The start of a new era: observers say US investment will continue

Following the outcome of its recent US presidential election, there are fears that president-elect Donald Trump may apply some unwanted pressure on what is Ireland’s most important economic relationship. However, experts in Ireland say that the recent positive trends in US foreign direct investment here over the past number of years look set to endure – if not deepen.

“The two-way US-Irish business relationship is really at an all-time high,” says Bob Savage, president of the American Chamber of Commerce Ireland. “We are in a very, very good position as a global destination of choice for US investment. The relationship is also strong on the people side, but we shouldn’t take our eye off the ball.”

The chamber represents some 700 US firms, which together have invested $343 billion in Ireland as of 2015, and directly support 140,000 jobs here.

While the full-year numbers for FDI in 2016 have yet to be compiled, evidence suggests that US firms here are expanding operations while new and early-stage companies find that Ireland remains hugely competitive as their first overseas base into the all-important European market.

As an indicator of the broader 2016 trend, Savage points to the more than 1,300 new jobs announced across a number of locations, including Limerick, Cork, Galway, Waterford, Ballina and Drogheda, all helped by the IDA.

“We’ve done a lot of work this year and last year talking to our members,” he says. “The key things that came up were skills, talent and innovation in the region. And when you look at places like Cork, Waterford, Ballina and Drogheda, I think it’s been a very good year.”

Series of strong years

Fergal O’Rourke, managing partner for PwC, acts for firms mainly from the US west coast. “It’s another strong year in a series of strong years that Ireland has had, and certainly in the west coast where my beat is, we’ve now gone into a virtual cycle of companies that come to us looking to expand abroad.

“And their first call and their first line is, well, I presume Ireland is the place to go because everybody else is there. But we’ve got to a position now where our education and our track record is getting us – at least at the start – to the top of the list.”

O’Rourke says it was heartening to see not just new entrants but existing operations in Ireland receiving new mandates from their HQs and expanding employment here.

“In getting those new mandates, what’s really happening then is they’re moving along, they’re not getting stuck in operations that have become peripheral, or becomes bypassed by the newer people in the organisation,” he says. “Business is so fast-moving these days that it’s critical first that they get their existing operation locked in.”

Dublin also continues to do well. One of the first job announcements of 2016 was the news that technology giant Oracle would create 450 new sales positions to support its growing cloud computing business.

Oracle already employs some 1,400 in Dublin, not far off the 1,700 who work for Amazon, which announced during the summer that it would add 500 jobs high-tech jobs over the next two years in the capital and Cork.

This was followed shortly after by news that Google would open a second data centre in west Dublin, at a cost of $150 million, and that it had upped its workforce by 1,000 to 6,000 over the previous year.

“It’s not just larger companies,” Savage says. “You’re also talking about more emerging start-up-type companies coming here as well, which we in the chamber are very interested in and will working with as closely as we can.”

The Trump election looms large, particularly implications for a change in direction regarding tariffs. Savage reiterates that the strength and breadth of the US-Ireland business relationship should enable it to withstand any changes.

No complacency

Anna Scally, partner and head of technology and media at KPMG, is also confident that Ireland’s long track record of attracting FDI will stand to us.

Still: “We can’t afford to be complacent, particularly in light of the presidential election, and the fact that tax reform happens much more quickly than anticipated,” she says. “But I don’t think there’s any need to panic.

“We need to remain confident and sure-footed about the policies we’ve adopted,” Scally adds. “For those early-stage companies that are coming and have invested here and the older ones that continue to do so, they have done it not just for tax reasons but because they’re accessing the talent here, and because Ireland is a good place to do business.

“They’re coming here to service their non-US markets, and no matter what happens, with these markets there are certain functions and activities that will have to base outside of the States in order to service non-US markets.”

The spectre of Brexit has also cast a shadow, but O’Rourke is more sanguine about that than any changes arising from the ascension of Donald Trump.

“From a US FDI perspective, its probably not one the major issues because the UK is just one of the markets they serve out of Ireland as well as the much larger single market,” he says. “So its a much, much bigger issue for indigenous Irish companies, where the UK is a major part of their overall market.

“For US companies it’s another added complication, but because of the breadth of their operations here and the breadth of the markets they serve, its of relatively smaller importance.”

EARLIER STAGE INVESTING IN IRELAND
Anna Scally, KPMG's head of technology and media, agrees that many of the US companies making maiden investments into Ireland are earlier-stage companies than would traditionally be the case.

“In 2016, we continued with the pattern that has started to develop over the last number of years of being the location of choice for earlier-stage, high-growth companies,” she says, “These are companies are probably investing in Europe for the first time, but they are certainly earlier in their development than it would have been for companies that went before them.

“These are companies setting up new projects in Ireland, and they objectively and independently assess whether Ireland should be their location of choice without, potentially, the bias that comes with having operations here already. “

These new investments include a new security centre of excellence in Dublin for DocuSign, an electronic signature development firm; 134 jobs in an international operations centre in Limerick for Trusource Labs, a technical support services company; and 100 jobs at a technical support and innovation centre for WP Engine, which delivers managed services for websites built on Wordpress, also in Limerick.