Irish
Forfás says Employment in IDA and Enterprise Ireland client firms grew by 1,187 in 2007; Over 18,500 people were employed in research activities across Ireland in 2007
By Finfacts Team
Jan 14, 2008, 15:30

Martin Cronin, Chief Executive Officer of Forfás

Martin Cronin, Chief Executive, Forfás commented “We are facing a more testing international economic environment which presents further challenges to the success of enterprise and economic sustainability and growth. 15 years of economic success, however, has provided Ireland with resources and strong enterprise foundations which mean that we are now better placed than ever before to tackle issues and successfully progress to the next phase of economic development. Substantial challenges for enterprise will persist but Ireland is well placed to address them.”

Economic Progress - the Exporting Sector

“Over the last five or six years Ireland’s economic growth has been driven by domestic demand and not by our international competitiveness. Projected lower domestic demand for 2008 has reinforced the absolute need to revitalise other sources of economic growth. The way this can be achieved is to focus on the development of Irish enterprises supplying goods and services abroad. To reorient the economy towards export led growth we will need to be both innovative and competitive.”

“Services now account for 40% of our total exports and at current growth rates will exceed 50% of export earnings by 2010. The Forfás Services Strategy Group will publish recommendations during 2008 to ensure enterprise policy continues to provide a supportive environment for the expansion of this key sector. It is also timely to ensure that our national trade strategies are oriented to best support the internationalisation of Irish services enterprises and services exports from Ireland. The EU Services Directive will open new opportunities for Irish services businesses to increase their trade internationally.”

“Outward direct investment will increase in importance for firms who are expanding sales overseas. Multi country presence has become international practice for fast growing companies and an important strategy in keeping domestic companies globally competitive. Companies can gain advantage by investing in overseas operations and by accessing foreign market opportunities and lower cost production inputs.”

Cost Competitiveness

“High and increasing costs are a challenge that Ireland needs to face head on in 2008. 2007 saw a loss in Ireland’s international price competitiveness due to the appreciation of the euro and wage increases ahead of productivity growth rates. A further weakening of sterling or the US dollar, together with anticipated moderation of economic growth in our main trading partners would result in an even tougher international trading environment. Irish exporters will need to continue to develop contingency plans for these eventualities, in particular with a focus on developing into the euro-area and emerging markets.”

“Forfás agrees with the National Competitiveness Council in its proposal for a national programme to restore cost competitiveness including the setting of a national inflation target close to the ECB two percent target.”

Research and Innovation

“Innovation is key to increasing our export growth. The transformation of the Irish science and innovation system over the past ten years has been dramatic. Forfás research and innovation expenditure data shows Ireland has reached the EU average spend on Higher Education R&D as a proportion of GNP, and business R&D expenditure continues to grow. The Government’s Strategy for Science, Technology & Innovation has ambitious targets for doubling the number of firms doing R&D and thereby increasing returns to enterprises from innovation by doubling the high-end skills and researchers available from humanities, social science and science and technology disciplines to undertake research and manage innovation in firms.”

“The fundamentals are in place and the challenge now is to ensure that firms can effectively absorb the ideas and the high skills from investment in research to serve customer needs better and compete in international markets.”

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Reclaiming the Competitive Edge – Partnership

“International competition is creating pressure for greater efficiency, quality and productivity in both indigenous and foreign owned firms in Ireland. Achieving higher relative productivity growth rates will be important for future international competitiveness and securing sustainable wage growth. Our productivity growth rates have weakened in recent years. Productivity growth will have to come from both a shift in employment towards higher value added activities and from raising the skill levels of existing employees in all sectors of the economy.”

Forfás says that regaining competitiveness will require change in the workplace and a partnership approach to developing more innovative workplaces. Partnership has delivered for the Irish economy at the national level and if we are to move towards more innovative, higher value activities and an upgrading of skills the same level of partnership will be needed at firm level. The enterprise development agencies will continue to support companies and their employees in securing and expanding their operations in the more challenging environment ahead.

Reclaiming our competitive edge also requires us to:

• Address the need for next generation broadband networks;
• Accelerate the pace of regulatory reform;
• Ensure increased competition in locally traded services; and
• Implement in a timely manner the actions set out in the Government’s Energy White Paper.

Overview Enterprise Statistics

Employment

• The Forfás Employment Survey for 2007 indicates that total permanent employment in client firms of Enterprise Ireland and IDA Ireland was 290,077 in 2007 (up 1,187 from 288,890 in 2006). In addition, there were 30,658 in temporary/part-time employment (down from 32,028 in 2006). Gains were made in IDA Ireland financial services firms (+2,000) and in the indigenous internationally trading services sector (+1,500).
• Reflecting the ongoing structural change in the economy, job losses in Enterprise Ireland and IDA Ireland client firms totalled 22,657 in 2007, an increase of 1,979 from 20,678 in 2006. These were offset by gains in employment of 23,844 in 2007 (although these are down from 27,461 in 2006)¹.

Research and Development

• Private and public investment in R&D in agency firms is estimated to have reached a new record of €2.5 billion in 2007, equivalent to 1.57% of GNP. R&D investment by enterprises is estimated at €1.56 billion for 2007, with Government funding increasing to €995 million.
• The focus of State investment through Enterprise Ireland and IDA Ireland continues to shift towards higher-quality and knowledge intensive activities.
• IDA approved support for 45 major new mobile enterprise R&D investments in Ireland in 2007, which will entail total investment of €310 million; and
• EI supported 157 projects under its productivity improvement fund in 2007 and c.70 high potential start-ups. The number of indigenous firms with significant R&D spend of over €2 million increased to 43.
• Over 18,500 people were employed in research activities across the state in 2007.

Productivity

• Overall economy-wide productivity growth has slowed in Ireland from an impressive annual average of 3.3% over the late 1990s, almost twice the OECD average, to 1.3% over the period 2003-2006. This is because much of the recent job growth has been in locally traded services and construction, sectors with lower rates of productivity growth and relatively slower productivity growth in high-tech sectors.

Sales and Exports

• 2006 was a good year for exports – up 8.3% (nominal) in Irish-owned firms and 5.8% in foreign firms. Estimates for 2007 are 2.7% (Irish, nominal) and 5.2% (foreign, nominal).
• The internationally-traded sector continues to perform well in sales, exports and employment. 2006 was a particularly good year for Irish ITS sector (exports up 11.8% nominally), and we predict this to continue in 2007, with a further rise in exports of 15.8% over 2006.
• Services exports are projected to have increased by 15% in 2007 in real terms following growth of 11% in 2006.
• Sales were up nominally by 5% in Irish-owned firms and 5.6% in foreign-owned firms in 2006. In real terms, this equated to 3.6% and 4% respectively. Sales are estimated to have risen by 1.6% (Irish) and 4.7% (foreign) in 2007.
• Value added (i.e. sales less the cost of materials and services inputs) grew strongly in 2006 for Irish-owned firms to €9.7billion, representing a nominal rise of 8.5% over 2005.

Irish Economy Expenditures

• Results from the Forfás Annual Business Survey of Economic Impact (ABSEI) shows that expenditures in Ireland by agency clients amounted to €34.8 billion in 2006 excluding corporation tax payments (€33.4 billion in 2005), which consists of €12.4 billion on payroll costs, €12.8 billion on Irish produced raw materials and €9.6 billion on Irish services.
• Total expenditure in the Irish economy was up significantly for foreign-owned firms (7.2% overall in nominal terms), especially in the manufacturing sector (9.7% nominal or 8.9% real) but total Irish economy expenditure for Irish-owned firms was almost static (up 0.9% from 2005).

¹Note that the employment figures are provisional and may change slightly.