Irish firms eye central Europe

When Leoni, a cable manufacturer, announced last month that it was moving its production to Slovakia, the news came as a shock to the 92 people in Birr, Co Offaly, who will lose their jobs as a result.

But Leoni is not alone in discovering the attractions of manufacturing in the formerly communist states of central and eastern Europe where technical standards are high and wages are low.

As a tight labour market at home makes hiring new staff difficult and expensive, a growing number of Irish companies are looking to the Czech Republic, Slovakia and Hungary for opportunities to expand their business and remain competitive.

"Most of the people are looking for component sub-supply into Ireland. There are certain elements of garments that would be tedious and they can't get people to do this. They would keep their staff in Ireland to do the added value elements of the garment manufacture and they would then bring in the component pieces. So it is still done in Ireland," said Mr Pat O'Neill, who heads the Enterprise Ireland office in Prague.

Enterprise Ireland helps Irish companies to find manufacturing partners throughout the region and, although Mr O'Neill insists that the purpose of this assistance is to help Irish firms to grow and to protect them in the longer term, he acknowledges that there is no guarantee that firms will not move their entire manufacturing operations out of Ireland.

"If the company didn't move, the jobs might be lost anyway by the company going bust. This help is constructive, it is positive. Most Irish companies would be very reluctant to move everything to another country," he said.

Ms Beibhin Marten, the chairwoman of the Irish Knitwear Exporters Guild, is not considering moving any production for her company, Beacon Designs, outside Ireland. But she agrees that the shortage of labour in some parts of the State is forcing many of her competitors to look to eastern Europe if they want to survive.

"The Celtic Tiger has basically eaten the Irish knitwear industry. Because we are labour intensive, we're at the bottom of the pile," she said.

Another knitwear manufacturer, who did not wish to be identified, claimed that Enterprise Ireland was actively encouraging manufacturers to outsource production overseas. But an Enterprise Ireland spokesman said that, although the organisation does encourage some firms to consider outsourcing, it never helps companies to move their entire operations abroad.

Trade unions are not opposed in principle to Irish companies manufacturing in eastern Europe but Mr Jack O'Connell, vice-president of SIPTU, believes that Enterprise Ireland should apply strict criteria to the firms it helps.

"It is certainly clear that Irish jobs have been lost because of production being moved abroad. If it is shown that there is clear evidence that Irish jobs would be lost if companies do not outsource, that is one thing. But it must be expressed in terms of the number of Irish jobs being protected," he said.

With the Czech Republic and Hungary likely to be among the first wave of new members to join the EU, possibly within the next five years, wages and other costs are set to rise steeply. Mr O'Neill believes that there is a window of opportunity for investment in the region that is likely to close within three or four years.

"If Irish companies want to benefit from the potential that sub-supply can offer them in their business, they have got to be doing it now," he said.

Although the Czechs are probably more advanced than the Irish in terms of technical expertise, neither they nor the Hungarians have yet developed the management qualities regarded as necessary for success. The managing director of a British software company with branches throughout eastern Europe has a policy of not employing anyone over 40.

"I don't think it's prejudice on my part. It's just that they all have a dead quality inherited from the communist years. Younger people are more prepared to be flexible and think for themselves but there is still a shortage of initiative," he said.

Such deficiencies, whether real or imaginary, have not prevented recruitment agencies such as Grafton Recruitment from setting up offices in Prague and Budapest that spend much of their time persuading well-educated eastern Europeans to take up jobs in Ireland.