Ireland loses FDI crown as value of new investment dropped by €40bn

OECD data shows investment into the EU fell faster than into Brexit stricken Britain

Ireland experienced a 5pc increase in employment in IDA-supported firms in 2020, says Ibec economist Gerard Brady

Sarah Collins

May 01 2021 02:30 AM

Foreign investment into Ireland tanked last year twice as fast as into the UK or Canada, but experts insists it was a blip.

Flows of foreign direct investment (FDI) into the country fell by $48bn (€40bn) in 2020 – around 40pc – compared to 2019, according to data from the Organisation for Economic Cooperation and Development (OECD).

Only the US and The Netherlands saw larger falls than Ireland in 2020.

It put Ireland behind Luxembourg and Germany in an EU ranking for inward FDI flows last year, after the country topped the EU league table in 2019.

However, Ibec’s chief economist, Gerard Brady, said flows were influenced by one-off factors or transactions, and won’t necessarily lessen Ireland’s stock of FDI.

That’s partly because the FDI data includes not only projects that bring jobs and direct investment but also the shifting of assets in and out of Ireland within the balance sheets of multinationals.

“Today’s OECD figures are based on financial flows, which can be volatile and impacted significantly by changes in company structures and financial transactions which don’t have any impact on the substance of activity – such as jobs and wages – in Ireland.”

FDI inflows to most countries plummeted last year, falling by 70pc to the EU and by 51pc to the 37-member OECD area, which also includes the US, UK, Australia, Japan and Switzerland.

“The pandemic accelerated a steady decline and contributed to sinking global FDI flows to their lowest levels since 2005,” the OECD said in a statistical release yesterday.

However, it’s not all bad news.

The numbers also show that equity flows into Ireland turned positive in 2020 as a result of various cross-border mergers and acquisitions.

Paddy Power parent Flutter Entertainment’s buyout of American gambling giant FanDuel Group was one of the highest-value acquisitions last year, while the merger of financial firms Aon and Willis Tower Watson also boosted the Irish figures.

And Ibec’s Mr Brady says Ireland was a positive outlier when it comes to FDI project announcements, which fell globally (by 35pc) and in the EU (15pc) last year. That is good news in terms of jobs.

“Ireland, on the other hand, experienced a 5pc increase in employment in IDA-supported firms in 2020. This was, for the most part, driven by the strength of our sectoral mix in sectors like BioPharma, ICT, Food and MedTech,” he said.

The Central Statistics Office has said that more than a third of foreign direct investment is simply passing through Ireland to subsidiaries in other countries.

Nobel Prize-winning economist Joseph E Stiglitz this week accused Ireland of “stealing” its EU neighbours’ tax revenues as a result of this FDI strategy.

However, the numbers directly employed in the multinational sector in Ireland are at an all-time high of almost a quarter of a million, according to IDA Ireland.

Meanwhile, there were net outflows of investment from Ireland in 2020 of $49bn (€41bn) the OECD said yesterday, almost three times the negative flows recorded in 2019.