Business Week: Economy in rude health for Kenny swansong
Also in the news – Brexit headwinds, AIB pay, and Dublin Airport developments
UK firms are looking to the Republic for a post-Brexit bolthole, but it may lead to staffing issues, warns AIB’s Richard Pym. Photograph: Eric Luke
Taoiseach Enda Kenny this week signalled his intention to bring the curtain down on 15 years as Fine Gael leader – but not before he takes to the stage for the final acts of his six-year production as head of government.
Shortly after he gets back from the St Patrick’s Day trade mission to Washington, Kenny will step down as party leader and put in place a timetable for his departure from the Taoiseach’s office.
That means he will still be at the helm when the leaders of the 27 remaining EU members agree on the terms for negotiating the UK’s departure from the bloc.
Despite the controversies that have dogged the Government in recent weeks, Kenny will depart the stage leaving an economy in rude health. The final quarterly national household survey figures for 2016, published by the Central Statistics Office this week, indicated strong growth as we entered 2017.
Total employment rose by 3.3 per cent, or 65,100, last year, bringing the workforce to about two million. The stronger-than-expected figures led some forecasters to increase predictions for jobs growth this year, with unemployment expected to continue falling towards 6 per cent.
Employment rose in all sectors and in all regions of the State during the fourth quarter, but the largest rise was in construction, which was up 9.2 per cent against the same period a year earlier.
Furthermore, there was a 72,000 rise in full-time employment and a fall in part-time employment, suggesting that employers are moving staff from part-time to full-time work.
Jobs announcements – the good news, and the bad
Among the jobs announcements that have become a regular fixture of the business pages was the news that Bank of America Merrill Lynch is to add 100 jobs in the Republic as it seeks to expand its global technology and operations hub in Dublin.
Also in the capital, technology group Ricoh is to more than double its workforce with the creation of 110 new jobs over the next three years. The Tokyo-headquartered company is investing €6.5 million in its Irish business.
Additionally, more than 150 jobs are to be created between technology company Pressreader; tech start-up ArtofUs and software firms Looker and ThinkSmart.
In the southeast, An Bord Pleanála granted permission for the construction of a new shopping development in the centre of Waterford city. The scheme is expected to create about 480 jobs, while another 250 people will be employed during construction.
Elsewhere, about 230 jobs are to be created by Topaz and McDonald’s with the opening of two new motorway services areas, one in Carlow and one in Cork. A further 100 temporary jobs will be created during the construction phase.
The news is not so good for staff at Denis O’Brien’s Digicel telecoms group, which announced plans to shed more than 1,500 jobs over the next 18 months in an overhaul of the debt-laden business.
While the Bermuda-based company has no workforce in the Republic, it is believed to have significant numbers of Irish workers in management roles in the Caribbean and Central America.
The company is trying to deal with its €6.2 billion debt pile, which credit analysts have labelled unsustainable. So, the plan is to restructure, which will involve the job cuts and a new deal with Chinese telecoms equipment company ZTE.
Digicel did not say how many people it employs, but figures published ahead of an abandoned flotation bid in 2015 showed it had 6,334 permanent staff and a further 989 on temporary contracts. The cuts are expected to focus on permanent staff.
UK firms scouting for post-Brexit office space in the Republic
March is just around the corner, which means British prime minister Theresa May will soon be triggering Article 50 to formally begin the process of the UK’s exit from the EU.
British MPs were this week told that 100,000 firms in the UK have registered companies in the Republic since last year’s referendum.
Stephen Kelly, chief executive of campaigning organisation Manufacturing Northern Ireland, told a House of Commons committee that the numbers displayed the anxiety felt by UK companies about their future access to EU markets.
One such company is Barclays, which said it is considering making Dublin the headquarters of its European business. Another, Morgan Stanley, is said to be actively scouting office space in Dublin and Frankfurt.
Property investor Green Reit said it expects to see businesses moving to the Republic to begin signing leases on premises by the end of the year. It also said it had the capacity to develop an additional 400,000 sq ft in office space at Leopardstown in south Dublin.
However, while the influx of foreign investment has long been touted as the silver lining to the Brexit cloud, Central Bank deputy governor Sharon Donnery warned there are potential risks if a host of businesses take flight to Dublin.
“The potential establishment of new business lines in Ireland presents a broad range of risks,” she said. “For the Central Bank, from a financial stability perspective, a key consideration is understanding the capacity of any potential firm to cause harm to the financial system, the economy and to citizens through its course of business – particularly were it to fail.”
You can bank on it
Over at State-owned AIB, chairman Richard Pym was also seeing potential problems with the expected rush of investment. He warned Minister for Finance Michael Noonan that the bank may face staffing problems due to the increased competition for workers.
Predictably, he called on Noonan to relax Government-imposed pay caps in order to deal with the arrival of formerly UK-headquartered banks, which he pointed out are not shackled by limits on remuneration when it comes to attracting staff.
That being said, members of the Financial Services Union (FSU) in AIB voted to accept an average 2.75 per cent pay increase that will apply in both 2017 and 2018. There was also an agreement that there will be no compulsory redundancies until 2019.
No such luck in the North where First Trust, which is part of AIB, announced it will close 15 branches over the next seven months. That amounts to half of the bank’s branch network. The FSU said the move shocked the bank’s employees.
Separately, the value of the State’s holding in AIB reduced by €900 million last year, according to a valuation carried out for the Ireland Strategic Investment Fund (ISIF) by accounting firm EY.
Taxpayers own 99.9 per cent of AIB, and this holding was valued at €11.3 billion at December 31st, 2016, down from €12.2 billion a year earlier. This reflected a reduction during the year in the value of European bank stocks on global markets.
Third terminal for Dublin Airport proposed
Finally, in news that is sure to thrill the residents of Swords and Portmarnock, Minister for Transport Shane Ross has floated the idea of a third terminal at Dublin Airport.
Ross said a review of airport capacity, to get underway within weeks, will examine the longer-term capacity needs of the three State airports, including “an option for a third, independent terminal at Dublin airport”.
Capacity is likely to be tested somewhat as Norwegian Air International announced plans to fly 24 times a week from Belfast, Cork, Dublin and Shannon to the northeastern United States from next July. The airline said some flights will be available from €69 one way, but it is likely that the bulk of seats will sell for more.