Manufacturing and services still turn wheels of economic growth

The importance of manufacturing and service companies to the economy is increasing and new figures reveal that their expenditure in 1995 grew by 12.5 per cent on the previous year.

The study by the State advisory board for industrial development, Forfas, on Irish Economy Expenditures (IEEs), shows that the greatest year-on-year growth in manufacturing industry's expenditure on Irish raw materials and services since 1989 was in 19941995. Mr John Travers, the chief executive of Forfas, said the survey showed the contribution made by manufacturing and internationally traded service companies to the economy. There were 250,000 employed in the sectors in 1996, the highest ever, he said.

Manufacturing industry companies increased sales by over 50 per cent (£8.7 billion) between 1989 and 1995, achieving an average annual growth of over 7 per cent.

Expenditure on Irish services increased by almost one third over the seven years, rising by £720 million. In the services and manufacturing sectors together, more than £19 billion was spent in 1995 on wages and salaries, Irish raw materials and Irish services - an increase in real terms of over £2 billion on the 1994 figure.

Comparing the two years, the single biggest increase was in expenditure on Irish services, with £5.2 billion spent in 1995, a 25 per cent increase. The largest expenditure was on Irish raw materials, amounting to £8.6 billion, an increase of 9.5 per cent on 1994. Wages and salaries expenditure only increased by 4.9 per cent to £4.3 billion.

"The slower growth in wage and salary expenditure, compared with total IEE spending, reflects a continuing growth in productivity and moderation in wage costs," a Forfas statement said. Manufacturing industry's expenditure on IEEs increased by 43.5 per cent to £1.8 billion between 1989-1995.

"The increase of £593 million (11.1 per cent) recorded in 1995 is the highest year-on-year growth since 1990, a further indication of the buoyancy in the Irish economy," the statement says. Irish-owned manufacturing companies exported 46 per cent of their exports to Britain in 1995. In other industries, the survey shows that profits in Irish-owned food, drink and tobacco companies have remained constant since 1991, at just over 4 per cent of sales.

In general manufacturing, profitability showed a marked increase in 1994 when it rose to over 7 per cent of sales. It moved to almost 9 per cent in 1995, in contrast to the 5 per cent figure between 1989 and 1993. "This is likely to result from favourable economic conditions in Ireland and internationally, and to an improvement in the competitiveness of Irish-owned enterprises," Forfas says.