Ireland secures a disproportionate share of foreign direct investment into Europe with project numbers growing strongly and an expected improvement in the country’s attractiveness to overseas investors over the next three years.


In brief

  • More than two thirds of overseas companies that are already invested in Ireland plan to increase investment in the next year.
  • Ireland is one of the most attractive destinations in Europe for investments in life sciences, technology, and global business services.
  • Ireland’s pro-business environment, availability of skilled talent, and political stability remain key differentiators for overseas investors.
  • Investors believe that Ireland has better tech skills than other European countries, putting us in a strong position to attract next-gen investment in key knowledge sectors.

Ireland’s attractiveness as a location for foreign direct investment (FDI) demonstrates enduring strength. Ireland ranks 10th in Europe and 80% of respondents to the EY Europe Attractiveness Survey 2023 believe the country’s appeal will improve or remain the same over the next three years. The survey, which measures FDI performance across 44 countries in Europe during 2022 and takes the temperature of global investor sentiment, also found that 71% of overseas businesses established in Ireland have plans to increase investment in the country over the next year.

Future attractiveness for FDI
of respondents to the EY Europe Attractiveness Survey 2023 believe the country’s appeal will improve or remain the same over the next three years.

These findings are in line with Ireland’s notably strong FDI performance in 2022, which saw the number of new projects increase by 21%, while the number of projects in Europe remained largely flat. 

Ireland now has an opportunity to use this strong position as a springboard to attract next-generation investment in key knowledge-intensive sectors including cleantech, renewables, artificial intelligence (AI), quantum computing, cell and gene therapy, and other forms of advanced personalised medicine. 

The outlook for attractiveness in the coming years is broadly positive despite global headwinds which include the elevated interest rate environment, high albeit moderating inflation, the continuing war in Ukraine, global geopolitical tensions, uncertainty relating to the global tax reform agenda, and a tendency towards deglobalisation. 

Here at home, respondents cite availability of talent along with infrastructure challenges as headwinds for Ireland’s future attractiveness, however these trends also impact many Western economies.

“Ireland’s continuing attractiveness for inward investment is firmly based on the agile pro-business environment which exists here as well as the country’s deep pool of highly skilled and educated talent. Other contributing factors include Ireland’s stable political and fiscal environment along with its internationally rated scientific research system which has a proven track record of collaboration with industry,” said Graham Reid, Partner and Head of Clients and Markets at EY Ireland.

Graham reid

Knowledge-led sectors bolster investment prospects



Outlook for 2023 and beyond



Further consolidating Ireland’s place in the league table



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Chapter 1

Knowledge-led sectors bolster investment prospects

Software and IT services, global business services, pharma, and medical devices emerged as top areas of investment.

Ireland attracted 184 new greenfield and expansion projects in 2022, up from 152 or 21% in 2021. The quality of those investments is worthy of note. Ireland is in the top five countries in Europe for investments in each of the crucially important high value, knowledge intensive sectors of pharmaceuticals, medical devices, and research and development centres.

Ireland has retained its place in the Top 10 European destinations for FDI. In contrast, Europe’s leading FDI destinations—France, Germany, and the UK—recorded either slight increases or decreases in investments during the year, with the total number of projects across the 44 European countries covered by the EY Europe Attractiveness Survey 2023 increasing by just 1%.

Number of FDI projects announced

The knowledge-led nature of FDI into Ireland is reflected in the sectoral focus of investments during the year with software and IT services topping the list at 31% of projects. This is followed by business and professional services in second place (at 15%), with medical devices and pharma accounting for 11% and 10% of investments, respectively.

A striking facet of Ireland’s performance during 2022, and indeed over many years, is the country’s particular and enduring appeal to US corporates. Across Europe, 60% of FDI originates in other European countries, with 21% of projects coming from the US. The picture is very different in Ireland where 59% of projects originate in the US and 30% come from Europe. While historical, cultural, and business ties with the US are important, they alone will not generate future investment. Preserving the flow of high-impact US projects must remain a critical focus for policy makers. 

Given the sectoral profile of current investment it is unsurprising that just over half (52%) of the respondents to the survey believe software and IT services will be the top driver of Ireland’s growth over the coming years. More notable, perhaps, is the view that utility supply, including cleantech and renewables, will be the second most impactful business sector driving growth. As we point out later in this report, more needs to be done to bring this to pass. 

Rank the top two business sectors that you expect to drive Ireland's growth in the coming years

“Reputation matters. By sustaining successful investments in high-value sectors, Ireland has developed a credible track record, a deeper talent pool, and ecosystems that foster innovation. All of these factors can reinforce existing positions of sectoral strength—the challenge for policymakers and other stakeholders is to ensure that existing investments form the bedrock for future investments in new and emerging technologies such as personalised medicine, AI, quantum computing, and Industry 5.0,” said Feargal de Freine, Assurance Partner and Head of FDI at EY Ireland.

A photographic portrait of Feargal De

A heartening feature of Ireland’s 2022 performance was the balanced geographic spread of projects with 52% in Dublin and the remaining 48% locating outside of the capital. The most popular region outside of Dublin was the South-West with 15% of projects, followed by the Mid-West on 10%. Very encouragingly, 71% of companies already established here and who plan to increase investment intend to do so in the regions with the remaining 29% saying they will do so in Dublin.

This is at least in part due to sustained efforts and investments over many years on the part of IDA Ireland and other agencies and government departments to achieve a better regional balance in FDI investment and associated economic activity. Improved connectivity, high quality local universities, new ways of working, and improved digital infrastructure all facilitate greater geographic choice for investments than existed in the past.

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Chapter 2

Outlook for 2023 and beyond

Key growth drivers in the coming years will be high value emerging tech in areas such as renewables, cleantech, ultra-personalised medicine, quantum computing and AI.

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…

These results indicate a shifting outlook which will influence future FDI flows in the coming years. There will be opportunities and Ireland will be able to play to its strengths as an established HQ location for European operations.

Risks to future FDI performance

There are identifiable risks to Ireland’s future FDI performance. The Department of Finance recently cited the “Four Ds” of demographics, decarbonisation, digitalisation, and deglobalisation as the key trends likely to transform the Irish economy over the next decade¹. They are also likely to have a profound impact on our competitiveness as an investment location. 

Survey respondents noted the ongoing war in Ukraine, the level of public debt and its potential impact on taxes, the tight labour market, high inflation, and a rising interest rate environment as key risks impacting 2023 investment plans in Ireland. 

Top economic risks affecting investment plans in Ireland 

For those who believed that Ireland’s attractiveness would diminish over the next three years (18% of respondents), the top concerns were increased costs and political instability, followed by increased incentives available elsewhere.

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Chapter 3

Further consolidating Ireland’s place in the league table

Ireland can continue to attract next-generation inward investment by strengthening the three key pillars of talent, technology, and sustainability.

Looking ahead to what will be a period of fragility for the world economy, Ireland will require a laser focus on those factors that lie within domestic control, whilst also seeking to offset at least some of the impacts of global events.

“As a small, open economy, Ireland is far more exposed to global conditions than many other European countries. This requires us to double down on our existing strengths and the factors within our control. Our highly regarded talent pool is key in attracting overseas investment, but we also need to address areas of weakness and home-grown bottlenecks,” said Dr Loretta O’Sullivan, Chief Economist and Partner at EY Ireland.

A photographic portrait ofOsullavan

Ireland’s progress up the value chain over the past two decades has been exceptional. Survey respondents identified factors and key priorities for government if Ireland is to maintain its attractiveness for FDI. Three core pillars that emerged were relating to talent, technology, and sustainability.

The Three Pillars

Talent

Technology

Sustainability

Talent

Ireland’s long-standing reputation for having a highly skilled, English-speaking workforce, coupled with access to the single market and favourable demographic composition, places us in a strong position in terms of talent. As a country we perform best in the EU with the highest number of STEM graduates per capita in the 20-29 age bracket (40 per 1,000 population compared to the EU average of 21)². In addition, 62% of those aged 25-34 have completed third level education (compared to 41%in the EU)³ and Ireland has the 4th highest share of an international workforce in the EU. 

Ireland is educating its population to a high standard, but also attracting highly skilled workers to live and work here, thereby continuously building up the skills base in the economy and supporting FDI locating here.

In your view, how does Ireland perform with regard to the following talent-related areas?

Ireland performed very well when compared to other European investment locations. Not only is its high-standard and broad access to education called out, but the culture, flexibility, diversity, and upskilling in workplaces has been commended, meaning that employers are focusing on the right areas that will appeal to investors.

Respondents to the survey perceived their Irish workforce as particularly strong in problem solving and innovative thinking and believe that the top domestic priority of government should be to continue to improve the skills level of the workforce to further improve Ireland’s attractiveness in the future.

The latest CSO data shows that Ireland had record high employment at 2.6m people in Q1 2023⁴, and low unemployment at 3.8% as of May 2023⁵, indicating a booming labour market.

Businesses and investors alike will need to think creatively about where they source talent, looking at different avenues and models to underpin continued business growth. Expanding the talent pool through sourcing from overseas requires a transparent and easy-to-navigate process for visas and work permits. Availability of housing, schools, and medical care is essential for new arrivals. In the longer term, we need to ensure that new entrants to the workforce are well-equipped, and that existing workers have access to ongoing and value-adding skills development.

Overall employment in Ireland is at record levels; and there can be a view that because Ireland is a small country, it doesn’t have the depth of strategic talent required by multinational companies. This is not the case, in addition to our strong local talent, our EU membership gives us access to a deep pool of highly skilled foreign workers who find Ireland an attractive place to live and work. And for talent from outside the EU, the critical skills employment permit is designed to attract highly skilled people into the Irish labour market.

Technology

Ireland scored exceptionally well in our survey on a wide range of technology related metrics. In particular, the availability of technology skills was rated as better than in other countries by 58% of respondents, up from 45% last year. This is a reputational asset of considerable value. 

The network of technology start-ups and research institutions; intellectual property rights protection; the availability of venture capital and other forms of financing; and support by government bodies and regulatory authorities to drive the digital agenda; all scored extremely well, and either improved or held their own on last year’s results. Having the right technology and telecommunications infrastructure in place will be critically important to Ireland’s ability to attract next-generation investments. Respondents also called for a number of policy areas to be prioritised while increased funding for R&D and improved telecommunications featured strongly. 

In your view, how does Ireland perform with regard to the following technology-related factors?

Companies were asked about the technologies with the potential to help expand their mandates in Ireland over the next three years. There were some significant changes since last year with cybersecurity/data protection emerging as the top ranked technology cited by 44% of respondents (up from just 19% last year) followed by cloud computing at 43%, up from 26% last year.

Which of these technologies, if any, have the potential to help you expand your mandate in Ireland over the next three years?

Understanding what investors see as the next technological growth drivers will ensure Ireland maintains its reputation and credentials in talent, skills development and infrastructure and will be important to drive future FDI in Ireland in the years ahead.

Sustainability

Respondents to our survey told us that sustainability is lower down the wish list for government priorities compared to a year ago. The requirement for investment to help the acceleration to net-zero fell to 14th on the priority list compared to fifth place last year. This is likely a reflection of the high inflation and interest rate environments putting cost reduction at the top of the corporate agenda, ahead of longer-term issues such as sustainability. It may be premature to see this as a structural shift in prioritisation. 

Ireland performs better compared to other European investment countries in relation to the percentage of renewables in the supply chain and has markedly improved in this area since last year (47% said performing better, compared to 29% a year ago).

Sustainability credentials are proving to be more critical, and accordingly, a more competitive battleground for attracting high-quality FDI. Other countries have shored up their strategies and started deploying significant capital to decarbonise. It is critical that Ireland not only tell its story of the positive efforts and the progress we are making, but also articulates a clear vision of what sustainability and decarbonisation looks like on the island in the medium term. This will help attract the right investors, and, ultimately, create a circular supportive flow of investments.

Sustainability considerations are now embedded in every new project as companies seek access to secure, reliable, clean, and cheaper sources of energy, while also reducing their impact on the environments in which they operate. A key differentiator for attracting future investments is the ability of a location to support companies on their decarbonisation and sustainability journeys. 

In your view, how does Ireland perform with regard to the following sustainability-related factors?

While there is clearly an ongoing need to invest in energy infrastructure and to remove blockages in the renewables development system, there are other, perhaps less obvious, opportunities for Ireland to play a leading role in sustainability matters. As new ESG reporting requirements apply to European companies arising from the EU Corporate Sustainability Reporting Directive (CSRD) and equivalent regulations, Ireland’s strong position in both digital technology and global business services presents an exciting proposition to take the lead in implementing this new reporting framework.

Summary

Ireland ranked 10th of 44 European countries and increased its number of FDI projects by 21% this year, while Europe overall increased by just 1%. Ireland continues to punch above its weight in comparison to the rest of Europe when it comes to attracting FDI. Top areas of investment were software and IT services, global business services, medical devices, and pharma. Investors continue to choose Ireland for its access to the European market, skilled workforce, attractive and transparent corporation tax regime, stability of the political and legal systems, and research and development capabilities. 

 We need to take a long-term view and understand the trends shaping the world of 2050 to ensure that we equip our people and infrastructure for an increasingly digitised, decarbonised, and competitive landscape. 

Ireland has proved adept at providing the right answers over many years and continues to be a highly attractive location for FDI. By strengthening the three key pillars of talent, technology, and sustainability, as well as the other policy issues identified by respondents to the EY Europe Attractiveness Survey 2023, it is possible to set a course that will help Ireland navigate the disruptions. It will also provide the foundations to maintain its standout performance for FDI attractiveness as well as to attract next-generation inward investment in the coming years.

About the survey

Methodology

The evaluation of the reality of FDI in Europe is based on the EY European Investment Monitor (EIM), the EY proprietary database produced in collaboration with OCO. The EY proprietary database enables the tracking of projects announced in 2022 across 44 countries and tracks the FDI projects that have resulted in the creation of new facilities and jobs. To confirm the accuracy of the data collected, the research teams aim to directly contact more than 70% of the companies undertaking these investments. The field research for the Ireland survey, on a respondent base of 153, was conducted by Euromoney in February and March 2023 via online surveys of international decision-makers.


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