continue to attract FDI in future years.  To ensure the continued growth in FDI into Ireland it is important that Ireland continues to develop each of their strengths from providing a skilled labour force to ensuring ease of doing business for those investing in Ireland.  As part of Ireland’s strategy it is vital that our Government acts on the announcements they made in Budget 2015 in relation to a “Roadmap for Irelands Tax Competitiveness”, which included plans for the implementation of a “Knowledge Development Box”. Ireland saw the beginning of its recovery during 2014 and it is expected that such recovery will continue through 2015.  FDI will play a significant role in Ireland’s recovery which is why it is important for our Government and State bodies, such as the IDA, to ensure our FDI offering is the most competitive within the market and is therefore capable of attracting and retaining significant FDI.    Images: Shutterstock
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