The results of our survey indicate a marked improvement in sentiment regarding Ireland’s attractiveness for FDI compared to 12 months ago. 46% of those surveyed believe Ireland’s attractiveness for FDI will improve over the next three years, an increase of nine percentage points on the 2022 survey result. A further 34% believe the country’s attractiveness will remain the same over the period and only 18% said it would decrease (down from 23% last year).
Future investment growth drivers
Next generation FDI is likely to be very different. High value emerging technologies in a variety of areas including renewables, cleantech, quantum computing, AI, and ultra-personalised medicine will be key growth drivers in the years to come. Countries competing for investments in these new battleground areas will need to demonstrate high levels of expertise and research capability along with a ready supply of top-level talent.
Competitiveness, agility, proximity and access to key markets, and tax remain important considerations when choosing a location. New imperatives including political stability, security of energy supply, and creative subsidy and support programmes such as the US Inflation Reduction Act (IRA) and the EU Green Deal are rising up the agenda. Businesses are also looking for locations that can support them on their net zero and digitalisation journeys. Coupled with those factors are the evolving priorities of governments and local communities. Governments across the world are seeking to reshape investment agendas through new policy instruments such as the US CHIPS and Science Act. As the incidence of FDI mega projects increases, investors are increasingly looking for direct subsidies and other supports.
Tax reforms
There is continuing uncertainty related to the global tax reform process. Ireland is committed to the new global minimum tax rate of 15% which will come into effect next year. Global adoption of new nexus and profit allocation rules is less advanced.
Respondents to our survey highlighted the importance of increased support for overseas investors and reductions in business tax in the countries in which they invest. Globally, increased levels of state support may present challenges to countries in Europe which are constrained by EU state aid rules and may require new and imaginative policy responses at the EU level.
Amid this uncertainty, Ireland needs to continue to set a stable and reliable course in terms of tax policy—this has been a key reason for Ireland’s attraction over the years. Ireland also needs to respond creatively in order to remain competitive. That response can include continuing to improve incentives like the R&D Tax Credit, investing in our universities to nurture the next generation of Irish talent and ensuring high-quality property and real estate options are available nationally for prospective investors.
Ireland will also need to continue to challenge itself in terms of how tax policy supports the ability to attract key senior talent as part of the strategy to secure and retain critical investment. Policy responses can be highly effective if they are responsive to investors’ needs, and not every policy requires material investment of government funds.
Pivoting supply chains
Supply chain organisations continue to evolve in response to the global environment. In last year’s survey, increasing manufacturing presence in Europe was cited as a priority for 36% of respondents while nearshoring was an area of focus for 25%. The position has changed quite markedly this year, with nearshoring now being cited by 47% of the respondents and just 19% of the respondents cited increasing their manufacturing presence in Europe as a priority.
How is your current supply chain organisation changing? We are…