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Inside the world of business

Signs of green shoots in Irish manufacturing

RUMOURS OF the demise of Irish manufacturing have been greatly exaggerated.

That was the message from IDA Ireland chief executive Barry O’Leary when he spoke to The Irish Times this week. “We are very interested in manufacturing investments,” said O’Leary. “We just weren’t cost-competitive so we couldn’t win them.”

He was reacting to the debate that has developed since Glen Dimplex chief Sean O’Driscoll told a recent conference that Ireland needs to get back to manufacturing, and forget the narrow focus on the smart economy, if we are to turn things around.

The good news offered by IDA Ireland and O’Leary is that there are “half a dozen” manufacturing projects due to be announced before the end of the year “that we couldn’t have been in the market for two or three years ago”. Primarily that’s due to a significant fall in unit labour costs – which have swung about 13 per cent in our favour since the peak when compared to the EU average – but the collapse in the commercial property market also makes Ireland more attractive for inward investment.

O’Leary maintains that far from neglecting manufacturing during the boom, it has accounted for “the bulk of investment” attracted by the IDA to these shores over the last four to five years. That’s because the IDA’s manufacturing successes have largely been in the areas of medical devices, biopharmaceuticals and life sciences, which require much larger capital investments than software or services. There are signs of green shoots in other areas such as automotive components. Mirror Controls International recently decided to invest in its plant in Leitrim over one in the Netherlands, while Valeo in Tuam has expanded into research and development.

IDA Ireland can’t be criticised for not going after manufacturing investments it couldn’t have won. There were plenty of other State agencies blithely wasting public money during the boom. But it is fair to ask if the focus on the smart economy by its political masters will damage its ability to create good old-fashioned production jobs.

Ryanair’s Aer Lingus plan

RYANAIR’S DESIGNS on Aer Lingus have been on hold since its two failed bids for the airline. But while it has ruled out a third offer a number of times, on other occasions it has seemed as if the mere presence of an Aer Lingus not controlled by Ryanair continues to offend.

During yesterday’s Ryanair agm, Michael O’Leary paused to note recent waves of consolidations and closures in the global airline industry, which outside of Ireland is enjoying an abrupt turnaround in fortunes. He identified February’s proposed merger between Greek carrier Olympic Air and Aegean Airlines, currently resting with European Commission competition authorities, as a “precedent” for the kind of Ryanair-Aer Lingus tie-up that he still, it seems, has in the back of his mind.

O’Leary rather glossed over the hurdles still faced by the Olympic-Aegean proposed marriage, however. Initial investigations by the commission pointed to “serious competition concerns”, particularly in relation to the Greek domestic market – not unlike, in fact, the reasoning it applied to its block on Ryanair’s takeover of Aer Lingus.

Rather than increase the desire for a single strong national airline, Greece’s economic woes appear to have strengthened the commission’s determination to avoid a competition-sapping union between Olympic and Aegean.

“The commission must make sure that consumers and businesses will continue to have a competitive choice of airline services in Greece . . . in particular at a time of difficult economic circumstances,” Joaquín Almunia, the commission’s vice-president for competition, said in July. Having opened a 90-day inquiry into the matter, a final decision will be taken by the commission by December 7th. Only then will we discover if this merger is quite the “precedent” for Ireland that O’Leary claims it to be.

Yes they can, but can we?

IT SEEMS that we’re not alone when it comes to concern about the plight of small businesses. Across the pond, President Obama has finally got Senate approval for his much-vaunted small-business Bill, which aims to aid struggling businesses across America gain access to credit.

The legislation will create a $30 billion lending programme that will channel government-backed loans through community banks, as well as providing tax breaks to businesses. The level of serious political debate over how best to tackle the issue is welcome.

As Ireland struggles with how to deal with the very real problem of access to credit for small businesses, the Government is in danger of introducing a series of disjointed responses to the problem, rather than a coherent strategy. The Credit Review Office, established in April, has received a paltry 20 applications.

Not to be accused of fiddling while Rome burns, the Department of Enterprise is now working on the details of a loan guarantee scheme. On Tuesday, credit reviewer John Trethowan told the Oireachtas Committee on Enterprise that he was dubious about a scheme that would transfer contingent liability onto the taxpayer. He has a point.

As policymakers try to address the problem of credit for businesses, and TDs come under pressure from constituents on the issue, it is crucial that a short-term response is not rushed. A proper assessment of the merits and workability of a scheme needs to be analysed and views from individuals such as Trethowan need to be taken on board.

Today

All eyes will be on the Central Statistics Office as it reveals how the economy performed in the second quarter of this year.

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