Using our strong US business connection to recover from Covid

In the midst of every crisis, lies great opportunity. The devastating consequences of the Covid-19 pandemic will live with us for some time, but so too will the ramifications of the economic earthquake it caused, making it all the more critical that Ireland remains an attractive prospect for foreign direct investment. The US-Ireland business connection is strong, with our unique shared history and natural position as the gateway to Europe.

But does this represent a chance for Ireland to reinvent itself? What are the key factors that US multinationals will look at when considering future investment in Ireland in the coming decade as we move to a post-Covid economic recovery?

EY partner and head of FDI, Feargal de Freine, says it is crucial that we nurture the elements that make up Ireland’s attractiveness for FDI as we navigate our way out of the Covid-19 pandemic.

“Approximately 20 per cent of all private sector employment in the State is directly or indirectly attributable to FDI and it contributes significantly to the exchequer, therefore it must be central to our recovery plans as we emerge from this crisis.”

EY recently published the EY European Attractiveness Survey 2021, which showed that Ireland has maintained its top 10 position as one of Europe’s most attractive locations for FDI, ranking ninth out of 48 countries. Ireland also maintained its position in first place for the greatest number of projects per capita.

“What we’re seeing in our data is that investor interest in Europe has not waned despite the pandemic and the inevitable reduction in FDI projects that we have witnessed in the past year. However, what has changed is that companies are now seeking to establish more diverse supply chains capable of insulating against future geo-political events,” de Freine notes.

Other EY research has shown that there are three sectors that will drive European investment growth in the coming years – digital, cleantech and renewables, and healthcare and wellbeing. “Therefore, we need to position Ireland for success in these developing areas.”

Demonstrating our focus on sustainability as a country will be key to our future attractiveness

Ireland is fortunate to have a strong reputation as a green and clean country to do business, De Freine says; “We have an abundance of clean energy sources such as wind, however that doesn’t mean we should rest on our laurels. Demonstrating our focus on sustainability as a country will be key to our future attractiveness.”

Declan Lavelle, partner at William Fry, echoes this, saying the life sciences and technology sectors have continued to thrive despite the global pandemic, and Ireland’s exchequer returns have been buoyed by the performance of multinational companies.

“The wider local economy greatly benefits from these multinational companies – for every 10 jobs a multinational creates in Ireland, another eight jobs are indirectly created in the wider economy,” Lavelle notes.

“We need to continue to incentivise multinational companies to locate substance-based operations in Ireland focused on creating well-paid, value-adding jobs for the economy. As a country, we have been hugely successful in utilising our tax policy to stimulate responsible economic growth but it’s not just the tax regime here. It’s our talent, it’s our language, it’s our access to the single market and it’s also about how we do business and interact with people from every corner of the world,” he states.

However, his William Fry colleague, David Kirton, partner technology, warns that from a tax perspective, the OECD rule changes, combined with US tax changes, may give rise to changes to the corporation tax regime which, for many years, was a key part of Ireland’s pitch to multinational investors.

“However, we need to remember that the case for investing in Ireland is about much more than corporation tax. Cuts in third-level education have taken their toll, for example, where the ratio of students to lecturers is one of the highest in the EU and spending per student is relatively low.”

According to Thomas Harden, senior relationship manager for EMEA Regional Multinational Coverage with BNP Paribas, during the last recession, Ireland experienced the dreaded “brain-drain”, in favour of other competitive countries.

“Since 2012 onwards we’ve seen talent return to Ireland, but post-Covid that talent faces significant challenges in terms of affordable housing, infrastructure, relatively high income tax levels, all of which are compounded with a very high cost of living, especially in Dublin. What incentives will those individuals have in returning to an overcrowded and expensive housing market and increasingly costly way of life, especially with the looming threat of possible inflation. These issues are well known and not sustainable,” he warns.

The availability of good-quality, high-speed internet connectivity is so essential for an effective remote working strategy to be feasible

Siobhán Gantly, chief human resources officer with Vistatec, agrees. “Availability of talent is one of the core reasons Vistatec established our global HQ in Dublin, Ireland, almost 25 years ago, and it is the primary reason we have remained here.”

Yet Gantly also has concerns about Ireland’s ability to continue providing that talent pipeline. “Like many high-growth cities, Dublin has become an expensive place to live. I can say with some certainty this has impacted our ability to attract and especially retain talent here. If this trend continues, it will inevitably impact the domestic retail, hospitality, and travel industries’ recovery,” she warns.

Vistatec has sought to combat these challenges by offering greater flexibility in remote working and Gantly admits that “it is hard to see things ever going back to the way they were”.

“Nevertheless, we believe there will be somewhat of a shift away from city living which may ease the pressure on the demand for accommodation in Dublin and other major cities; we already see this trend in the US and other global locations in which we operate.”

The availability of good-quality, high-speed internet connectivity is so essential for an effective remote working strategy to be feasible, says Gantly, who adds that more national support for remote working hubs should be provided.

Ireland will need to think outside the box if it is to sustain and cement its international reputation as an attractive FDI prospect. Alison Campbell, director of Knowledge Transfer Ireland (KTI), says the “innovation imperative” is becoming more crucial for companies than ever before as we emerge from the Covid pandemic and look to an evolving future.

“Improving competitiveness by finding new ways of doing things, developing new products and bringing them to new markets etc, is the key to stay ahead of the game and ahead of the competition. Bolstering corporate innovation to do this by tapping into the research, knowledge and expertise from the Irish third level is a real opportunity for companies of all sizes,” she says.

Campbell explains that the KTI website provides various tools and information to help signpost and guide companies through this process, such as identifying the right research organisation to work with and finding the funding available for R&D activity with third-level research or in-company.

“As a starting point, the best place a company considering this opportunity for innovation might begin is with KTI’s Directory of Research, Development & Innovation Supports which provides a snapshot of the various players and supports across Ireland’s research and innovation system and details of how to work with them and the kinds of financial supports there to help.”