Foreign direct investment in Ireland exceeds €1 trillion for first time

CSO figures show value of FDI in 2019 equated to 288% of Ireland’s GPD

More than a third of FDI in 2019, equating to €314bn, was so-called “phantom” capital, passing through the jurisdiction to finance operations elsewhere.  Photograph: Getty Images

More than a third of FDI in 2019, equating to €314bn, was so-called “phantom” capital, passing through the jurisdiction to finance operations elsewhere. Photograph: Getty Images

 

The stock of foreign direct investment (FDI) in Ireland exceeded €1 trillion for the first time in 2019, according to the Central Statistics Office (CSO).

In a new report on Irish FDI trends, the CSO said the value of inward investment that year rose to €1.03 trillion – equal to 288 per cent of Ireland’s gross domestic product (GDP).

This is extraordinarily large in international terms – the EU average is 62 per cent – and reflects what the CSO said was “the highly globalised nature of the Irish economy”.

More than a third of FDI in 2019, equating to €314 billion, was so-called “phantom” capital, passing through the jurisdiction to finance operations elsewhere. Many multinational subsidiaries here acted as treasuries for parent companies, distributing funds across their global supply chains.

When pass-though investment, reverse investment (involving subsidiaries making payments back to the parent company), intellectual property (IP) and aircraft-leasing assets are removed, the “remaining inward FDI” accounted for €261 billion in 2019.

That figure represents the inward investment that is tied to tangible economic activity on the ground here.

The US was the largest investor into Ireland, accounting for nearly three-quarters of total FDI or €734 billion.

The CSO’s report also noted that €15 billion of FDI in 2019 could be classified as brand new or “greenfield investment”,while about 6 per cent comprised of so-called “special purpose entities”, companies set up for reasons that are beyond the production of goods and services; often established for financing purposes or to hold certain assets or liabilities.

Concentrated

The data also illustrates how highly concentrated Irish FDI here is. They show the first group of 25 firms make up 71 per cent of Ireland’s inward FDI.

The figures also show that almost half of Irish investment abroad originates from so-called redomiciled PLCs. Beginning in 2008, in reaction to proposed changes to corporate tax rates in the UK and the US, a number of multinationals relocated their group headquarters to Ireland for tax purposes.

“The report shows that, of the €1,026 billion in FDI in Ireland, 31 per cent can be attributed to investment which passes through Ireland en-route to other subsidiaries abroad, highlighting the nature of global investment,” said CSO statistician John Sheridan.