Dell decision to hurt Irish exports, says IEA

The decision by Dell to move its European manufacturing to Poland could reduce the value of Irish exports by up to 6 per cent, according to the Irish Exporters' Association (IEA).

IEA chief executive John Whelan said Dell, as the largest manufacturer in the State, accounted for around 6 per cent of the State’s €148.2 billion worth of exports last year.

Mr Whelan said the cost challenges faced by Dell were similar to those faced by other Irish-based manufacturing companies and that “off-shoring” of production to lower-cost countries was happening in many other firms on smaller scale.

In its end-of-year review published today, the IEA said goods and services exports in 2008 were 4 per cent lower than 2007 and warned operating costs in Ireland were higher and rising faster than in other European countries.

The IEA also forecast a 5 per cent drop in exports this year that could result in €7.5 billion in lost sales and “up to 35,000 job losses”.

With the exception of the UK, where a 33 per cent depreciation in the value of sterling hit exporters to that market, declining overseas sales were a direct consequence of a loss of competitiveness, Mr Whelan said.

“Lost sales in the euro zone of 7 per cent must, in the main, be put down to a loss of competitiveness of Irish exports as wage and non-wage costs in Ireland continued their long term trend of rising faster than the European average,” he said.

The cost base in Ireland was now much higher than other European states and labour costs were "32.4 per cent higher in 2007 than at the start of the decade relative to that of our trading partners,” said Mr Whelan, adding there had been no increase in productivity to match the wage increases.

Non-wage costs were also hurting exporters, and the IEA pointed to data from Eurostat showing Ireland has the most expensive industrial electricity in the EU - some 34.4 per cent above the EU average.

“This places Ireland as the most expensive location within the EU for electricity,” Mr Whelan said. While not all the Dell jobs were leaving and it would remain a significant employer, he said the "lack of attention to cost drivers in the economy cannot continue".

By sector, beverage exports were 20 per cent lower in 2008, while agri-food exports fell down 7 per cent. Many operators in this sector rely heavily on the UK market.

Computer industry exports dropped by 22 per cent last year to €13.5 billion.

Despite global economic weakness pharmaceutical and chemical exports grew 2 per cent last year, and the sector accounts for over €43 billion of the State’s total.