The mood among manufacturers remains grim, but is the decline in industry a product of recession or something more permanent, asks LAURA SLATTERY

THREE-STOREY STACKS of brightly coloured shipping containers pile up in Dublin’s Docklands as the crowd mills by. But the corrugated boxes are not stuffed with bulky merchandise ready to be sent overseas by Irish manufacturers – they are images in an architectural drawing, this week’s winner of a contest to design a public events space.

Anyone who depends on Ireland’s manufacturers for a living can be forgiven for feeling nervous. The amount of cargo passing through neighbouring Dublin Port plunged 16 per cent in the first six months of the year, while figures from the Irish Exporters Association (IEA) indicate that merchandise exports leaving Ireland are falling at an annual rate 7.8 cent.

Is this purely the recession talking or is the kind of industrial activity that has to be loaded into vast freight containers destined to become little more than a creative urban planning concept?

Ireland’s sea ports have not had to suffer the ignominy of finding space for ocean-sized car parks lined with unwanted motor vehicles – a fate that befell the major car-manufacturing nations.

Nevertheless, July’s manufacturing purchasing managers’ index (PMI), a snapshot of the economy of making things, did not exactly provide any bank holiday cheer earlier this week.

Jobs are still being lost, export orders are declining, new orders are plummeting sharply. “Disappointing” was the word that NCB economist Brian Devine used. “It will be a slow and gradual recovery as global demand remains fragile,” he said.

But what shape will Ireland’s manufacturing sector take when the economy eventually is reborn? A look back at a month of manufacturing insolvencies points to the kind of enterprise that might not make the cut.

Some 10 manufacturers hit the wall in July, according to information provided by InsolvencyJournal.ie. Frameco Limited and L Tracey Joinery were both manufacturers of builders’ carpentry and joinery. Discount Designer Kitchens Limited was a maker of wooden kitchen units. No prizes for guessing why these businesses went under.

The other manufacturing insolvencies were ER Engineering Limited (a metals manufacturer), Gulfland Traders Limited (a glass manufacturer), Oriserv Limited (involved in CD manufacturing), Food Processing Technology Limited (a packaging specialist) and Alternative Pizza Co (self-explanatory).

Finally, as printing is classified as manufacturing, the list is rounded off by two publishers of consumer and trade magazines, Cyndale Enterprises and HKM Publishing Limited.

These are all fairly “traditional” indigenous industries. And as the Central Statistics Office’s industrial production figures show, the “modern” sector is where Irish manufacturing is at.

Multinational-owned pharmaceutical, chemical and medical device manufacturers – described as “virtually recession proof” by IEA chief executive John Whelan – form a holy trinity of industries that have kept Ireland trading.

But, even more than the failures, the activities and announcements made by Ireland’s manufacturing success stories hint at the struggles, complexities and changes to come.

After years spent promoting “high-value manufacturing” clusters to multinationals, IDA Ireland’s brochure for the sector cites companies such as Boston Scientific, which manufactures stents at its Galway plant; and Pfizer, which produces the cholesterol-reducing drug Lipitor and makes the active ingredient for its anti-impotence drug Viagra in Cork.

And then, of course, there is Intel, the State’s largest private employer, spinning out semiconductors since 1989, and Coca-Cola, a seemingly straightforward consumer staple that generated a “big win” for the IDA last year with the announcement of a €190 million flavour manufacturing site in Wexford.

But all four companies have axed as well as created jobs over the past 18 months (or threatened to axe in the case of Coca-Cola’s warehouse and distribution facility).

The pattern bears out the Government’s oft-repeated claim that it wants Ireland’s manufacturing base to go up the value chain.

So while assembly-line jobs at the older processing plants swell the redundancy statistics, pockets of upper-end research and development (RD) positions are promised along with the investment press releases. From nanotechnology to neurostents, the expertise will be here, so the thinking goes, and higher-value activities cannot be so easily replicated in lower-cost locations.

There are still some happy anomalies. Brewing good old Guinness is more a legacy of Ireland’s industrial past than anything the Government can reasonably claim as the “knowledge economy”.

The desire to maintain the flavour of its Irish authenticity stops Diageo from shutting up shop and transferring production to any one of the other 49 countries in which Guinness is brewed. But recessionary pressures are clear.

Earlier this year, Diageo announced it was reviewing its plan to invest €550 million in the proposed Leixlip brewery, while in June, it cut 100 support function jobs, citing leaner times. The danger is that its original market will prove too expensive to stay in forever.

Meanwhile, Ireland’s infant formula industry is a rather different proposition to Guinness, and not just because the overlap in their end-consumers is presumably zero.

Unlike Diageo, where there is an image to protect, the baby milk sellers have nothing as stubborn as brand loyalty to anchor them here.

Manufacturers can step up production in key, cheaper markets such as Singapore without incurring any marketing headaches, because under World Health Organisation restrictions, no marketing is allowed anyway.

The high-tech food processing industry is itself an example of how successful Ireland has already been at moving up the manufacturing value chain.

But while it might take longer for other countries to copy and better a high-value manufacturing cluster than it does for a multinational to simply up sticks, the risk remains that they can and will do so.

Some commentators have pointed to Ireland’s dive into deflation as a possible band-aid, with the newfound competitiveness postponing an inexorable decline in manufacturing.

Certainly, the Government’s announcement yesterday that is to offer €250 million worth of employment subsidies to exporters suggests that regardless of how many nice RD jobs the economy wins, no one is quite ready to let the shipping containers become museum pieces just yet.