FDI and Ireland’s recovery
The Irish economy has taken a blow because of the pandemic. How can we go about restoring it? Foreign Direct Investment is an important key to recovery, argues Thomas Sheerin from PwC.
COVID-19 has had a severe impact on the Irish economy. Activity and employment have dropped sharply and this is expected to continue for some time. As Ireland begins its recovery, the Foreign Direct Investment (FDI) sector will play a significant role from an employment, activity and financial contribution perspective. Continued and sustained investment in multiple sectors such as technology, pharma, medical devices and financial services will greatly assist the rebuilding of our economy.
FDI’s contribution to the Irish economy has been significant, with over 1,200 overseas companies directly employing over 200,000 people. In addition, FDI contributes significant tax revenue and generates commercial activity across the wider economy. FDI drives investment in research and innovation, with strong linkages to Irish third-level education institutions. During the pandemic, many FDI companies engaged in the production of hand sanitizers, ventilators and vaccine research. These positive contributions will prove more valuable than ever as Ireland emerges from a substantial economic downturn. In particular, the local impact of FDI and its links to domestic businesses will assist recovery across the country.
The key attributes that have assisted Ireland’s success in attracting and retaining FDI remain very strong. These include a skilled workforce, a competitive business environment, a strategic location, EU membership and a competitive stable tax regime. Notwithstanding the current challenging economic climate, continued success in the FDI space is reflected in recent job and investment announcements from Bearing Point//Beyond and Udemy.
Overcoming the challenges
As the COVID-19 situation continues to evolve, businesses are feeling the human, social and economic implications. Businesses must continue to manage and mitigate the disruption that COVID-19 brings to every aspect of their operations. From working with our clients, it’s clear that key challenges arise in the areas of supply chain, travel, workforce and tax, trade and regulation.
The effects of COVID-19 are particularly felt by organisations dependent on supply chains for products and materials. Businesses have been forced to act quickly to map their entire supply chains. This provides the visibility and information needed to make critical decisions in real-time and to identify alternative supply chain strategies.
From a workforce perspective, new employee welfare and engagement challenges have emerged. Technology needs to be adopted quickly to ensure that teams can work remotely while staying connected and productive. Returning to the workplace needs to be managed effectively with clear processes in place – early engagement, clear communication and provision of alternative working arrangements are key.
As a small, open economy, travel plays a fundamental role in how FDI investment is secured, sustained and developed. COVID-19 restrictions have brought international travel to a standstill, presenting a significant challenge for FDI. However, proactive adoption of technology and utilisation of video and web conferencing technologies has enabled the necessary connections to continue to take place during the pandemic.
COVID-19 has brought additional complexity and risk from a tax and regulatory perspective. This requires FDI businesses to consider the broader economic, political and societal context in which they operate to ensure informed, tax compliant decisions are made which drive the business forward.
While the economic outlook for Ireland has changed dramatically in recent months, the road to recovery is underway. Similar to our emergence from the 2008 financial crisis, FDI should prove to be a key feature in that recovery.
