The Tánaiste has been warned of a drop-off in foreign direct investment as political and economic changes exacerbated by Covid-19 make it “much more difficult” to lure foreign companies to the Republic.
Briefing notes prepared for Leo Varadkar by civil servants in the Department of Enterprise state that "it is already clear" that the conditions for attracting FDI, which supports hundreds of thousands of jobs in the State, "are more challenging".
Citing the ongoing possibility of a disorderly Brexit, changes to global taxation rules and the global economic downturn due to Covid-19, the briefing papers state that "it can be expected that attracting FDI to Ireland – at least at the record levels of recent years – will become much more difficult".
The notes cite studies that suggest that, globally, FDI will fall by 30-40 per cent in the next 12-18 months. The Covid-19 pandemic will also require a radical restructuring of the long-term strategic plan for the State's inward investment agency, IDA Ireland, they say.
The agency had drafted its strategic plan before the pandemic hit, but the officials warned Mr Varadkar that this would “now need to be reconsidered given economic developments over the last number of months which will impact FDI in Ireland and potentially our capacity to sustain the high level of investment flows of recent years”.
“The introduction of travel restrictions around the world and the widespread restrictions on external visitors by client companies is also already disrupting the typical way in which the IDA engages with investors. The significant impact to date is evident in the reduced number of site visits by potential investors, client meetings, marketing trips, announcements and events,” according to the briefing documents.
Trade tensions
The notes also warn of international trade tensions, saying there is “growing support across the EU for what could be regarded as more protectionist policies, which could have a negative impact on Ireland’s interests, especially with respect to industrial, single market and competition policy”.
This trend, along with the departure of the UK, “a key like-minded ally supporting an open trading policy and the efficiency of the single market, will be a key challenge for us to address,” the notes state.
They also contain a warning of “de-globalisation pressures”, with the framework that supports global trade “under increasing pressure, with competing interests creating deep fractures in the multilateral system”.
