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Foreign Direct Investment

Ireland is an attractive destination for investment but inflows are highly volatile as they are dependent on the activities of large multinational companies that are present in the country. According to UNCTAD's World Investment Report 2022, after falling sharply from USD 149.4 billion in 2019 to USD 80.9 billion in 2020, FDI inflows to Ireland further shrank to USD 15.7 billion in 2021. Ireland dropped to the 25th rank in terms of FDI inflows, but ranked 9th in terms of FDI stock, which reached USD 1,362 billion in 2021 (UNCTAD). According to OECD data, Ireland’s inward FDI flows dropped to negative levels in Q1 2022 (USD -522 million) and in Q2 2022 (USD -36.1 billion). In addition to the COVID-19 pandemic, the war in Ukraine and inflation created a challenging business environment.

The United States is by far the largest investor in Ireland, followed by Luxembourg, offshore centres, Switzerland and the UK. FDI flows mainly target manufacturing, financial intermediation, IT and administrative services (Central Statistics Office). The structure of FDI is changing, as low-value activities are being replaced by R&D and high-end services (engineering, information and communication technologies, pharmaceuticals, medical technologies).

According to the latest The Economist’s Business Environment ranking, Ireland is a top performer, occupying the 8th position out of 82 countries. The business climate is favorable, but it worsened recently due to changes to the tax regime. Having signed the International Tax Agreement in October 2021, the corporate tax rate will be increased from 12.5% to 15% for companies with a turnover of at least EUR 750 million, reducing the attractiveness of the Irish economy. According to the Investment Promotion Agency of Ireland (IDA), more than 32,000 jobs were created through FDI in 2022 (over 24,000 net jobs). In the first half of 2022, investments were up 9% on 2021, with associated employment potential of over 18,000 jobs. In 2021, the agency announced a new five-year strategy, which aims to create 800 investments and 50,000 new jobs, focusing on five pillars: growth, transformation, regions, sustainability and impact. Among the country's assets are an attractive tax and legal framework, a skilled and multicultural labour force, and strong ties with the United States. Ireland is also the only English-speaking country of the euro zone.

 
 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 149,43380,87115,702
FDI Stock (million USD) 1,212,7891,346,8081,362,510
Number of Greenfield Investments* 228246284
Value of Greenfield Investments (million USD) 11,27410,2808,828

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Ireland OECD United States Germany
Index of Transaction Transparency* 9.0 6.5 7.0 5.0
Index of Manager’s Responsibility** 8.0 5.3 9.0 5.0
Index of Shareholders’ Power*** 9.0 7.3 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Ireland

Strong Points

Ireland's strong points include:

  • Strong and tightly knit industrial and tertiary fabric
  • One of the lowest corporate tax rate in Europe
  • Young, skilled and multilingual workforce
  • Competitive economy, with pro-business government policies and regulators
  • Modern infrastructure
  • One of the lowest unemployment rates in Europe
  • Strong and stable domestic demand, notably thanks to high wages and living standards.
Weak Points

Ireland's weak points in term of FDI attractiveness include:

  • The economy is voluntarily very open internationally and therefore highly dependent on the European economy (especially on the UK) as well as the strategies of multinationals that are currently attracted by favourable taxation
  • The economy is highly dependent on the activities of  multinationals: their offshore business, mainly in the form of contract to manufacture abroad, accounts for a quarter of GDP and has a great deal of weight in the labour market
  • Exposure to the consequences of Brexit
  • High labor and operating costs
  • Internal market is relatively small and is under increasing pressure on labour costs
  • Banking sector remains vulnerable to shocks and the level of public and private debt remains high.
Government Measures to Motivate or Restrict FDI
For years, the Irish Government has actively promoted foreign direct investment (FDI). Ireland provides an attractive taxation framework for foreign investors and has one of the lowest taxation rates in the European Union. This strategy has fuelled robust economic growth since the late 1990s.

More recently, the Government has focused on Ireland’s international competitiveness by encouraging companies with foreign investments to increase their research and development (R&D) activities and to provide goods and services with higher added value. The United Kingdom’s departure from the EU (Brexit) leaves Ireland as the only remaining English-speaking country in the EU, an asset for the country.

Several state organisations promote investment inflows:

The Irish government provides aid grants through its investment organizations, which will only pay grant aid after the foreign investors have achieved externally audited performance targets.

The government has invested heavily in ambitious programs to attract the best researchers specialised in business. Science Foundation Ireland (SFI) is the state science agency that has been responsible for administering Ireland’s R&D funding.
In the same vein, by investing in the entrepreneurial ecosystem, the state seeks to attract entrepreneurs to Ireland who wish to create start-ups with a strong international orientation.

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Investment Opportunities

The Key Sectors of the National Economy
Household and consumer goods; drugs and pharmaceuticals; electrical power systems; building products, franchising, medical equipment, computer software, information and communication technologies, agricultural sector.
High Potential Sectors
Advanced manufacturing projects in information and communication technologies (ICTs), pharmaceuticals and biopharmaceuticals, medical technologies, engineering and consumer products.
High value-added international services, software, video games, shared services and customer support activities.
Privatization Programmes
Ireland does not have a formal privatisation program at the moment. However, the government is reducing its participation in the banking sector, and measures were taken to open the employment services, bus transport and water sectors. The Irish government previously declared it may sell the electricity generating arm of Electric Ireland as well as some non-strategic elements of the gas supply company Ervia, but no plan has been implemented yet.
Tenders, Projects and Public Procurement
Etenders, Irish Public Tenders
 Tenders Info, Tenders in Ireland
 Ted - Tenders Electronic daily, Business opportunities in EU 27
 

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Several state-owned enterprises operate in the energy, broadcasting, and transportation sectors. However, all of them are open to competition for market share.
Sectors in Decline
Net export contribution has declined due to some sector-specific issues (chemicals, ICT), the general deterioration in cost competitiveness in recent years and the strong Irish domestic demand. Since the Irish economy is not as diversified as large economies it is therefore particularly exposed to external risks.
The aviation sector has been heavily affected from the COVID-19 pandemic, same as for tourism and hospitality.
 

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