Ireland attracted 165 foreign direct investment (FDI) projects in 2020, placing it ninth on the European league table of the most attractive investment destinations. The ‘EY European Attractiveness Survey 2021’ reports that while Ireland experienced a drop in investment projects since 2019 (from 191), it has maintained its position in first place for the greatest number of projects per capita.
The report examines the performance and perceptions of Europe as a destination for FDI and includes a survey of 550 international investors looking at the impact of COVID-19 on their investment decisions.
EY’s analysis demonstrates that while Ireland’s number of FDI projects has now dropped for the second consecutive year, this is largely due to a “Brexit bounce” that occurred in 2018 which saw a record 205 projects. Looking more broadly at the trend for Ireland over the past five years, we have maintained a steadily high level of FDI at an average of 167 projects per annum. The US continues to be the most active investor country into Ireland, accounting for 58% of projects, followed by the UK (17%) and Germany (5%).
Commenting on the data, Feargal de Freine, Assurance Partner and Head of FDI, EY Ireland said, “our data illustrates how FDI was impacted across Europe in 2020 as the pandemic took hold. Despite our own reduction in FDI in line with our European peers, Ireland has held up well and in the last three years alone, we have secured over 550 projects which is truly remarkable for a country of our size. The strength of Ireland’s track record in FDI can also be seen in our GDP and more specifically the tax records for 2020 which were only down by 3.6% despite the devastating impacts of COVID-19, helping to facilitate the significant level of financial support given by Government to firms and individuals during the pandemic.”
Looking at the insights from over 550 global investors, the report also predicts that investment will rebound this year, with 40% of investors saying they plan to establish or expand operations in Europe in the next 12 months. Reflecting long-term optimism in Europe as an investment destination, 63% believe Europe’s attractiveness will improve during the next three years, with only 5% saying they think it will deteriorate. Meanwhile, 80% believe Western Europe in particular will be the most attractive global location for FDI post COVID-19.
With the EU Green Deal in place and ambitious targets to reduce greenhouse gas emissions in Europe by 55% by 2030, it’s no surprise that 92% of respondents stated environmental sustainability was either critical or important to their investment strategy. Furthermore, the availability of talent with technology skills was deemed critical or important to 89% of investors, demonstrating the significant role that digital skills will have on Europe’s attractiveness in the future.
Feargal de Freine also stated that, “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. In tandem with this, the tech talent within and sustainability credentials of the countries they are seeking to invest in, have never been more critical decision drivers.”
“Talent has always been key to investors – and now more than ever, tech talent – therefore it’s critical that Ireland continues to invest in STEM education in particular to ensure we have a strong pipeline of talent to feed further FDI. Equally, the importance of sustainability has only grown during the pandemic, with consumers, employees and policy makers increasingly placing the protection of the planet and resources front of mind in their decision making. Ireland is making strides in this area but will need to make some tough decisions in order to continue to be aligned with and attractive to investors as they advance on their own green journeys.”
The EY European Attractiveness Survey reports that Europe as a whole registered a reduction in FDI projects last year, attracting 5,578 versus 6,412 in 2019, representing a 13% reduction in line with Ireland’s own decrease and a modest one considering the unprecedented circumstances in 2020. This partly reflects the long lead time in making investment decisions and the increasing trend of firms wanting more, not less, investment locations to balance risk.
France was Europe’s top destination for FDI for the second year running, attracting 985 projects, an 18% annual decrease. Despite the looming impact of Brexit, the UK maintained its second place position with 975 projects, representing a 12% decrease on 2019, while Germany in third place secured 930 projects, experiencing a more modest 4% decline on last year.
Taking a deeper dive into the data, manufacturing FDI declined by 22% due to national lockdowns, restrictions on movement and uncertainty around demand, while logistics projects increased by 11%, to meet new ways of buying and selling and more direct to customer delivery. Life sciences was the only major sector that experienced an increase in FDI as businesses rapidly moved to meet the demand for COVID-19 vaccines, treatments and personal protective equipment
Source: EY Ireland